AT&T’s 5G service may be split into speed tiers rather than priced by data caps, with the carrier’s CEO arguing that the same strategy which has worked in fixed line broadband could prove equally successful – and, for AT&T, lucrative – for next-generation wireless. The carrier is preparing to launch its 5G service for consumers, having paved the way with controversial “5G E” branding for its so-called “5G Evolution” network.
One of the big pitches for 5G has long been the dramatic increase in capacity. As well as higher speeds that next-generation networks should support, they’ll be more capable of handling larger numbers of devices simultaneously.
With dealing with data cap absolutes less of an issue, however, consumers and industry observers have been left wondering what, exactly, they’ll be paying for their 5G service. AT&T still hasn’t confirmed pricing for its consumer plans at this stage. However, speaking on the company’s Q1 2019 financial results call today, AT&T CEO Randall Stephenson predicted that 5G pricing would be likely to be based on speed rather than data transferred.
“On the 5G piece, I would be very surprised if as we move into wireless the pricing regime in wireless doesn’t look something like the pricing regime you see in fixed line,” Stephenson said. “If you can offer a gig speed, some customers are willing to pay a premium for 500 meg to a gig speed, and so forth. So I expect that to be the case, y’know, we’re two or three years away from seeing that play out.”
The strategy stems from AT&T looking, not to 4G LTE plans which are typically limited by data caps, but fixed line broadband connections, which are more commonly capped by speed. It’s arguably not a strange decision for the carrier to make. After all, its current 5G service is focused on businesses.
“Right now, from a 5G standpoint, what we’re seeing in terms of adoption tends to be business – in fact it’s exclusively business for us right now – it’s serving as a LAN replacement product,” Stephenson explained. “And we’re having really impressive demand, where we turn up the 5G service, from businesses basically saying “we want to put a router in” and it becomes their LAN replacement.”
The future of that model, though, as the AT&T CEO sees it, is multiple devices no longer reliant even on a 5G router. “And so now as you begin to think about equipment – whether it be handsets, or tablets, or laptops that have 5G modems within them, that will happen starting this year and really pick up over the next year – then that truly does become a LAN replacement, you don’t even need the router at that stage,” he predicted.
“And so, the idea that – just like business customers pay more for more speed in a fixed line environment – we expect that there is going to be demand and that there will be price differentiation for speed as you move into a 5G environment.”
It won’t be an instantaneous change to speed-based tariffs, mind. 5G networks are only gradually rolling out: AT&T currently has 19 markets with service, a fraction of the carrier’s total coverage. To begin with, it seems more than likely that most subscribers – even with a 5G-capable device – will only see 5G service a small fraction of the time. Trying to charge based on speed in that situation is unlikely to go down well among users.
As the networks spread, though, the model of usage measurement will have to evolve. What could end up costing users more for high-performance devices and tasks, though, could conversely be beneficial for less speed-focused devices. Another of 5G’s benefits is expected to be its power frugality and greater support for low-speed Internet of Things devices, which only require much lower data rates and are far more reliant on low-latency. A speed-based tariff for IoT could be far cheaper, therefore, given the low rates involved.