Rogers new LTE service signals the higher pricing of 4G

Telecom analysts say they expect Rogers Communications Inc.’s new LTE pricing to be the norm in Canada. The fourth-generation, super-fast wireless service provides connection speeds of up to 150 Mbps and facilitates better mobile applications like video-conferencing, on-demand movies and multi-player gaming. But it also comes at a cost. Rogers announced Canada's first LTE network last week and is charging $45 per month for a 1.5 GB data plan and $90 per month for packages providing up to 9 GB of data. Overage fees will be $10 per gigabyte. As Rogers waits for LTE-enabled smartphones from Samsung and HTC to become available in Canada, its LTE service is for now available through the Rogers LTE Rocket Stick, which connects through a USB port. The Internet stick is available at Rogers stores for $80 on a three-year plan or a full payment of $170 without a contract. Duncan Stewart, director of research for technology, media and telecom at Deloitte Canada, said in an interview that a $10 overage fee for wireless is an industry norm. “Overage charges between $8 and $12 are not unreasonable based on the cost of that data,” he said. Overage charges in the United States are also comparable to Canadian costs but are slightly cheaper, with Verizon Wireless charging $30 US for a 2 GB monthly plan and $80 US for monthly plans providing up to 10 GB of data. Verizon’s overage fees are also $10 US per gigabyte used. Stewart said that on 3G and HSPA networks, data transmission used to cost a carrier between $10 and $15 per gigabyte. Stewart said that LTE now offers more efficient use of spectrum and bandwith, so that the service is of less cost to carriers. “The assumptions were that it costs carriers today around $5 to $8 for each incremental gigabyte of data,” he said. “Based on that, we expect to see overage charges somewhere between a small and reasonable profit for data.” Stewart also predicted that the price of LTE will drop as the technology establishes itself over time. “As future generations of LTE come out, that price is likely to drop,” Stewart said. “However, according to work I’ve seen out there, it’s unlikely that charges will ever get below $6 a gigabyte.” John Lawford, research analyst and counsel with the Public Interest Advocacy Centre (PIAC), said Rogers’ LTE fees are typical—but over-priced. “It sounds like typical, way over-priced wireless to me,” Lawford said in an interview. Lawford said Rogers’ is right now benefitting from a lack of competition on the Canadian LTE market. Bell Canada says it plans to launch LTE sometime this year and Telus Corp. intends to deploy the service in early 2012. “Rogers is first out of the gate with this one, and they can charge whatever they want,” Lawford said. Paul Gallant, a telecom and media analyst at MF Global in Washington, D.C., said in an interview that, like Rogers, Verizon is benefitting from being the first to launch LTE in the U.S., which it deployed in late 2010. “Verizon increasingly views itself as a premium wireless service that some customers will pay for,” he said. “You can see an example of that in the U.S., when it moved to usage-based pricing for wireless and it didn’t drop the price at the lower end.” Lawford said he is concerned about the 1.5 GB maximum under Rogers’ basic LTE plan. He said that, for someone who streams a lot of video, it would not take long to exceed the limit, leaving the customer at risk of incurring significant costs. Rogers' and Bell's 3G mobile data plans charge about $5 per gigabyte for overage fees. Customers won't realize that their LTE service is on a separate contract and has a differently priced overage fee “until they get their first bill shock,” Lawford said. “It’s like you’re giving somebody a sports car and not telling them there’s a cop around the corner,” Lawford said of the LTE overage fees. He said that if companies are capping wireless data usage, they should also cap overage fees. “They should have overage fee caps too, at $100, let’s say,” Lawford said. “Because then it gets away from the disciplinary and goes into the punitive.” Rogers may want to keep LTE pricing a bit higher as an economic way of managing network traffic, he added. “The reasoning might be that if Rogers prices its LTE high enough, it will be able to keep a lid on usage so people don’t start watching and streaming videos on their laptops over this new network,” he said. But Rogers says its new LTE plans are designed to “flex” according to customers’ needs. Reade Barber, senior director of data product management at Rogers, told The Wire Report in an interview that, with LTE, customers will be charged according to their exact usage and will be placed into the appropriate data tier to ensure they are getting the best price. “If you go over the threshold, we flex up to a new tier of charges,” he said. The same thing will happen when customers use less data. “If the next month you don’t use your Rocket Stick as much, for example, it automatically flexes back down to the smallest price bucket,” he said. Barber said that as a user goes up in his or her amount of usage, the price per gigabyte goes down. “So the more you use it, the more economical it actually becomes per gigabyte,” he said. Rogers says its LTE service tiers include $45 for 1.5 GB per month, $60 for 3 GB, $75 for 6 GB or $90 for 9 GB. Barber said Rogers’ new LTE service is one of the most economical plans the company has launched. “These plans are actually cheaper per gigabyte in terms of any plan we have previously launched in mobile broadband,” he said. “What we have really tried to do here is adjust the plans for the customer.” The company says it plans to have the top 25 Canadian markets covered with LTE by the end of 2012. In the short term, Barber said Rogers plans to have the major metropolitan areas of Vancouver, Toronto, and Montreal covered by the fall. dgrenier@thewirereport.ca

Rogers new LTE service signals the higher pricing of 4G

News | July 14, 2011

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