4G UK: the high price of EE's monopoly

At the end of this month, the United Kingdom will finally join an elite group of nations with the launch of its first 4G LTE service. While the United States, Australia and many more countries dotted around the globe have all enjoyed 4G services for some time, the UK has lagged far behind many others in its next-generation mobile strategy.

Indeed, the sad truth is that the UK’s 4G spectrum auction – which will allow network operators to bid for the licences to operate LTE services throughout the country – has not even taken place yet, and will not do so until sometime next year. The UK’s first 4G operator, EE, has been granted special dispensation by the telecommunications regulator, Ofcom, to convert some of its spare network capacity for 4G services, using bandwidth freed up by the company’s two 3G carriers, T-Mobile UK and Orange UK.

With other operators unable to offer 4G services until they acquire spectrum in 2013, EE will be the UK’s only 4G carrier until well into next year. Given the eye-watering pricing that the company has just announced for its tariffs, it’s clear that this 4G monopoly is bad news for consumers, and yet more bad news for the deployment and adoption of 4G services throughout the UK, which are already languishing embarrassingly far behind so many other nations.

Before we look at the new 4G tariffs, let’s remind ourselves first of some of the price plans that EE currently offers its 3G customers through its T-Mobile UK brand. T-Mobile offers what it calls ‘Full Monty’ tariffs, including unlimited voice calls (with certain exceptions), unlimited text messaging and – crucially – unlimited data:

 

Now, let’s take a look at EE’s new 4G tariffs in more detail:

 

So, let’s compare what you can get for your money at, say, £41 a month. On T-Mobile 3G, you can get unlimited everything – including unlimited data – with a Samsung Galaxy S III LTE (yep, T-Mo will sell you a “4G-ready” handset even on your 3G tariff) for £29 upfront. On EE 4G, for £41 per month, you’ll get unlimited SMS and voice calls, but you won’t get unlimited data. Instead, your 4G data usage will be capped at 1GB (with unlimited WiFi via BT Openzone hotspots); that Galaxy S III LTE will also cost you an extra £20.99, with EE demanding £49.99 up front.

The handset price disparity makes even less sense at £46 per month. If you want a Galaxy Note II LTE with that monthly spend, it’ll cost £39 upfront with a T-Mobile 3G contract, but £89.99 for the same 4G-ready handset with EE. Let’s just dwell on that for a moment, and let it sink in: an identical 4G-ready handset can be purchased for £50 less with an equally-priced 3G contract (and no, you won’t even be obligated to upgrade to a 4G tariff if you don’t want to). Why does the same 4G-ready handset cost £50 more, from the same company, on a 4G contract? Who knows?

Even at EE’s top monthly tariff, costing £56 each month, you’ll only get 8GB of mobile data included (along with the unlimited WiFi access offered on all 4G plans). That’s a far cry from the unlimited, uncapped data offered at 3G speeds on T-Mobile for £20 a month less. Indeed, when T-Mobile offers unlimited everything for a lower monthly spend, with a lower upfront cost for handsets, it’s hard to understand the appeal of paying dramatically more for increased speeds that will propel you towards your new data cap at a much faster rate.

EE will let you know when you’re approaching your limit, and again when you’ve hit the buffer; after that, you can either go without mobile data usage for the rest of the month, or buy a data add-on. But with prices ranging from £3 for a 50MB add-on to £20 for an extra 4GB, one must surely wonder how serious EE is about driving a data “revolution” for the UK with 4G, as the company’s CEO, Olaf Swantee, promised at the EE launch press event last month.

Meanwhile, tethering is included free of charge on all EE 4G plans – although it’s worth bearing in mind that, when the company launched the T-Mobile Free Monty plans earlier this year, they also included free tethering, but new customers must now pay an additional fee for this option as it is no longer offered free of charge.

Customers who have recently purchased a 4G-ready phone via T-Mobile or Orange will be able to migrate to a new EE 4G tariff – under a new contract – with no extraneous fees. In a genuinely impressive offering, any T-Mobile UK or Orange UK customers who have purchased an Apple iPhone 4S, Samsung Galaxy S III or HTC One X via either brand – and who are in the first six months of their contract – can choose to pay a one-off fee of £99 to upgrade to a brand new 4G-ready iPhone 5, S III LTE or HTC One XL, if they are migrating to a 4G tariff with EE.

Compared with its 3G offerings, EE’s 4G tariffs evidently offer less for your money, but at much greater speeds. EE calls this “simple pricing for the digital consumer”, “putting the customer in control”; in practice, consumers may well find that the idea of being offered a service that by its very nature encourages greatly increased data usage, with such meagre data caps and such costly data add-ons, is hardly the kind of control that they seek. The steep pricing is even more incredible when you consider that it will be over two years – the lifetime of most contracts – before EE’s 4G service approaches full geographical coverage of the UK, and in the opening months of your contract term, you may well find yourself leaving 4G areas frequently.

