Today EE announced that it has commenced pre-orders for the first four 5G models in its range of smartphones, and that its commercial 5G network will go live on May 30 in six UK cities: London, Cardiff, Belfast, Edinburgh, Birmingham and Manchester. EE intends to cover a further 10 cities by the end of 2019.
What Can We Expect
EE’s entry-level 5G tariff, including the Oppo smartphone, is £150 upfront plus £54 per month for 10Gb of data. The top-end tariff, including the OnePlus smartphone, is £10 upfront plus £74 per month for 120Gb of data. Contract duration is 24 months. The tariffs all include Anytime Upgrade and the “swappable benefits” (such as BT Sport passes and charge-free roaming) in EE’s Smart Plans that were announced on May 1. There will also be a 5G home broadband service plan, and a range of tariffs for small and medium-sized businesses.
Initially EE’s 5G network is using the 40MHz of 3.4GHz spectrum that it licensed in last year’s auction. EE reports that the network is delivering an uplift of 150Mbps on 4G downlink data rates in congested areas and up to 500Mbps–600Mbps in less congested areas. There will also be a few “hero sites” combining the 40MHz of 5G with 90MHz of 4G to achieve downlink speed in the 1Gbps range.
5G vs 4G
So now we know which operator will be the first to market with the new G in the UK: it’s EE, just as it was for the previous G. Unlike 4G, though, EE will not have the 5G market to itself for a year. Vodafone UK has already announced that its commercial 5G network will be going live on July 3. Competitive pressures will play their part in the development of the UK’s 5G market from the outset. Another important difference is that 4G launched in the middle of a boom in smartphone demand, and the rising tide of new smartphone acquisition helped to drive 4G adoption. The launch of 5G, by contrast, is taking place in the middle of a downturn in smartphone shipments, which means that service plans will play a bigger role in the rate of adoption.
EE’s service plans are priced high. That said, there is a lot of value bundled in, so it’s hard to isolate the price of the 5G service itself to compare it with 4G, or with competitors’ prices. EE says it is charging a £5 premium for 5G, the same as it charged for 4G when that was first introduced. EE managed to make that premium stick with 4G, but the circumstances are very different this time. One important difference could be competitive pressure. On the face of it, EE’s pricing strategy contrasts with Vodafone’s intention to “price 5G the same as 4G.” However, there are other ways besides an explicit premium to charge more for 5G — for example, by tying 5G to larger, higher-priced data bundles.
Is It a Reasonable Price for the Service Provided?
EE’s packages are somewhat similar to those of Swisscom in Switzerland. That operator has also bundled in lots of extras, and it is charging high prices: CHF 80 per month for its “flagship” tariff. But Swiss consumers are among the most affluent in Europe. It is not clear that large numbers of UK consumers will commit to spending that amount of money every month for their mobile service plan, especially if continued Brexit uncertainty damages the economy. Early sales will be skewed towards tech enthusiasts, who will probably be willing to pay a premium. In the longer term we are less convinced about willingness in the mass market to pay significantly more for a faster data rate. Experience in the fixed-line broadband market suggests that faster rates are likely to become a tool for maintaining ARPU, rather than increasing it.
CEO Marc Allera said the value proposition featured in EE’s 5G marketing will be “a reliable, high-performing connection in the busiest areas”, based on the increased capacity of 5G networks. As he explained, “It will be like having a seat waiting for you when you enter a packed train, or a lane to yourself when you’re driving on the motorway.” High performance is relatively straightforward to market, based on quoting the higher numbers for 5G data rates. Reliability is a trickier proposition, though, because it is a relative benefit. When touting 5G as “more reliable”, EE must take great care not to imply that its existing service is “less reliable”.
What Will be EE Partners?
EE will be partnering with several companies for its 5G launch, one of which is the augmented-reality (AR) gaming vendor Niantic, provider of Pokemon Go. EE will have exclusive UK access to some “special benefits” of Niantic’s forthcoming game Harry Potter: Wizards Unite, and there are some aspects of the game that will only work on a 5G connection. Niantic has been something of a one-hit wonder so far, but the Harry Potter brand remains very powerful in the UK and this partnership looks like a good draw for gaming enthusiasts. As well as the Harry Potter brand, the choice of this game is shrewd because it will not rely on ultra-fast response times. The sub-10ms latency that has been touted for 5G will not be achieved by any operator during the first year or two, because the first services will all use the NSA (non-standalone) version of the standard. EE reports that latency in its first 5G service will be only a marginal improvement over 4G.