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3G operators continue to reduce smartphone data allowances

Photograph of Mark HeathIn his mobile blog, Mark Heath discusses T-Mobile’s recent reductions in smartphone data allowances.

As a further sign that 3G operators need to constrain mobile traffic growth, T-Mobile UK  announced, in January 2011, a substantial reduction in mobile data allowances. The announcement caused an outcry from some smartphone customers. The move, which is clearly aimed at preventing major network congestion problems, demonstrates that traffic management is one of the most important issues facing mobile network operators today.

Previously, O2 and Vodafone took the opportunity of the launch of Apple’s iPhone 4 to implement new data limits. For example, in June 2010, O2 announced that its £25, £30 and £35 per month iPhone tariffs would have a monthly data allowance of 500MB. At the time, O2 claimed that “based on current usage patterns”, 97% of O2 smartphone customers would not need to buy additional data allowances, with the lowest bundle (500MB) providing at least 2.5 times the average O2 customer’s current use. While this suggests that only a small minority would be affected initially, these limits will eventually affect a much greater number of users as average smartphone usage increases over time. Reduced data allowances send a clear message to mobile users that 3G operators do not expect smartphone users to use Internet services (particularly intensive services such as streaming) in a similar way to fixed Internet services, at least not before LTE is widely deployed.

On Monday 10th January 2011, T-Mobile UK announced that it would be reducing its Fair Use Policy for data usage to 500MB a month for all mobile phone customers. Once that limit was reached, users would still be able to read emails and web pages, but more intensive applications like video and audio would be blocked. During the day of the announcement, there was angry feedback to the proposals from T-Mobile customers, particularly existing customers who had previously signed up to much more generous allowances, including Android smartphone contracts with a 3GB monthly data limit. By late afternoon, T-Mobile stepped back from its original position and announced that, following “a further review” of its policy, the changes would be introduced to new and upgrading customers only. While T-Mobile announced that there would be no change to the data packages for existing customers  for the duration of their contracts, it is only a matter of time before most customers are affected, for example when they eventually upgrade their mobile handsets.

The painful reality is that the early days of 3G services with underutilised networks are now over. Mobile Internet services do not have the same cost structures and capacities of fixed broadband services, and, without the capacity uplift provided by widespread deployment of LTE networks, mobile users must resign themselves to significant service restrictions for several years.

Dr Mark Heath co-founded Unwired Insight in 2001, to provide analysis and market intelligence for the mobile telecommunications industry. Previously he contributed to the standardisation of GSM, UMTS and DECT and held senior roles for a mobile network operator and equipment manufacturer. Mark has written over 40 industry reports and has advised investors, network operators, equipment vendors, lawyers and government bodies.

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