Business Watch: End of unlimited data

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The ‘all-you-can-eat’ data orgy is officially over. Party poopers O2 last week revealed that heavy data users of its smartphone customers will have to cough up more if they use lots of bandwidth on the mobile internet

Until now, O2 smartphone subscribers have been free to browse or use the App Store on their Apple iPhones as much as they want for a fixed monthly payment. But that is all changing.

And it’s not just changing for O2 customers. Apparently, the merged Orange and T-Mobile are preparing to follow suit, as is Three. According to The Financial Times, Vodafone has also taken some steps to end unlimited data plans although its arrangements are not as tight as O2’s new ones.

It’s clearly been a very difficult PR operation for O2 to manage: nobody likes to tell customers they are going to get less for the same price.
So O2 has been quick to point out that it expects only three per cent of its 21.4 million customers to have to pay extra charges.

Clearly, that three per cent – the ultra-heavy users – are costing the company dearly, and it is no longer economic to keep giving them so much cheap bandwidth because the more they use, the lower the returns for O2.

So concerned was the company about managing the announcement that O2 chief executive Ronan Dunne penned a pretty frank but carefully-crafted 700-word blog about the changes on the O2 website.

He had some salient points to make. The first is that smartphones have proved far more popular and powerful than nearly everyone expected, driving an unheard-of increase in the amount of data being consumed.

“We are becoming increasingly reliant on data networks that were originally conceived with far dumber devices in mind. Thanks largely to smartphones, those networks are under greater pressure every day – one streamed YouTube video has the same effect on the network as half a million text messages sent simultaneously, the equivalent of everybody in Newcastle sending a text at once,” wrote Dunne (pictured).

But he added that such growth “inevitably comes at a price”. O2 says data traffic on its network is doubling every four months.

“At the same time, though, the way that we charge for this data is pegged to an old flat-fee, all-you-can-eat model designed for a far less data-hungry audience. So while data consumption is growing at enormous rates, our revenues are largely flat – a far from ideal situation for any business, least of all one growing as fast as ours.”

It was a remarkable admission, as was the revelation that nearly a third of O2’s data traffic is accounted for by just 0.1 per cent of its customer base. It strikes me that those ultra-heavy users need to get out a bit more.

So Dunne has appealed to the rest of his customer base (the people who he actually makes money from) by effectively suggesting those mega-heavy users are ruining it for everyone else by clogging up the network and affecting its performance.

Full article in Mobile News issue 466 (June 21, 2010).

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