Why is No one Buying 5G Phones / SIM Services?

No one Buying 5G Phones / SIM Services

Telstra 5G rollout expanding quickly, but Australians lack enthusiasm for the technology

Telstra plans to expand their 5G coverage to 70 percent of the population by June of next year. Telstra CEO Andrew Penn has stated that Telstra over 10 million Australians “live, work or pass through” their 5G foorprint, which is already expanding to 53 cities and towns in the country.

The telco is accelerating its 5G rollout to capture a sizeable lead in the market ahead of Optus and Vodafone. Earlier this year, Telstra decided to bring forward a $500 million expenditure that was planned for 2021, helping to accelerate the rollout even further.

Telstra has made adjustments to its plans to hammer out the details of how to access their mobile 5G plans, and at what costs, while Optus and Vodafone remain silent on the specifics of mobile 5G plan costs.

But while Telstra expands and makes decisive moves, Australians seem reluctant to purchase 5G plans.

Australians intend to spend less in general

The coronavirus has changed many things, including Australians’ spending habits. Many Australians had to stay at home to prevent the spread of the virus, while many also lost their jobs.

The economy also took a hit and we’re currently experiencing an economic downturn which could possible lead to a recession. These factors have contributed to a general shift in how Australians intend to spend their hard earned cash.

During the height of the coronavirus pandemic, we reported on a survey by data analytics company IRI Australia, which suggested that only 15% of Australians plan to spend the way they did prior to the COVID-19 pandemic.

The survey also indicated that the majority of the respondents expect a weaker economy for the next 12 months.

IRI Australia survey

IRI Australia survey suggests Australians are less optimistic about the economy than Americans. src

5G is already shaping up to be more expensive than 4G

While Optus and TPG Telecom (Vodafone) have dodged the question of exactly how much mobile 5G will eventually cost their costumers compared to 4G, Telstra has set its prices for the service already and it’s turning out to cost more than 4G. When the other telcos decide to address pricing head on, they will likely charge more for 5G as well.

5G, essentially, is being viewed as a premium service. Its faster speeds, higher bandwidth, and low latency are the selling points for its premium nature. It is also a costly technology that telcos are investing heavily in to roll out. These costs will likely be passed down to customers who want a taste of 5G networks.

Here’s a look at each major telcos take so far on 5G SIM plan pricing:

  • Telstra initially planned an additional $15 charge for 5G access, after allowing customers try the service free of charge for 12 months. But the telco recently scrapped that idea. However, they then increased the price of all plans and canceled 5G access for Small plans. So if you want 5G, you must sign up for higher plans starting from $65, which is pretty much an end run to the same idea of charging more for 5G access.
  • Optus has not committed to answering the question of whether they will charge more for 5G or not, and have not introduced any mobile 5G plans. However, the telco recently begun to wholesale their fixed home 5G broadband to MVNOs, and they seem to be charging those MVNOs a premium for it. The telco’s first wholesale customer is Spintel, which is reselling Optus’ fixed home 5G broadband service to customers at $20 more than Optus themselves. Where Optus charges $70 for the same service (with more benefits, actually, like allowing you buy your modem and keep it), Spintel charges $90. This hints at the likelihood that, while Optus hasn’t committed to extra charges for mobile 5G as a premium service for consumers, it is already charging MVNOs very high prices to access its 5G network, which in turn causes those MVNOs to resell 5G at higher, premium prices.
  • TPG Telecom (Vodafone) initially committed to their 5G service not costing extra. However, they did an about-face last month, reneging on that promise and stating that they might, in fact, charge extra for 5G in the future.

Final words – Australians reluctance to spend makes it difficult to convince them to spend more for 5G

For consumers, this is what 5G looks like: Increased costs for 5G SIM plans when compared to 4G, and a need to upgrade devices to 5G compatible phones, which are quite expensive. But right now, Australians have no desire to spend more on anything, and this includes 5G – especially when there is a viable alternative in 4G, which is pretty fast and efficient itself.

To convince Australians to pay more, 5G would have to be significantly better than 4G – sort of blowing 4G away so convincingly that they almost feel as if they need 5G. At this point, it’s difficult to see that happening.

However, in the future, the ongoing economic downturn will right itself. At that point, things should be back to normal and Australians might be willing to spend more, after racking up some disposable income. When that happens, perhaps we’ll see a willingness to pay more for 5G. But as for right now, 5G being sold as a premium, more expensive service might just make it unattractive to the majority.

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.