The Consumer Impact Of An End To "Unlimited" Mobile Internet

Last week, O2 in the UK and AT&T in the US announced an end to "unlimited" mobile data on their smartphone tariffs.

Many have argued -- some discussed with me on twitter last week -- that the impact on consumers will be minimal as very few consumers currently use a greater amount of data than the new data limits. This is only a part of the story. There will be unintended impacts as the new limits will alter mainstream consumer behaviour:

  • The perception of "unlimited" is as important as the reality. Like the word "free", "unlimited" is a powerful word in helping consumers feel sufficiently comfortable to experiment with the mobile Internet. Any sense that a consumer will incur extra costs, or a glacial throttled speed, as a result of using too much data will cause consumers to alter their behaviour. And, as mobile Internet adoption is still relatively small, this could cause a slowdown in usage that will harm the mobile industry. Handset makers will see slower demand for advanced smartphones while operators will see lower revenues, alongside the lower data costs that they so desire.
  • Consumers' expectations have been set by their home broadband experience. Before the arrival of unlimited mobile Internet tariffs three to four years ago, adoption of mobile Internet was tiny. The vast majority of new mobile Internet users never used the older tightly limited mobile data tariffs -- the time when 10Mb was a generous bundle -- but the new consumers that have started using mobile Internet in the post "unlimited" data era have been conditioned by home broadband. In the home, most packages are either unlimited and marketed as such, or so generous with their data limits so as to be effectively unlimited.


In a similar vein, I'm unconvinced that the widely publicised AT&T and O2 moves will mean an end to "unlimited" mobile Internet tariffs across the board in Europe. In diverse countries across Europe there is fierce mobile operator competition. The iPhone is non-exclusive in most countries. Other advanced handsets typically enjoy brief periods of exclusivity before being offered on all operators.

This competitive dynamic enables consumers to pick and choose the best offer from the variety available, and so encourages mobile operators to differentiate. O2 showed its hand early with its new iPhone and smartphone tariffs last week, I expect we will see a variety of options from the six operators in the UK that sell the 3GS today or have announced they will sell the iPhone4. In markets with fewer mobile operators -- such as France -- and a lesser competitive dynamic, the range of offers will likely be more uniform.


"Unlimited" Mobile Internet is Not Sustainable at Flat Pricing

It is well understood by operators that flat pricing for unlimited data is an unsustainable model, because it defies the laws of physics (finite capacity) and economics (scarcity drives prices up).

Rather than impose quota-based limitations for undifferentiated mobile data consumption, mobile operators now have the tools to get out of the unlimited data price point competition. They can, through well integrated policy management and enforcement, network optimisation, deep packet inspection, and BSS/charging and CRM platforms create highly dynamic service bundles that cater to people's willingness to pay for benefits received. It will take some marketing finesse, but consumers will soon come to understand that the "unlimited" mobile internet comes at a price. They will learn to shift consumption habits just as they did when nights and weekend voice calls were free or discounted.

This represents an even

This represents an even greater arguement for the alternative voice originators to take a greater share of the voice origination cake. With a downloadable client app and a WiFi connection you needn't worry about these issues anymore. Let the internet act as your transmission bearer and leave the worrying about monthy charges and complicated service bundle plans to others.