As the telcos have moved towards deploying 5G, there have been questions about how they intend to charge customers for it going forward. The responses here have been mixed. Some companies, like T-Mobile, have pledged that 5G access will be no more expensive than LTE. Others, like Verizon, have said that they’ll put a premium on 5G access. AT&T has now sounded off on its own plans for the segment — and they appear to be planning for a different sort of future than the competition.
Michael Rollins, with Citigroup Inc Research Division, asked AT&T CEO Randall Stephenson the following question:
Do you see a multiyear opportunity in the wireless segment to change the pricing model and charge higher prices for higher bit rate, especially as you introduce 5GE and then eventually full 5G?
Stephenson: Yes. On the 5G piece, Mike, I will 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. If you can offer a gig speed — because there are some customers that are willing to pay a premium for 500 meg to 1 gig speed and so forth. And so I expect that to be the case. We’re 2 or 3 years away from seeing that play out.
This would be a substantial change from how wireless performance is typically billed. Historically, as Stephenson notes, wireless service has been sold to customers based on total data consumption, while wireline fixed access has been sold primarily in terms of speed.
In theory, pricing based on speed and total amount of data consumed would actually make sense — but only if AT&T was willing to adjust its overall pricing so that customers actually wound up paying less. Historically, ISPs and telcos have been unwilling to do this. While some offer lower-cost payment plans if you use very small amounts of data, the discounted plans are typically only a marginal savings in exchange for a very tight data cap.
But AT&T’s blithe talk of charging more for 5G based on speed brings up the very real question of how, exactly, they’re going to meter that kind of rate. 5G performance is volatile, with substantial data rate differences depending on which side of a window you’re standing on. Deploying various beam-forming technologies will improve this to an extent, but both T-Mobile and Verizon have admitted just this week that customers will never see full 5G performance unless they’re in a dense urban environment. And that, in turn, raises the question of exactly what kind of shift AT&T is envisioning here.
From this context, AT&T’s willingness to rebrand its LTE service as “5G E” looks even worse. The company appears to be trying to establish 5G service as a premium offering with absolutely no intent to deliver actual 5G performance across the entirety of its network, while simultaneously queuing up a pricing model in which you’ll be charged for both speed and total data consumption without actually delivering the performance it wants to charge you for.
The company’s existing wireline business model already does this. AT&T charges customers based on speed, yes, but it also imposes data caps — 1TB per month and $50 for each additional block of 50GB of data, or an additional $30 for actually unlimited internet service. What’s far more likely than any kind of fair metering is a flat-rate fee in which you’ll pay extra for the opportunity to receive 5G speed without any guarantee of receiving it.
There has always been some risk of this. From 2011-2013, the rural area where I lived only had 2.5G service on AT&T’s EDGE network. In 2013, I finally got 3G service. I moved out of the area in August 2014, so I don’t know if LTE has been deployed, but it wouldn’t surprise me if it hasn’t. Either way, I spent several years paying for speeds I couldn’t use.
But 5G is going to make this problem significantly worse, and AT&T’s willingness to create a fake 5G network it calls “5G E” (translation: Advanced LTE, just like everybody else) implies it’s perfectly willing to misrepresent data rates and service quality to customers in the name of wringing more money out of them.
Right now, 5G looks to be shaping up as the least-impressive performance upgrade in wireless history for everyone who doesn’t live in a major city center. Deploying service in lower spectrum bands may not help this. The frequencies that reach longer distances and are more suitable for suburban and rural deployments also carry less data. 5G performance in LTE frequency bands is not anticipated to be dramatically better than LTE Advanced. When local improvements occur, it may ultimately be due to the replacement of older LTE equipment that didn’t conform to the latest version of that standard rather than due to any intrinsic capability of 5G.