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Summary

Around one year after 5G networks were launched with genuine commercial ambitions, there is still little indication from operators in Europe on user uptake or network usage. While network KPIs will arrive when there is good news to share, their absence hasn’t stopped operators in Europe from pushing ahead with launches, and KPN’s is a great example of how operators should do so.

Widespread coverage and no premium are crucial to consumer interest

Just three days after it paid €416m for 5G frequencies, on July 24 KPN switched on 5G at 700MHz, with carrier aggregation and over 90% 5G coverage in the largest five Dutch cities at launch. KPN aims for nationwide coverage by year-end, an ambitious target comparable to market rival VodafoneZiggo, which aims for nationwide 5G coverage by end-July. Analyzing successful 4G launch strategies, this is the exact strategy that Omdia recommended for 5G. Widespread availability at launch in areas where coverage is claimed is the surest way to meet customer expectations, thereby avoiding the customer disappointment that comes when an operator claims it has launched in an area where in fact there is only limited coverage. And worse than any initial disappointment—consumer interest will be harder to win back when coverage does become available.

Another key pillar to KPN’s launch strategy is to charge no premium for consumer 5G access. This approach has already been adopted by most European operators that have launched 5G, following the same tactic that proved successful with 4G. Even when operators charge no premium for 5G access, they still have plenty of opportunities to differentiate their tariffs, through either bundled premium content (e.g., BT/ EE and Vodafone in the UK), amounts of data, or speed (e.g., Swisscom, Telekom in Germany). At launch, KPN will also offer business customers 5G-only services such as coverage on demand and guaranteed bandwidth, capabilities that clearly differentiate 5G for enterprises and which could give KPN an early advantage over rivals in that market.

5G’s marketing conundrum: When will consumers care?

Marketing departments had it relatively easy with 4G: it was noticeably much faster than 3G and had much greater capacity—as a result the network experience was tangibly and significantly better. Apart from specific consumer applications such as gaming, how much do consumers notice the difference between 5G and 4G (especially for operators with the latest LTE specifications)? The answer so far is not much—not for the average consumer who doesn’t do speed and latency tests anyway. What this really highlights is that for operators, 5G, to date at least, really is much more about network modernization, opex savings, and enterprise applications—none of which will cause the average consumer to rush out and upgrade their phone before they plan to.

To address the 5G consumer marketing problem, Omdia urges operators to closely align advertising with network availability. Although operators often want to make a nationwide splash around a new technology to claim technology leadership, this has little meaning, and is more likely to have a negative effect when early consumer adopters buy new devices but find they have little or no network connection. Instead, operators should use local advertising and local stores to communicate when consumers will be able to connect to 5G.

Although there are currently no facts about which 5G frequencies Apple will support or at which price points, the next iPhones will cause a huge increase in consumer 5G interest when they launch in 4Q. At which point, operators such as KPN, which have widespread and coherent network availability (depending on iPhone 5G frequencies) will be in a great position to keep high-ARPU customers, and gain new ones when people ask why their friend’s iPhone says “5G” in the top righthand corner when theirs has “4G.”

Appendix

Further reading

2020 Trends to Watch: 5G Strategies and Services, GLB007-000328 (January 2020)

5G Launch Strategies: Networks, Pricing, Marketing, and Services, GLB007-000275 (August 2019)

5G Service Provider Tracker: 2Q20, GLB007-000408 (July 2020)

4G in Western Europe: Network Expansion and Subscriber Growth, TE0014-000418 (August 2016)

Author

Paul Lambert, Principal Analyst, Service Provider Strategies & Regulation

[email protected]

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