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EE’s 4G prices pave the way for the future of the UK mobile telecom industry

 

EE, the new UK network established by Everything Everywhere in September 2012, has officially revealed pricing for its 4G service, which has a planned rollout date of October 30th. On offer are 24 month contracts, which range from 500 MB to 8GB data allowances, and support a range of Android devices as well as all varieties of Apples latest flagship, the iPhone 5.

The cheapest consumer contract over 24 months will set customers back £36 (approximately $57.74) a month, and includes unlimited texts and calls but only 500MB of 4G data. Additionally, the consumer must also pay an upfront fee in order to acquire a compatible handset. For instance, if a customer chooses the 16GB, i.e. the cheapest, iPhone 5 with this plan, an upfront cost of £179.99 (approximately $288.68) will apply.

Comparatively, for the same monthly price, customers can get a 16GB iPhone 5, with unlimited texts and calls and 1GB of 3G data from EE’s rival O2. Furthermore, the upfront cost of the handset is only £99.99 (approximately $160.37) with this particular contract. Similarly, consumers can also pick up the same handset on another competitor network, 3, for the same monthly price with unlimited 3G data, 2,000 minutes and 5,000 texts and an upfront cost of £79 (approximately $126.70).

It is no surprise that EE’s prices are in excess of its competitors- it is, after all, offering dramatically enhanced data services with 4G as opposed to 3G. However, EE’s data cap is certain to be the main bone of contention amongst potential consumers. The very nature of 4G, which EE claims will offer data speeds up to 5 times faster than 3G services offered by its competitors, means that consumers that have invested in 4G services are likely to utilize the service in order to carry out data-intensive tasks, such as video streaming. Some may therefore argue that the advantages of 4G are, essentially, negated by EE’s respective data limits.

In order to take full advantage of the faster data speeds on offer with 4G, it is likely that consumers will have to opt for higher data packages which, in turn, command higher revenues. Take, for example, EE’s top-tier 8GB a month plan which will cost £56 (approximately $89.82) a month, not including upfront costs involved with acquiring a 4G handset.

It therefore seems that, through its pricing strategy, EE has essentially targeted competitors’ premium customers, who typically spend in excess of the standard £36 a month. Whether O2, 3 and Vodafone’s highly valued premium customers will be tempted away from their typically unlimited data plans in order to enjoy EE’s data capped 4G services remains to be seen.

Nevertheless, EE has essentially set the benchmark for the future of the UK’s mobile telecom services with their rollout of 4G, and it will be interesting to gauge its competitors’ reactions when their prices announced at future 4G rollouts.

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