Offering fair and transparent access to mobile data

O2’s Chief Executive Ronan Dunne explains why unlimited is a thing of the past.

When the mobile industry first heard the word “smartphone”, few of us realised how smart these devices would eventually turn out to be. Today, though, their extraordinary power is visible to anyone. They have literally changed our world, in ways that the first smartphone creators could barely have imagined; they entertain, help us navigate around unfamiliar cities or countries and keep us in touch with each other in myriad ways. For tens of millions of people around the world, it’s hard to imagine life without one.

To make all this happen, of course, we need data. And that in turn means that 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.

This extraordinary growth in the smartphone phenomenon is gratifying for the industry to watch, but it inevitably comes at a price. At O2, we’re seeing a doubling of data traffic on our networks every four months, and we are far from the only operator worldwide seeing growth of this kind of magnitude. 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.

As an industry, we’re doing an excellent job of coping with the increased demand. O2 alone invests £1 million every day in its networks as part of our effort to ensure that customers continue to get great performance from their mobile devices. At the same time, though, we’ve been working to hard to understand exactly how customers use data, so that we can predict and manage demand more efficiently. The results of those investigations have revealed some extraordinary facts. Nearly a third of our data traffic is accounted for by just 0.1% of our customer base, for example; a stark imbalance by any conceivable measure, and one which often affects network performance for the rest of our customers.

We don’t think it’s fair that the many should subsidise the behaviour of the few, and we think that we have a responsility to our customers to address this kind of imbalance. So from June, O2 will pioneer a simple but important change to our billing structure, in which we will begin to ask our heaviest data users to pay more for using large amounts of data. The vast majority of our users will be completely unaffected by the changes – 97% of our smartphone customers currently use less than 500MB of data every month.

This change may be a simple one, but it is a revolutionary one too. For most of our customers, the only noticeable difference will be a positive one; we’ll invest more money in more network capacity, with the result that their experience will be smoother. But at the same time, we’ll start to change customer perceptions about the value of the data they use; a vital part of ensuring that people share it responsibly and considerately.

At O2, we believe that in the future, mobile data will be every bit as important as the other commodities that we take for granted – water, electricity, TV signals. It will form an important part of the basis for a new digital future, in which all citizens have access to the information and services they need to run their lives. But we also believe that unless we find a way to manage it more effectively, the provision of mobile data will become uneconomic for the world’s operators and risk holding back the digital economy of the future. Our new billing strategy is an important stepping stone to that future – a means to ensure that however it evolves, everyone has fair, transparent access to the mobile data they need.

Comments

[Seprothia]

If just 0.1% of your customer base is causing most of the issue, why can't you just deal with them directly rather than offering a worse service to the rest of your customers?

You say yourself the smartphone industry has rapidly expanded, which it will continue to do so - the iPhone 4 will provoke more data use generally what with newer apps tending to use more data, new advertising, multitasking so more data will be asked for at the same time - this is a huge step *backwards* in terms of the needs of the customers.

I reckon there are a huge proportion of customers sitting not far below the 500MB line, who will naturally see an increase in data usage with the new phone, and therefore will see themselves being charged extras and being strangled by your limitations.

[Rob]

The worry for me is that some new feature (faceTime for example) or third party app will cause me to go over a limit without intention.

Suddenly I could be faced with a huge bill without being warned.

What will you be doing in order to stop this happening? Warning text messages, emails, push notifications from the O2 app perhaps?

Or are you hoping this will happen to get some quick cash?

[O2]

Hi Rob - Facetime is Wi-Fi only so won't affect your data usage. You'll also receive regular text messages to let you know how you're doing on your data allowance.

[Mark Piggott]

What happens in 2011 then when FaceTime is also on 3G ?

Did O2 offer unlimited data plans before the iPhone?

[O2]

Hi Seprothia, the average customer uses 200MB per month - by applying these limits across everyone they are fair and transparent. If you do use more than 500MB then you're able to get Bolt Ons for extra data, whereas if you regularly expect to use more than that you can get a tariff with a higher monthly cost to get more data.

[Andrew]

Will customers on old "unlimited" data contracts be forced to move to a capped limit once there minimum term has expired.

[stuart]

Can you provide an indication of how much data 500mb equates to in the real world, ie number of hours surfing the web etc?

[O2]

Hi Mark - the unlimited model is broken and by introducing this new model we hope customers will get an improved experience.

We'll send you regular updates on your usage and if you use more than is included in your bundle you'll be able to buy extra Bolt Ons to continue to use your favourite data services.

