Telstra and Optus will struggle with falling revenue from mobile services until the launch of 5G next year, as increasingly generous data allowances are used to lure and retain customers amid competition from low-cost resellers, a study of consumer behaviour from research firm Telsyte has found.
The firm’s bi-annual Australian Mobile Services Market Study uses data from a digital consumer survey of 1162 Australians aged over 16 and combines the results with interviews conducted with executives from mobile service providers, device manufacturers and channel partners to provide a snapshot of the local telecommunications sector.
It found that mobile network operators (MNOs) Telstra, Optus and Vodafone have sought to turn up the pressure on mobile virtual network operators (MVNOs) such as Aldi Mobile, Amaysim, Kogan Mobile and Boost Mobile, which resell mobile packages over their networks. However, closely watched average revenue per user (ARPU) numbers are predicted to suffer as a result.
Telsyte said MNOs were putting the squeeze on the MVNOs in the BYO handset market by substantially increasing mobile data inclusions on their BYO contract plans within the $30 to $60 pricing range. In retaliation, MVNOs had been waging a price war by introducing more competitive mobile plans in the sub-$30 range.
As a result, the report found, consumers were benefiting from much better deals across the board compared with a year ago. Telsyte senior analyst Alvin Lee said Optus and Vodafone had been particularly aggressive with data allowances, while Telstra had also improved its offerings in the BYO device segment during 2017, but sought to maintain its premium position.
“The introduction of its low-cost brand Belong to the mobile market will help Telstra tackle the mid- to low-end market. However, ARPU will likely further decline before the arrival of 5G,” Mr Lee said.
“Optus and Vodafone have been competing more heavily on price and data inclusions, and this will likely put their relationships with MVNO partners under added pressure.”
Telsyte’s study found that the average data allowance on mobile plans grew by more than 100 per cent in 2017, while average data usage on smartphones grew by only 49 per cent. Consequently, only about 50 per cent of the average data allowance per user was used in 2017, down from 67 per cent in 2016.
Rather than suggesting plans were too generous, or that consumers were paying for more than they needed, Mr Lee said the figures showed consumers took time to amend their behaviour to new parameters.
“Consumers have been given much more data for the same or similar prices they have been paying, but consumption patterns won’t just change overnight,” he said. “We expect usage will catch up this year with more using streaming services on their smartphones.”
He said Telsyte didn’t expect mobile service providers to start offering genuine unlimited data plans, without speed shaping, until 5G became well established because it was still more expensive to deliver data on mobile compared with fixed-line broadband.
However, the report did find that the arrival of 5G would blur the line between mobile and fixed broadband. 5G is expected to deliver much faster data speeds at greater network efficiency, which Telsyte said would likely enable further innovation in mobile services plan constructs and bundled services, helping create differentiation in the market for MNOs.
It said there was a future opportunity for telcos to provide unified internet services regardless of the technology that sits behind it as consumers became less concerned by which technology they were using to access the internet.
“Service providers that supply both fixed and mobile connectivity will benefit here,” Mr Lee said.
“Those that have their own network infrastructures will have more flexibility and supply internet connectivity in a more cost-effective way with the right technology mix.”
There has been some commentary in telco circles in the past year about the potential for consumers to eschew the NBN and fixed-line home internet plans in favour of tethering to smartphones but Telsyte found there appears to be limited demand for such an approach.
Mobile at home
It found two-thirds of Australian smartphone users that have fixed broadband at home said they would use their fixed broadband just as much, even if they had access to an unlimited or very large mobile data allowance. However, in 2017, one in four Australians were forced to tether to their mobile connections in the past 12 months due to a slow or non-working fixed broadband connection at home or work.
Among those that were forced to tether, 32 per cent said they are likely to upgrade their mobile data limit.
The study found about 15 per cent of Australian smartphone and mobile broadband users do not have access to fixed broadband at home. While this indicated a level of fixed to mobile substitution in the Australian telecommunications market, it said the consumption of fixed broadband data showed no sign of slowing down, with usage continuing to grow at about 40 per cent per annum.
“Fixed and mobile connectivity complement each other and we don’t expect one will replace the other anytime soon,” Mr Lee said.
“We expect the majority of Australian households to maintain a fixed-line connection, apart from shared households.”