EE’S TEN-month monopoly on 4G in the UK came to an end yesterday, with Vodafone rolling out a competing network in London and O2 launching in the capital, plus Bradford and Leeds.
These small-scale launches have been disappointing to many. But two factors underpin the operators’ abundance of caution: the expensive 3G debacle a decade ago, and mounting evidence suggesting that consumers still need convincing that more download speed while on the move is worth the extra money. More ambition might have won praise from pundits, but risked hubris and – worse – a shrug from customers. The results of EE’s head start have not been enough to convince its competitors to go any faster.
A number of economic studies, however – by the World Bank, McKinsey and others – have shown a positive correlation between broadband access (both fixed and mobile) and economic growth. Specific to the UK, a study by Capital Economics, commissioned by EE in 2012, found that 4G could deliver a boost to national GDP of up to 0.5 per cent per year. Of course, this assumed widespread coverage by 2013, and the piecemeal approach by UK operators means this goal is years away. The go-slow strategy also guarantees that any substantial economic impact from 4G will be felt only in the long term.
Yet with networks concentrated in cities, companies offering popular services for bored travellers – television, music, gaming, gambling – are sure to benefit sooner than most. This is why Vodafone has bundled Sky Sports television and Spotify Premium, a music streaming service, into their 4G offering. O2 is also offering sports, music and online games as part of its package to address the main strategic imperative – differentiating a core product, the network, for as long as possible before it is commoditised. With Three poised to disrupt the market in December with unlimited 4G data, this could happen sooner than any operator would like. Exclusive content packages make customers less likely to be tempted away by offers of all-you-can-eat data.
Consumer 4G gets the most attention, but mobile operators are also betting on 4G to expand their lesser-known business-to-business products, and delayed rollouts cannot be helping. The higher bandwidth capacity of 4G networks makes them ideal to transmit data-heavy applications in sectors like healthcare, security and energy. Vodafone, EE and O2 all have “machine-to-machine” arms selling these services into different industries. Differentiating on network quality or security, which is very difficult in the consumer market, is easier when, say, a hospital relies on secure, always-on connectivity during life-threatening situations.
But the significance of 4G goes beyond the number of percentage points it will add to GDP or which mobile operator will come out on top. Superfast mobile broadband is a vital tool to keep the UK competitive in the “global race” that David Cameron will make a centrepiece at the 2015 election. At the moment, the UK risks falling further behind.
Jason Sumner is lead telecoms analyst at the Economist Intelligence Unit.