[O2]

Hi Andrew - if you're on an existing contract then you're welcome to stay on that for as long as you like. If you upgrade to a new phone however you would need to move to a new tariff.

[Martin]

Bad move going it alone don't you think? I'm at the end of my iPhone contract and was just going to upgrade to iPhone 4 with you. I'll be checking the other operators out I'm afraid.

[twitter.com/c_davies]

FaceTime is WiFi only for now - Apple say they're looking to roll out 3G service after this year. We can't really argue with your usage stats, but we can ask what you'll be doing, as a network, to address what's an inevitable fact of the mobile industry: people are going to use more data as services, devices and habits develop.

I suppose what I'm asking is whether this is being seen as the "fix" or merely something to tide you - and the O2 network - over until you can put something in place to better deal with data demand now and in the (near) future. Expecting data use to a) go away or b) get squashed down by making it more expensive seems a short-sighted approach, frankly. You're apparently spending £1m a day, but I'm still seeing awful speeds (if I can even get onto 3G) in Central London.

Seprothia is right - this situation isn't going to get "better" in terms of people realising they should be frugal and use less data. It would sweeten the pill a whole lot if you were upfront about what you plan to do over the next 6-12 months to boost network capacity in a tangible sense.

[O2]

Hi C_Davies
We have invested £½ billion in our network over the last two years; £10bn to date. In November 2009 we unveiled plans to accelerate network our growth totalling £100millions over the coming year. This includes building 1550 new sites across the UK by the end of this year (2010).

[Andrew]

Thank you.

It looks like my iPhone 4 will have to be a PAYG then.

As i like my old simplicity contact (as i think in future i will be using more than 500MB)and i also get 4 text for 1 when abroad.

[O2]

Martin - you'd have to check with the other operators about what they are doing but we believe the current charging method is not sustainable if we're to build for the services of the future.

[Kerin]

This post doesn't add up at all.

You say that your bandwidth usage doubles every four months, so you need to institute a usage cap. You then say that 97% of users won't be effected, and (one would assume) will continue to use the same amount of data - so what difference would the cap make? Are you really claiming that 3% of your customers are solely responsible for doubling your bandwith every four months?

And how does this justify raising the prices across the board, for what is now an inferior service compared to the last three years?

[Neil]

will this now make O2 just "another" provider? I've been with O2 for around 10 years and stayed for the last couple of years as the minutes/text and data options were so well priced, compared to other providers. The selection of phones available is very poor and I have been tempted to leave several times, but the tariff has kept me with O2 and I have just bought phones sim free from online stores.

If this change goes ahead, then O2 will need to improve on their selection of phones, to keep customers with them, because as the tariffs are now all very similar, people will be more inclined to jump to another provider.

[O2]

Stuart - you can see what a typical customer might get out of their data allowance at http://j.mp/O2DataTariffs.

[O2]

Neil - we're always looking at our range of handsets to ensure we've got a range of the best devices. Great to hear you've been with us for so long, hopefully some of the phones we've got in the pipeline will hit the right spot for you!

[Skiefire]

Any chance of O2 updating the "My O2" app so that we can keep track of our usage via that?

Checking in the settings is fine, but you need to remember to reset the usage each month manually :p

[O2]

Kerin - the 3% of customers who use more than 500MB use a lot more than that. We believe our new data plans provide more than adequate allowances for the vast majority but believe it's fair that customers who use far more should pay for their heavy data use to create fairer pricing and a better service for the rest of our customer base.

[O2]

Skiefire - good idea! That's definitely something we're working on. We'll also regularly text customers on the new tariffs to keep them up to date on their usage - we want to make sure people are in control of their data usage.

[Jonathan]

If you go over your 500MB limit, will O2 automatically charge an extra £5 for another 500MB, or will you charge some extortionate amount per kB, unless the customer has bought the extra allowance prior to going over?

[Paul]

I don't think it would be so bad if you kept the monthly charges the same as they previously were. The fact you are now forcing customers to a 2 year contract (to get the old monthly charge) when everyone knows a new iPhone comes out every year, is just another ploy to get that extra bit more out of us. How about offering a special iPhone 12 month agreement?????

[Paulbatterham]

Is there any way O2 can give us a report on average monthly usage up to now? I'd love to know my usage statistics over 12 months; this would inform me of whether I need to buy a bolt-on.

[O2]

Hi Paul
We don't want to force anyone to move to the new tariffs - you're welcome to keep your current one if you like. We are also offering iPhone on a range of tariffs - to see these head to http://j.mp/iPhoneOnO2.