16th May 2014 by Tony Levene
Whatever happened to 4G – the super high speed mobile internet that was supposed to revolutionise both our lives and the phone firm profits?
Taking a look behind the hype can be instructive for tech stock investors. It suggests that our appetite for constant improvement has its limits. What worked 10 years ago for customer numbers cannot be repeated today.
4G has by no means disappeared – or been replaced by the promised 5G that is currently trialling in South Korea – but anyone expecting big changes either to earnings or consumer behaviour must be disappointed. The big roll-out has not occurred while the number of handsets able to deal with the faster downloads remains a minority – and many new purchases fail to embrace the standard.
What appears to be happening is a Moore’s Law in reverse. In its most basic form, Moore’s law says computing power doubles every 18 months or so. Today’s £500 laptop is twice as fast and has twice the capacity as one for £500 in late 2012 or, alternatively, it is the equivalent of a £1,000 machine at that time. The phone industry has assumed that all these possible technology advances will be welcomed by the paying public with open credit cards.
But Reverse Moore’s Law says the number of consumers willing to pay for these power boosts halves as well. There are few willing to queue all night outside an Apple store for its latest marginal upgrade.
It’s like music reproduction. We could pay thousands of pounds for top of the range gear but many choose to listen to songs on phones through cheap, leaky headphones even if they could afford better.
The change from 2G to 3G brought with it the mobile internet. That revolutionised life on the move. We no longer needed maps or railway timetables or restaurant guides. And we could play games.
The 4G promise was that we could all watch films or download material faster than ever before via mobile wi-fi. And so we can. But the question is whether we are prepared to pay for this – to bin our 3G phones well before they reach their natural lifespan to re-invest in more expensive 4G.
Phone companies have not fully understood that consumers who listen to low fidelity pop may not care if their downloads arrive in five or fifty seconds. And, more importantly, they have failed to note that the mobile space has moved on.
Consumers still want mobile wi-fi for those in-the-street decisions – eateries, directions, timetables – but anything that demands more attention such as films or email responses or ordering groceries online is difficult to do while walking around – no matter 3 or 4 or 5G. They can also be tough on a small phone screen.
The solution is the low priced Android tablet, now selling in its millions (Tesco alone has shipped well over 500,000 of its own brand Hudls). Few are mobile wi-fi enabled but all can take advantage of free wi-fi hotspots.
I can check my emails or watch last night’s television free of charge at countless department stores, shopping centres, pubs, coffee shops and restaurants, on long distance trains, and even when I am waiting at my local London Overground station. Free wi-fi is not perfect but for most, it works.
Phone companies ignore this behaviour change – they prefer to blame restrictions on roaming charges for holding back investment on 4G which they say would have increased the numbers.
But firms such as Three or Tesco Mobile have cottoned on to customer apathy for 4G or they advertise 4G at the cost of 3G.
The snag for the moment is that 4G enabled phones are mostly at the top end so you could easily be talking £39 or more a month with the Iphone 5s instead of £19 or less for the same minutes and download with a budget phone such as the Motorola Moto G (as good a screen but no 4G).
Users have yet to say that the extra cash is worthwhile in sufficient numbers to produce the gains once promised to investors. Phone companies will need to find new tricks if they are not to decline into commodity-style suppliers.