Since the commercial launch of 5G in 2019, the performance of the three major domestic operators has continued to improve, with 5G driving the growth rate of operators' ARPU value from negative to positive, and the total revenue scale of domestic mobile services has also increased.
According to the statistics of the China Academy of Information and Communications Technology, in 2023, 5G will directly drive the total economic output of the mainland to reach 1.86 trillion yuan, which will have a significant impact on the economic pull and digital transformation.
However, it should be noted that after the first half, operators' 5G DOU has reached a high level, and traffic growth has slowed down.
With the large-scale deployment of 5G-A in China, 5G network capabilities will be upgraded to a new level. This provides a stronger foundation for operators to explore new models of multi-dimensional billing, including rate-based, to further increase revenue.
Globally, especially in the European market, many operators have successfully practiced in this regard, which is worthy of reference in the domestic market.
5G rate billing models are becoming more and more common around the world
What is the rate billing model? In the context of mobile network services, the rate billing model contains three major connotations, one is the intergenerational/maximum rate, that is, the maximum speed that the mobile phone can reach after connecting to the network, which is divided into uplink and downlink rates and standard (4G or 5G).
Generally, it is the key indicator of the classification of package stalls; The second is deterministic/minimum guarantee, that is, the lowest speed can be reached after the mobile phone is accessed, which is also divided into uplink and downlink rates and fractional systems; The third is differentiation/priority, that is, users with higher rate packages have higher access priority.
Looking at the global market, Finnish operators have been offering rate-based tariff packages in the 4G era, which include unlimited data. In the 5G era, several major operators in Finland have continued this model.
In the case of Elisa, the operator offers 5G packages of 300Mbps, 600Mbps, 1000Mbps downlink, and the "highest speed" Premium package, all of which offer unlimited data. Speed remains the main driver of 5G upsells in the country's market.
Importantly, the financial report data shows that after the 5G era, Finnish operators have not only achieved an increase in revenue and ARPU, but also the lowest off-grid rate of Finnish operators in the past 10 years. In the case of Finnish DNA, the operator's revenue will grow by 8% in 2023, and mobile ARPU will grow by 5%. Revenue for the first quarter of 2024 increased by 6% year-over-year, and mobile ARPU increased by 7%.
"Now, in the 5G era, operators in other regions have also begun to adopt the 5G rate billing model." Nicole McCormack, chief analyst for broadband and bundle pricing at market research firm Omdia, told C114 that Omdia estimates that about 20% of the world's 5G operators have already launched packages of different speed classes for smartphone users. The success of the "Finnish model" has attracted many operators from other countries to join the team.
Among them, KPN in the Netherlands introduced a new rate billing package in the first quarter of 2024, and the effect was immediate, with mobile service revenue increasing by 7.8% year-on-year, adding 30,000 postpaid users, and ARPU increasing by 5% year-on-year. In addition, in 2020, the Bulgarian market began to introduce rate charging for commercial 5G, and from 2020 to 2323, the average ARPU of operators in the country increased by 8% and DOU increased by 40%.
5G-A makes rate billing even more possible
At present, 5G user access traffic accounts for more than 50% of the traffic in mainland China, and 5G has become the main network for traffic bearing. However, according to the statistics of the Ministry of Industry and Information Technology, the revenue of mobile data traffic business in mainland China will be 636.8 billion yuan in 2023, a decrease of 0.9% from the previous year, and the growth rate of mobile data traffic business revenue will slow down. At present, everyone's traffic anxiety has almost disappeared, and new "pain points" are beginning to manifest themselves as users need higher quality Internet connections.
As early as 2019, when 5G began to be commercialized, China Mobile proposed to explore multi-dimensional 5G billing models, such as billing by traffic, rate, bandwidth, delay, slice, and function. During MWC Shanghai 2023, the China Academy of Information and Communications Technology (CAICT) and the GSMA 5G IN jointly released the "5G Business Model Innovation and Development White Paper (2023)", which also showcased the new exploration of 5G billing methods in the mass consumer market by leading operators.
This shows that domestic operators have been actively discussing and exploring new multi-dimensional billing models to ensure that users are provided with a better service experience. In addition, in the current 5G package, domestic operators have tried to include the maximum speed in different network rights and interests such as premium and extreme speed, but it is not obvious, and the user attention is relatively low. However, this does not count as a true rate billing model.
Obviously, operators' multi-dimensional package monetization capabilities will continue to evolve with the upgrading of network capabilities and terminal development. In 2024, China will take the lead in starting the large-scale deployment of 5G-A. This will provide a more solid foundation for operators to provide multi-dimensional billing models such as rate. This is because these new billing business models are more demanding on the network, and 5G-A's enhanced network certainty and reliability will enable operators to better meet promises such as speed and latency. At the same time, in the 5G-A era, the introduction of new models such as rate billing is also expected to help operators achieve the "next hop" of 5G monetization.
The success of the European market has shown that operators are more focused on creating the best experience for their users, after they have greatly increased revenue and mobile ARPU through the rate billing model. In fact, this has formed a positive cycle of industry development: operators launch rate billing packages to achieve increased revenue and ARPU, and the increase in revenue further promotes operators to optimize and upgrade 5G networks to provide users with a better experience.
Cultivating user habits is not advisable overnight
According to Nicole McCormack, it is easy for operators to introduce rate-based package plans in 5G services, as rate-based billing has been around for many years in the wired home broadband space, so consumers are familiar with it.
But she stressed, "it's critical that telecom operators educate consumers about peak rates – and even advertise in the market what different rates mean for different applications and how the experience will be different." ”
In the international market, unlike Finland, which has adopted a rate-based billing model, many operators have adopted a dual billing model – offering not only rate-based packages (most of which offer unlimited data according to different rate classes), but also data-based packages (billed according to the size of the data package).
This is because there are certain challenges and risks associated with a full shift to rate billing all at once. For example, KPN in the Netherlands has launched both rate-based and data package-based 5G packages.
In our view, domestic operators can take a similar approach. In the beginning, rate billing packages can be oriented to high-end packages, which can include experience guarantees in various scenarios (such as games, live broadcasts, concerts, etc.) in addition to peak rates, and users in these scenarios will be interested in higher rate guarantees and higher priority network access services. At the same time, compared to existing packages, such a service needs to give users a clear sense of gain. ginseng
Based on the successful practice of the European market, the rate binning of the rate billing package needs to include a variety of connotations, whether it is the highest rate and the lowest rate guarantee, or the network priority access, so that users of different bins can have a clear perception of these differentiated services, which will be the key to success.
It is foreseeable that after building the world's largest 5G network, the next step is to take the rate billing model as the entry point, and high-quality, reliable and differentiated 5G services will become a new force for mainland operators in the 5G-A era.
Source: C114 communication network