Research Notes

Now it’s final – LTE is NOT 4G

–  4G is a term that mobile operators around the world are using to mislead their customers

Around the world there are many mobile operators that are marketing LTE as 4G – despite the fact that LTE is not part of the 4G standard, but is in fact part of the 3G standard IMT-2000  that was created many years ago.

Strand Consult brought this issue up a long time ago. Last year we published a research note with the sole purpose of making the industry aware of the fact that they were misleading their customers, which could have serious consequences for their customers’ trust in the Telco industry.

In connection with ITU’s now finalised standardisation work on the upcoming 4G standard, they left no doubt that the LTE that is currently being marketed as 4G is not 4G, but a 3G technology. ITU was very clear about this in their 4G announcement.

Based on the ITU announcement, the Norwegian ombudsman has imposed a temporary ban preventing the Norwegian operator Netcom using the term 4G in their marketing of LTE, as he believes there is a risk of customers being misled.

Around the world the real 4G standard has started a debate about 4G and the legal and moral aspects of marketing LTE as 4G. We believe that this is a very relevant debate for a number of reasons. Below we have outlined the main points that we believe the Telco industry should include in their evaluation of this issue.

1. Consumers are increasingly seeing products that are labelled to ensure that the consumer can see what he is purchasing. Some labels are national and others International. The EU is very focused on this area as you can see here: European Legislation – Product labelling and packaging

2. The Telco industry is battling to improve its generally poor reputation amongst consumers and it is safe to say that most consumers have very little faith in the industry. One reason why the telco industry ranks low in consumer trust is that it has not always been honest with its customers and another is that there has not always been a relationship between what the industry announces and what it actually does.

3. As the Telco industry has developed, it has historically used the current and next generation of technology, e.g. 2G, 2.5G, 3G etc to differentiate their products and inform customers about new functionality and features that will be available with new technology. This strategy was also used when moving from the original analogue mobile systems (NMT) to the digital 2G GSM technology. The final GSM standard agreement was actually signed here in Copenhagen on September 7th 1987, where 15 market players including a number of national telecom regulators were among the original founders of what became GSM and 2G.

4. Everybody who works within telecommunications standardisation knows that LTE is not 4G, but part of the 3G standard and arguing that LTE gives higher speeds than UMTS is not valid. In practice one can most often achieve the same speeds using UMTS/HSDPA+ and HSUPA as you can with LTE. 

5. The politicians have allocated mobile licences to market players. In some countries this has been handled through beauty contests and in other countries through auctions. The licences give mobile operators the necessary frequencies to allow them to launch various types of mobile technology. Usually there have been more companies applying for licences than the number of licences available, resulting in the highest bidders or beauty contest winners receiving the rights to launch certain technologies.

6.  When a mobile operator acquires certain frequencies, they are allowed to build and operate a mobile network. They can then market their mobile services to end users that then use and pay for those services. For example Norway offered operators 2G and 3G frequencies (900, 1800, 2100 and 2600 MHz), which were used to launch a number of mobile products 2G (GSM, GPRS og EDGE) and 3G (UMTS, HSDPA, HSDPA+, HSUPA and LTE).

7. A number of marketing and PR people in today’s mobile world have chosen to disregard the experts’ knowledge regarding 3G and 4G. These people have chosen to call LTE 4G, despite LTE not being a 4G standard and regardless of the fact that they actually do know that LTE is not 4G. The only reason these people have chosen this misleading communication strategy is not to help customers understand what they are purchasing, but simply to increase their sales. Quite simply these communication employees know that it is easier to sell a product at a higher price if that product is called 4G, instead of telling customers the truth; that the operator has simply increased the speed of the mobile broadband connection the customer already has access to via 3G. This misleading marketing is very clear in the photo here: 

8.  In the coming years a number of countries will start offering the frequencies that most probably will primarily be used for 4G. The frequencies and the right to launch real 4G will be awarded to operators that via their bidding qualifiy to gain access to launch real 4G. In practice there are no guarantees that existing operators will automatically receive a license that will allow them to launch and market real 4G – instead an auction or beauty contest will most probably decide the outcome.

9.  So when 4G arrives in Norway sometime in the future, it will be possible for a new market player to market themselves and their products by using the term that is connected to the technology that is part of the 4G standard. In other words, operators that win a 4G licence will thereby be allowed to use the term “4G” to differentiate themselves on the market and from their 3G competitors, by labelling their services and offerings “4G”.

10.  But if politicians silently accept that operators around the world today market 3G as 4G, they are greatly reducing the value a future 4G operator will have in using the label “4G” in their marketing. At the same time they are totally confusing customers, as customers already believe that something called 4G is available on the market today. Customers must be able to trust the labelling on what they are purchasing. Being allowed to call a 3G product “4G” is no different from calling a non-ecological food item ecological – it is directly misleading and should not be allowed.

We strongly support the ombudsman in Norway and applaud that Norway is the first country to take steps to both protect consumers and future business opportunities for mobile operators. We are certain that many other countries will follow Norway’s example and that if the Norwegian ombudsman makes the right decision, it will have consequences all over the world.

If the Telco industry is to improve their image among consumers, the industry must be honest. We do not believe that some slick businessmen wanting to sell more services at a higher price should justify legalising that they suddenly label 3G as 4G. We have no doubt that if this debate was about semi-ecological food that was being labelled as ecological food, there would be no debate at all, because the political system would act very promptly – it would simply not be allowed.
Strand Consult has already spent a great deal of time on this subject. In our report about the mobile broadband market Successful Strategies for the Mobile Broadband Market we have examined this issue and described a number of the other challenges that the mobile industry is facing when creating, marketing and selling mobile broadband.
More information:

Successful Strategies for the Mobile Broadband Market

Related Reports:

OneAPI – Next Generation Value Added Services in the Mobile industry

Show me the money – The future Business models for mobile Broadband Services

How MVNO´s can get success in the Mobile Broadband market

How media companies can get success on the mobile broadband market

How to get success with Value added services on the Mobile Broadband market

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