Will cash-strapped consumers splash out on 4G?
Published 16/11/2012 | 05:00
It took about two years, was complicated and frustrated the country's four main mobile telecoms operators, but at last, 4G mobile services are on the way.
Having stumped up the guts of €1bn for the privilege of effectively renewing their existing licences and securing the rights to offer the new super-fast mobile services, now the mobile firms are going to have to make it pay.
Not only are they paying for the licences, they'll also be paying to upgrade their infrastructure. O2 reckons it will invest €200m to roll-out the new technology, as will Hutchison 3G. Eircom's Meteor unit and Vodafone will probably end up spending something similar.
How to earn a decent return on the investment but not switch off consumers at the same time is one of the big questions. When consumers are already cutting back on their spending, it could also make 4G a tougher sell, at least initially.
All the companies that won licences – Vodafone, Telefonica's O2, Eircom's Meteor unit and Hutchison 3G – have been feeling the squeeze in the past few years and some more than others.
Average monthly revenue per user – an industry yardstick – has been on the decline as consumers both spend less and operators try to keep customers by cutting margins and offering enhanced packages.
That makes generating returns more difficult, but many users will want the types of services 4G networks hope to deliver. Among the main uses are likely to be video streaming and downloading, which on fixed line networks soaks up an enormous amount of bandwidth. Tony Hanway, chief executive of O2 in Ireland, said he doesn't believe that the 4G networks will over-promise and under-deliver.
Mobile users in general haven't always been happy with the type of speeds they see over the mobile network compared to what they've been promised.
"This is going to be five times faster than 3G networks," Mr Hanway told the Irish Independent yesterday, adding that he doesn't think 4G networks' capabilities will be oversold to consumers.
He concedes that there will most likely be a premium to pay for using the new fast services when they get rolled out starting next year, but he says there will be people willing to pay for them.
And, as with such services, the more people that begin to use them, the cheaper the cost will eventually be as it becomes the norm rather than the exception.
So, where's the inflection point? When is the tipping point reached that will see 4G being widely adopted?
In a report this year, PricewaterhouseCoopers predicted that global 4G device penetration won't reach 23pc before 2015, while about 10pc of subscribers are expected to be paying for 4G services by then.
PwC reckons there will be a "surge" in 4G innovation – with a range of new services – that will kick off around 2014 or 2015.
For mobile operators that have paid a fortune for licences, that surge probably can't come quick enough.