LTE, unlimited data, and tablets: Can German operators make 4G pay?
Not too long ago, almost one in two German mobile users didn't even know what LTE was. But after substantial infrastructure investment, speed increases, and marketing by Germany's mobile carriers, the majority of users are now aware of the technology and would adopt it — even if they're not so keen on paying for it.
"Germans are not reluctant to take LTE, but they are quite reluctant compared to others to pay for it," said Klaus Böhm, Deloitte Consulting's director of technology, media, and telecommunications in Germany. Deloitte recently completed a study, which looked at mobile consumer behaviour of people in over 20 countries across the world, including Germany as well as the UK and France, Russia, and the US, among others.
Böhm says that German smartphone users are quite aware of LTE and its benefits, but that for many, the decision to adopt it simply comes down to cost.
"Germans are willing to use LTE, and the LTE infrastructure will be successful here in Germany, but the network operators will not be successful in upselling from 3G to LTE," Böhm said.
In fact, Germany was an early adopter of LTE — regulators in the country saw it as a great way to supplement limited broadband service in rural parts of the country, and carriers started rolling out the service for this purpose in late 2010. Because of these initial conditions of the early launch, "the uptake is going to be relatively slow, if you compare it to the initial rate of uptake in the UK, where it launched on a completely different basis," said Rosalind Craven, senior research analyst at IDC.
Indeed, mobile carriers began offering LTE-capable smartphones in 2012, which means that German mobile users haven't had all that much time to adopt the service — especially because Germans tend to be a bit slower to replace their old, non-LTE phones than mobile users in some other countries.
"There is a generalisation to be made that German consumers are a bit more prudent and cautious, and so the renewal cycle has been a bit slower than in other markets in Europe," Craven said.
The bottom line
However, prudence doesn't explain everything.
In fact, according to the recent Deloitte report, a majority of current LTE users in Germany are not actually paying extra for 4G, but were either grandfathered into it, or got the service through promotions or by negotiating with their mobile providers. Many German smartphone users, it seems, are not willing to pay extra for LTE — at least not yet.
In terms of current smartphone plan options in the country, the main selling point of LTE connectivity is of course increased speed compared to 3G. For example, for its 3G packages, Vodafone advertises speeds of up to 7.2Mbps, while its advertised speeds of LTE plans start at 21.6Mbps, at an added cost of €10 per month.
A main reason that smartphone users in Germany are less willing to pay the extra €10 (or more) for LTE packages may be the way in which mobile carriers introduced the technology. In other countries where LTE has been launched, mobile providers often created clean breaks between 3G plans and their LTE equivalents — in effect forcing customers to pay extra for the service if they wanted it — rather than adding it to existing contracts through promotions, as was done for many German smartphone users.
Or, it may be that many mobile users in Germany are simply satisfied with the speeds of the country's current 3G networks, and see no need for faster service, at least compared to users in other countries.
"The German operators have been quite aggressive in upgrading their 3G, so that the service is pretty good," IDC's Craven said. "In some other markets, operators have been sort of sluggish in upgrading to the latest 3G technologies that provide better speeds."
In any case, it probably won't be until the end of 2013 until a clear picture of LTE adoption rates in the country emerges. At that time, "I might expect Germany to be a little bit slower than some other markets, but I wouldn't be expecting a significant lag," she said.
Data plans
Whether they're on 3G or LTE, many consumers across the globe want plans that offer unlimited data, but carriers are generally not willing — or are unable — to provide them.
This is a bit more complicated in Germany, where in the past, some mobile providers tended to market data plans as 'unlimited,' even though they would include caps where once users reached a certain threshold, their speeds were throttled, often substantially. This miscommunication might have left some mobile users in the country confused — or even unsatisfied — as the carriers stopped branding these plans as 'unlimited'.
Indeed, in the recent Deloitte report, over 40 percent of respondents who had data plans had no idea of how much data they could actually use per month, and because of this, many said they are cautious about their data usage.
One way that carriers could meet a demand for more data — in Germany and in other countries — would be by selling plans that offer unlimited data for specific usages or applications. As an example, last year, Deutsche Telekom partnered with Spotify to offer a plan that included unlimited data specifically for music streaming through the app. Notably, this service is exempt from any data caps.
Similar offerings, where users could have unlimited data for apps that they use a lot, could be bundled into mobile contracts and successfully sold at a premium — although whether this kind of arrangement will hold up against evolving network neutrality laws will remain to be seen.
In any case, "there's a huge potential here on the German market," Deloitte's Böhm said of what he called "all-you-can-app" plans.
But where are the tablets?
In general, smartphone adoption in Germany has lagged behind other countries, but "the gap is closing," according to IDC's Craven.
"It's not that Germans are refusing to adopt smartphones, they're just a bit slower in converting."
The same might be said for the country's tablet adoption rate, which is again somewhat lower than other countries like the US and the UK. "We see tablet penetration here in Germany on a much lower level," Deloitte's Böhm said, because German consumers see tablets as complementary to other devices, like smartphones and PCs, rather than a replacement for them.
"Tablets are a very healthy, niche market [in Germany], but they will never see the massive sales as in other markets," he said.