Posted by Thomas Husson on June 14, 2010
Following AT&T's decision in the US ten days ago (see my colleague Charles Golvin's take here), there's a hot debate as to whether European operators will follow suite and stop their unlimited mobile Internet pricing schemes.
O2 UK announced no later than last Friday that it will stop it and introduce various caps: from 500MB for the cheapest one (GBP25 with 100 minutes and unlimited texts) up to 1GB for the most expensive (GBP60 for unlimited voice/SMS and 1GB of mobile Internet).
According to the press release, 97% of O2 smartphone customers would not need to buy additional data allowances, as the lowest bundle (500MB) provides at least 2.5 times the average O2 customer’s current use. In short, just 3% of customers will have to pay extra.
Other UK operators as well as KPN in the Netherlands and Orange France have shared indications that they will follow suite and that this pricing scheme is outdated. Here are a couple of thoughts:
- The devil is always in the details. Few "all-you-can-eat" data plans have really been fully unlimited. There have often been restrictions, whether on usage (VoIP, tethering, etc.) or on speed. That's why SFR's new pricing is interesting. If you want better quality for the mobile Web, you have to pay more.
- Average does not mean much. Earlier this year, Orange UK stated that iPhone owners on average were using 150MB/month. That does not seem high to me. The issue is precisely with the minority of users who make up most of the traffic and of network congestion. Mobile video (and the likes of YouTube) represent a significant chunk of this overload.
- The total volume of data is just one indicator. What is really key for operators is where and when the traffic is peaking. Providing simultaneous access for mobile data services in dense urban areas is a challenge for opeators. I am a heavy user but certainly not among the heaviest users. However, I have to force my phone to 2G to simply make phone calls. Can you believe it? Isn't that a huge risk for operators' brands?
- In Europe, the key challenge will be in prepay data and in roaming data tariffs. Two issues that haven't been really tackled by operators yet.
Communicating these changes to the market won't be an easy task. It is, however, critical for the uptake of mobile services. Smartphones are just one of the drivers and many players will now depend on how good operators are at marketing these new pricing schemes.
I remember a few years ago asking the head of strategy at one operator about the areas where he thought operators should concentrate their innovation efforts. At the time, I was surprised by how clear and immediate the answer was: pricing. He repeated it three times, very distinctly. Pricing, pricing, pricing. Seems like he was right!
Updated: Vodafone Spain just announced today a new flat rate pricing for smartphones which includes roaming (from 50 to 250MB), modem use and VoIP. However, if you hit a certain ceiling, speed is reduced down to 384Kbps...
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