Vodafone And O2 To Create A Competitive UK 4G Landscape

The long wait for 4G services in the UK finally came to an end when EE 4G went live in ten cities across the UK in November 2012. The operator was controversially granted permission by Ofcom to use its existing 1800MHz spectrum ahead of the perpetually delayed auction of 2.6GHz and 800MHz bandwidth that was eventually completed early in 2013.

The network has since expanded to 105 towns and cities across the country, while EE has doubled speeds in a number of locations and taken advantage of its monopoly on LTE to secure 687,000 4G subscribers.

This monopoly is now over. Armed with the bandwidth they won in the spectrum auction, both O2 and Vodafone have launched the first competitors to EE 4G and will help create a more competitive 4G landscape that is set to accelerate the adoption of LTE services in the UK.

EE head start

Of course EE’s ten month head start gives it an advantage, but analysts suggest this might only have an impact in the short term and other operators might even benefit in the long term from EE’s marketing.

Whereas the first operators to launch LTE in the US and South Korea enjoyed significantly higher 4G market share, Gyanee Dewnarain, research director at Gartner, believes the UK market is sufficiently different for this not to be a factor.

“The UK is different in a number of ways,” she tells TechWeekEurope. “EE already had quite a big market share, so the amount it could gain was not going to be massive.

“The second thing is awareness. Despite the huge marketing campaign by EE during the first three to four months of LTE in the UK, it took a while for customers to actually figure out what 4G was.

“Those who come later, like O2 and Vodafone, will benefit from this education that EE has paid and done for them.”

It’s true that despite the wall-to-wall Kevin Bacon adverts on our television and cinema screens, the take up of 4G was slow at first, but adoption rates have doubled in recent months and awareness is increasing – something that should make it easier for O2 and Vodafone to secure customers.

“The advantage EE has is going to make a small impact to start with, but it’s going to be a level playing field very, very quickly,” predicts Dewnarain.

Kevin Bacon’s awareness drive

According to the most recent Ofcom Communications Market Report, 79 percent of adults with an Internet-compatible mobile phone were aware of 4G services but just 8 percent said they had EE 4G and 12 percent said they planned to sign up for 4G in the next 12 months.

Smartphone users were more receptive, with 30 percent claiming they would upgrade to 4G when their current contract expired. Vodafone and O2 hope their 3G customers stay put when they make the transition and have both offered incentives that allow subscribers to upgrade early.

Of the remaining 70 percent who do not plan to upgrade, cost is the main issue, with 46 percent saying they won’t upgrade to 4G at current prices, while 37 percent also cited the cost of buying a new handset.

Another survey from mobilephones.com suggests the absence of unlimited data bundles is the biggest reason not to upgrade. Half of respondents said they would not sign a contract without limitless data, believing them to be much better value, with 59 percent of EE 4G users warning they had exceeded their data limits at least once since signing up.

A price on 4G

“From Vodafone and O2’s perspective, they have to make their proposition compelling,” Dewnarain explains, claiming there are four factors in adoption – coverage, device portfolio, pricing and value added services.

EE has come under fire for its relatively expensive tariffs and meagre data allowances. It charges an additional £5 premium for 4G, but its cheapest plan comes with just 500MB of data when the average user consumes 1.4GB.

Increased competition should at least provide more choice. Vodafone tariffs start at 2GB, and for a limited time, those on more expensive contracts will receive more.

O2 is also offering 1GB on its cheapest tariff, but is offering to increase data allowances from 3GB to 5GB and 5GB to 8GB on more expensive contracts until 31 October. Both offers are good news for those covered by 4G from launch, but for many people to take advantage, they must sign up for a service they won’t be able to access for at least a few months.

Coverage comparison

EE is currently offering customers the chance to double their data until the end of the Summer, meaning the cheapest tariff will come with 1GB of data for the life of the contract, which might prove tempting to customers in areas not covered by O2 or Vodafone.

EE clearly has the advantage in terms of coverage, with 60 percent of the UK population covered by its network. O2 will launch in London, Leeds and Bradford while Vodafone 4G will only be available in the capital. Both have plans to expand to some of the UK’s largest cities by the end of the year.

This advantage in coverage will only last a few months as both networks expand across the country. This will be increasingly true as DC-HSPA+ technology becomes widespread, making the distinction between 3G and 4G networks less obvious.

Sports are king

Both Vodafone and O2 have assembled ‘4G-ready’ device portfolios, but they are lacking one crucial device – a 4G compatible iPhone. The current model of Apple’s smartphone only works with the 1800MHz spectrum used by EE, but if you believe what you read, a new model should be announced on 10 September with support for the 800MHz and 2.6GHz bands.

All three operators have moved to include value added services into their packages, but it appears as though Vodafone is the winner here. It plans to offer free Sky Sports Mobile TV or Spotify premium to customers, something which observers believe will be far more attractive than EE Films or the music, sports and gaming content from O2.

“From the initial pricing we’ve seen, Vodafone is clearly offering more value for money,” says Dewnarain, while Uswitch telecom expert Ernest Doku is unconvinced by O2’s offering.

“O2 has finally entered the 4G fray by announcing its own range of competitive plans, but seems to have fallen short,” he says.

Three’s disruptive influence

There’s no doubting the arrival of two new players has changed the 4G landscape, but Dewnarain believes the true benefits to consumers and businesses will be when Three arrives with its LTE offering and the distinction between 3G and 4G is no longer made.

Three has already said it will not charge a premium for 4G and the technology will be used as part of its ‘ultrafast’ service which currently offers fast speeds thanks to DC-HSPA+. This, she says will eventually see operators offer ‘mobile data’ plans rather than 3G or 4G tariffs, as is the standard practice in the US.

“It’s very likely Three is going to do something very disruptive,” says Dewnarain. “This might make the market even more competitive. It will be interesting to see.”

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