5G pricing - How would Service Providers monetize 5G investments?

5G deployments and commercial launches have started in many parts of the world. Service providers are spending several billions of dollars to build the 5G network. But, most service providers are still in the "learning phase", trying to understand how to monetize their 5G investments. "How is 5G going to be priced?" - is still a million dollar question for many in the industry. In fact, 5G pricing is still a puzzle for even the service providers. This article explores how 5G can be priced by the service providers.

A quick look at the history

"Study the past, if you would define the future", said Confucius, a great philosopher. So, it is important to look at how Service Providers priced their previous generation wireless technologies, before looking at 5G pricing.

Traditionally, service providers charged their wireless customers based on the amount of bandwidth they consumed. For example, a customer using 2Gb of data a day is priced higher than the customer who is using 400 Mb of data, a day. But, that pricing model isn't going to be relevant for 5G, as 5G caters to a variety of use cases such as IOT and Autonomous Cars. For example, in an IOT deployment, several 100s and 1000s of sensors / devices are going to push small chunks of data at periodic intervals to the network or to the cloud. The aggregate volume of data pushed to the network/cloud isn't going to be as high as 2Gb a day. However, the network has to support several 100s and 1000s of active sensors/devices at a given time. So, service providers cannot make a lot of money if they charge customers just based on the bandwidth consumed. They'll have to be more creative at charging the customer, month-on-month basis.

How Service Providers are pricing 5G today?

US has been leading the 5G wave. So, let us look into how the major service providers in US are pricing their 5G services.

Verizon charges $70 per month for new customers signing up for Verizon 5G Home services. They are charging $50 per month for existing wireless customers who sign up for Verizon 5G Home services. The good news is, there is no data cap/limit for 5G Home customers. So, they can do unlimited data downloads/uploads.

For 5G mobile services, Verizon has mentioned that it is going to charge an additional $10 per month, when compared to the 4G customer.

However, even the best Verizon's Unlimited plan allows a customer to access up to 75Gb of data a month, beyond which it may lower the speed of data access.

AT&T's initial launch of 5G services comes with a $70 per month plan and with a 15GB data cap/limit.

T-Mobile has mentioned that they won't charge extra for a 5G connection. T-Mobile is planning to generate additional revenue through 5G by offering home broadband service and Internet of Things (IoT) capabilities.

How can Service Providers price their 5G services?

There are a few indications from leading service providers on how they are planning to price their 5G services. For example, Hans Vestberg in his keynote address at the Consumer Electronics Show (CES) talked about the 8 currencies of 5G. He talked about 8 key parameters based on which the 5G services can be priced such as Peak Data Rate, Mobile data volume, Rate of Mobility of the device/user, number of Connected Devices, Service Deployment time, Service Reliability, Energy Efficiency and E2E Latency.

In the recent earnings call, AT&T CEO Randall Stephenson mentioned that they are going to charge 5G customers based on the speed of network connection. For example, customers who are availing a 1 Gbps 5G service would be charged higher than customers who are availing just 50 Mbps service.

1. Pricing based on Bandwidth consumed - This is the traditional pricing strategy and some service providers would continue to provide 5G wireless plans based on customer's bandwidth consumption. Once the customer reaches their maximum upload/download limits, the service provider would switch the customer to a slower tier of service.

2. Pricing based on network latency - There are services such as Autonomous Cars and Robotic Surgeries that are latency sensitive. Customers and Enterprises using such services would avail plans that support different latency tiers. For example, a customer signing up for 1 millisecond latency would be charged higher than the customer who signs up for 5 milliseconds or more latencies.

3. Pricing based on number of devices  - In an IOT deployment, pricing of the 5G services is going to be based on the number of devices that connect to the network. For example, a farm land would have several 10s or 100s of sensors / devices actively monitoring parameters like weather, water levels, soil quality, pesticide levels etc., and pushing such data to the cloud. In such deployments, access to 5G services will be charged based on the number of devices that connect to the 5G network.

4. Pricing based on network speed - Services such as online gaming, Augmented Reality / Virtual Reality (AR/VR) would require a network that performs well and can support higher data speeds. Customers who use AR/VR or online gaming services can sign up for a pricing plan that offers higher network speeds.

5. Pricing based on Network Slice  - Network slicing is a new technique introduced in 5G, to partition the physical network into multiple virtual network slices, based on parameters such as speed, latency and security. An Enterprise customer can avail a dedicated network slice that offers a secure SD-WAN connectivity between its branch offices. This would improve the quality of the SD-WAN service for the customer..

6. Pricing based on tenant space in the MEC infrastructure - Multi-access Edge Cloud (MEC) infrastructure opens up the service provider edge for hosting a variety of MEC applications such as video streaming, video surveillance, IOT and AR/VR applications. Service providers can charge their partners and customers for the MEC tenant space. The various MEC use-cases would enable service providers to create additional revenue streams.

7. Free 5G service (subsidised by OTT players) - Considering the growth of OTT (Over-The-Top) services, online service providers are even ready to subsidize the connectivity to Internet for their customers. Google today is rolling out free WiFi services in railway stations, in countries like India. In the future, online service providers like Google may partner with telecom service providers to offer free 5G services to their customers. 

8. Pay using Bitcoins - Imagine a day where you'll have to play online games and earn bitcoins that you can use for paying your monthly 5G services bill. Not sure whether we'll ever get to this. However, considering the amount of time subscribers spend in online gaming applications (and in earning bitcoins), this could also be a reality.

In the next three years, we would have more clarity on how service providers are going to monetize their 5G investments. In the mean time, we can ponder over the various 5G pricing options available and service providers can start experimenting with a few.