Higher ARPU from Mobile Speed Tiers, On-Demand Access?

Mobile operators hope network slicing emerges as a a key enabler of new mobile service plans, adding both on-demand, dynamic service levels and pricing, plus speed tiers similar to those offered by fixed network providers. 

Traditionally, mobile service plans have been differentiated by usage allowances, not speed. But the virtualized 5G core network can support the creation of end-to-end virtual networks that might be differentiated on a number of performance metrics.

Among the possible changes are speed-guaranteed tiers of service, or services featuring quality of service related to latency. 

That would, in principle, allow mobile operators to offer speed tiers similar to those offered by fixed network internet service providers. Where today mobile services are differentiated by usage allowances, in the future network slicing could enable differentiation by speed tiers. 

Elisa, a Finnish telco, reports that customer-satisfaction scores are around 50 percent higher for customers whose plans afford them speeds of greater than 300 Mbps, compared with those with plans offering less than 100 Mbps, a McKinsey survey suggests.

To be sure, nary an innovation in the mobile business related to any next-generation network fails to elicit a hope that consumers will pay more for some new feature. Such hopes often do not materialize. 

McKinsey believes ARPU lift ranging from five percent to 10 percent is possible simply based on faster 5G speeds, even if offered only on a “best effort” basis. Perhaps a more-realistic expectation is possible three percent to six percent ARPU lift. 

 source: McKinsey 

Further, McKinsey consultants also believe additional ARPU lift of perhaps three percent to six percent in average revenue per user is possible if on-demand features also are offered, such as on-demand and temporary boosts in speed or perhaps latency. 

That might arguably be true for a subset of customers, typically the highest-yielding accounts, for example. 

For example, if a customer needs stronger connectivity to stream a video, play an interactive game, or make an important phone call, they can simply press a button, pay $1 to $2, and receive a temporary performance boost, McKinsey argues.