This week saw the finalisation of the Ofcom 4G bidding process. The auction concluded without surprise, with the U.K.’s main mobile operators each grabbing some of the available spectrum to roll out their own superfast mobile service. Whilst 4G is nowhere near as conceptually revolutionary as 3G – the service which enabled true, widespread internet access on mobile devices for the first time – it is nonetheless an extremely important evolutionary step for consumers and operators alike.

Mintel’s Mobile Phones – UK – February 2013 report discovered that less than 1% of consumers have a 4G connected phone at the moment. This mimics the global trend, as discovered by Cisco and discussed in its excellent though awkwardly named_ Visual Networking Index: Global Mobile Data Traffic Forecast Update_. The update relates how the global 1% of 4G devices currently account for 19% of all data traffic, and forecasts that by 2017, whilst 19% of devices globally will be 4G connected, they will account for up to 45% of all data traffic.

The enormous volume of data that 4G access allows will increase the ability for brands and retailers alike to provide consumers with feature rich experiences through connected devices on-the-fly. It will potentially allow augmented reality – currently a stunted and lacklustre experience in the vast majority of cases – to come into its own, whilst providing a conduit for the enormous volume of video content likely to be delivered to tablets and phablets in the coming years, as VoD services continue to grow in popularity amongst the fifth of consumers who prefer to schedule their own entertainment (according to Mintel’s Video on Demand – UK – March 2012 report).

Despite some potentially game changing benefits however, operators will not necessarily find it easy to attract consumers to a 4G proposition. In the few years since smartphones have become the dominant mobile handset type, consumers have become extremely savvy about data limits and allowances. Attempts by Everything Everywhere to charge higher rates for the same amount of data on its fledgling 4G network in 2012 came a cropper following fairly obvious complaints that with a similar data limit on a faster network, consumers would be paying more to simply run through their allowance quicker. Research by think broadband.co.uk in the latter months of the last year discovered that 70% of consumers said the cost of Everything Everywhere’s tariff would put them off joining a 4G service.

This is a big problem. There have always been premium products and services that consumers will pay more for, but the superfast mobile network is currently unproven and relatively unknown. Mintel’s 2012 Mobile Phones report discovered that the cost of a mobile tariff was so fundamental for consumers that it was listed as one of the most important factors not only when choosing a mobile contract, but also when buying a handset or device. Our upcoming March 2013 report into Mobile Network Providers specifically researches consumer attitudes to 4G pricing to find similar results – a significant proportion of consumers simply do not feel the outlay to join the untested 4G network is currently worth the return.

Although three is making some admirable efforts to overcome this attitude by widely advertising its more egalitarian system of network access (everyone’s upgraded, as standard, no charge), it doesn’t address another glaring consumer concern thrown up by Mintel’s research for the above mentioned report: even if consumers do pay for a 4G connection, what are they then supposed to do with it?

This is a problem of two halves. Services that fully utilise the increased data pipeline down to connected consumers are currently thin on the ground, and it is unrealistic to expect them to spring up overnight. In-depth research by retailers, advertisers and more will be necessary in order to fully identify the opportunities contextually relevant to consumers in a variety of situations and on a variety of devices.

However, when these services start to appear they will do no good if mobile operators are artificially curtailing the amount of data consumers can access through their new, speedier connections. The consumer paying more money to watch her unchanged data allowance disappear faster each month may well question exactly what benefit the 4G network has brought her beyond extra charges on her phone bill. This dissatisfaction is a problem for the customer, a concern for the operator, and a potential disaster for the industry as a whole.

Finding the careful balance between maintaining operator revenue and keeping consumers happy will be a process of trial and error. Mintel examines these problems in its upcoming Mobile Network Providers – UK – March 2013 report, alongside in depth discussion and analysis of exclusive research into consumer attitudes to mobile network providers and the new 4G network. 

If you’re excited about the superfast network and want to fully understand the lay of the land contact us here.

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