Just yesterday, we reported on a UK survey which had found that only 15% of respondents were willing to pay a premium for 4G mobile services, with 48% declaring that they had no plans to pay any premium over 3G. Of course, most people will have anticipated that EE would charge a modest premium for its 4G service – it was hardly going to give away what it genuinely needs to charge for, in order to fund the development of its 4G network across the United Kingdom over the next few years.

But the premiums that EE seeks to charge appear far from modest; indeed, they appear unnecessarily punitive towards early adopters, and completely at odds with the company's bloviating about how its 4G tariffs are “designed for 21st century consumers and businesses”. One is left wondering limited data usage - as low as 500MB a month - offered at higher speeds is in any way representative of modern users, when every available trend points to users moving away from traditional voice calls and SMS messaging towards data-based communications and apps.

EE’s assertions seem at worst, disingenuous; at best, out of touch with how people now use their smart, connected devices.

“Our new plans have been developed to offer our customers everything they have been asking for,” said Swantee in a press release. “Superfast performance, choice and value.” EE seeks to add some of that all-important value through “expert support” for its customers, and through “exciting new services”, such as EE Film (a movie store, which also offers the 2-for-1 cinema tickets popularised by EE’s own Orange Wednesdays offer) and higher-tier customers being offered inclusive add-ons such as access to a game service with two free downloads each month.

But while some of these add-ons are nice, it’s questionable how much real value is added by offering a movie store that duplicates all the similar stores already out there, along with other me-too services such as EE’s ‘Clone Phone’, which backs up contacts, photos and appointments to the cloud, along with a find-my-phone feature. Customers might well have appreciated lower monthly tariffs and reduced upfront handset charges, instead of inclusive add-ons that are already offered elsewhere through most smartphone operating systems and app stores, and which consequently add little genuine value to justify the steep launch pricing of these tariffs.

EE will surely be relying on two things as it starts to sell these tariffs to consumers: first, the ignorance of its potential customer base, who will be presented with marketing that carefully overlooks how poorly these price plans compare with those offered by the same company at 3G speeds; and second, the fact that there is simply no point of reference for 4G services in the UK at this stage, effectively giving EE licence to set pricing with impunity.

Other major network operators in the UK have expressed utter fury at Ofcom’s decision to permit EE to offer 4G services long before its rivals even have an opportunity to bid for their licences. While much of the anger of EE’s competitors is obviously self-interested, there’s no ignoring the fact that the absence of competition in this emerging product category gives EE no reason to do anything but apply extravagant pricing to its 4G products while it can.

And with the magic and sparkle of novelty appeal, EE’s marketing is already presenting its 4G offering as something amazing, when a closer examination in a harsher light exposes it as little more than a cynical effort to squeeze early adopters and impressionable consumers before competition finally arrives next year to drive prices down to a more realistic and sensible level.

There will, of course, be those who buy EE’s 4G products because they want to be the first, others because they believe that they have a genuine need for the greater speeds. But for many consumers, I fear, this launch will offer little that appeals, as the promise of higher speeds at insane prices is one that sceptical Brits have heard before, with 3G services that overcharged, over-promised and under-delivered for a long, long time. In the long term, EE's preemptive launch will do little to drive 4G expansion in the UK. EE is first to offer 4G services, but its pricing strategy will hinder adoption of 4G until the advent of competition corrects its pricing imprudence.

Last year, Ofcom released a report showing that the average mobile broadband speed in the UK was just 1.5Mbps; significantly, EE’s T-Mobile and Orange brands were identified as offering poorer performance – measured as slower average download speeds – than the UK’s three other leading carriers, Vodafone, O2 and Three. After a decade of working with 3G speeds, yet still placing last in the top five, this doesn’t exactly inspire confidence in EE’s nascent 4G proposition.

Commenting on the announcement of the company's 4G plans, EE's CEO told BBC News: "We really think we've priced it at the sweet spot. It's all based on months of consumer research." But in these times of tightening purse-strings, the idea of paying such a significant premium over 3G for a service that's arguably more limited, and which demands a higher price for identical hardware for no obvious reason, seems less than sweet to me.

Something tells me I won't be the only one for whom this announcement leaves a bitter taste.


Pricing information via TechCrunch and The Verge

Previous Story
Microsoft holds Windows 8 pre-launch event in China
Next Story
Nokia Lumia 920 pre-orders sold out at Best Buy