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

[AndyP]

So by your own admission (in response to Kerin) You are punishing the 97% who don't abuse the system because 3% do...

And you didn't answer the question about how you justify the price hike for an inferior service.

[Alex Johnson]

This is fair enough but a little disngenuous: you are also increasing costs on like-for-like tariffs by £5 (or requiring a 24 month commitment), and while unlimited SMS is nice, you're charging per MMS rather than using multiple SMS. When we add to that data being limited - even if, as you say, 97% won't notice - the cummulative effect is quite a price hike with less being offered at these price points, and people do see that. You're running a business and shareholders need to get a return but having a relationship with customers based on nickel-and-diming is one that can turn sour. I'm with you for broadband and home phone now (and will be holding on to my legacy SIMplicity contract too until you pry it from me) as well and I'm not unhappy but I do dislike being both chiseled, and asked to like it. I hope that's a reasonable comment and not unduly confrontational.

[O2]

Hi AndyP - these new tariffs aren't about 'punishing' anyone. 97% of customers won't hit our lowest limit, they won't have to pay more and they won't have to take any action to continue using data the way they are at the moment.

Regarding service quality, we believe these changes will improve the experience people are getting on our network.

[O2]

Hi Alex - you can also buy iPhone 4 on an 18 month tariff as well as our range of simplicity - you don't have to sign up for 24 months if you don't want to. Unlimited has never been truly unlimited and all companies have a fair usage policy - we're being open and transparent with our customers and offering them a range of data options.

[O2]

Jonathan - if you go over your data limit and don't buy a Bolt On then your data speed will gradually slow down. You won't be charged further.

[Tracey]

Will you be offering a voluntary cap so that it is impossible to go above the data limit if customers do not want to take that risk??

[O2]

Hi Tracey
If you don't want to buy a Bolt On you don't have to - once you hit your limit your data speed will slow down.

[Stan]

A good move for the business, but a retrograde move for the customer...What i would like to see is some flexibility in the tariffs, to reflect that some customers are heavier users of data services, but do not necessarily need 600 mins/500 texts per month allowance.

Also, stating that Wi-Fi allowance is 'unlimited' for all is a misnomer - of course it should be, it doesn't impact on O2's infrastructure or bandwidth, only on the Access Point being used, so that shouldn't be cited as an attractive bonus to the tariffs.

Unlimited data usage with the iphone tariffs was the attraction for me - i'm not on a business user tariff, but i do download all my work (and personal) emails throughout the day - some of which, come inevitably with attachments. A few large attachments in a day, and i'll be over my 500Mbs in no time...why should i be penalised as a data user?

Surely the ratio (and network load) caused by customers texting/making calls all day versus the minority that are heavy data users is a fair trade-off when considering the current tariffs?

"...We don’t think it’s fair that the many should subsidise the behaviour of the few..."

Arguably, as a heavy data user, but not texting/calling, I'm just as likely to be subsidising the service for those that are as they are for me?

[Scott Hayes]

I notice you are ignoring questions about charging for MMS and the, what can only be described as massive, drops in inclusive minutes.

Why the 50% cut in the £35/month 18 month contracts amount of inclusive minutes, why the sudden 20p MMS charge? If you are not punishing the 97% then why do this.

Customer service seems to be lacking from o2 at the moment.

[O2]

Hi Stan - video and apps are hugely data intensive, far bigger than text. Watching one YouTube video on a smartphone has the same effect on a network as sending 500,000 text messages simultaneously. That’s the equivalent of everyone in Newcastle sending a text message at once.

[Stuart Hurd]

I'm impressed with O2 responding to almost every comment. I get the impression from some companies that comments are not even read. I have to say I'm not happy with the change but I can live with it on the basis that if I exceed the 500mb limit I will be charged for a 50mb or 1gb bolt on as opposed to charging for every mb over the limit.
I am however much more unhappy about paying for mms. O2 had an edge over the other networks and in all my time with O2 I have never paid for them. They should still be included in text messaging. Have a 1000 or so text message tariff and have mms count as four SMS as they use to.

[O2]

Hi Scott
We're answering as many comments as we can - there's quite a few coming in...

Our tariffs haven't included MMS since we started offering unlimited texts - this isn't part of the changes announced today.

[O2]

Hi Stuart
Thanks for the comments - our tariffs are now offering unlimited texts as opposed to a smaller text bundle with MMS. We'll take your feedback on board though.

[Dan]

I'm so jealous! US prices are much, much higher. On AT&T it's $15 alone for 200MB of data, $25 for 2Gb. We're required to carry an an expensive voice plan and pay EXTRA for texts. Equivalent plans in the US cost twice as much as the 02 plans (or more.) Be grateful for what you have!

[Ian]

Hilarious reading! As usual the general public want everything for nothing. I can't blame them, who would want to pay for things if they don't have to but O2 have a valid point. I have an iPhone on O2 and my phone signal service has been crap for ages. No business can continue to operate like this for any length of time. Bring it on I say as long as the new income is put to good use and service is impoved!

[RussY]

I don't know what all the fuss is about, unless you are in the 3% that go over 500MB then what's the problem? If you are in that 3% why shouldn't you pay more? You are using more data than me so you should pay for it. If I go out for a meal with friends and eat twice as much than everyone else I would pay more.

As consumers we have the freedom to move supplier, so if you don't like it, you will go somewhere else. However, I would imagine when you compare O2's tariffs to the other networks they will be competitive.

[moz]

I would like to start by saying i very pleased that O2 are replying to comments which is very rare these days so i hope you can reply back to my comment.

I read on one of the above comments by yourselves that existing O2 customers can stick to their current contracts. so i would like to know in simple terms

if i get the iphone 4 on PAYG and then call you up to order a micro sim from my current o2 account will my current unlimited data plan carry on the same until i cancel my contract?

also you have stated in small print that the unlimited Data plans ends on 1/10/10. is this for all existing customers aswell on unlimited data plans

[Osian Lewis]

I think the fact that you aren't charging for when people go over this new data cap is a very good thing, and actually a surprise for me. Thank you.

I recognise the fact that your network is getting hammered because of the rise of data usage, and understand why you need to cap it, but I would like to see your plans for improving the network. If the networks are struggling to keep up with the phones, then it is holding back the digital economy. It's all well and good showing us how much you have invested so far, but it obviously hasn't worked. The whole industry needs a radical overhaul so that the networks can not only cope with the new technology offered by the iPhone 4, but also, to be prepared for future developments. Data networks are the future.

[John]

You say that most people are under 500MB (97%?) -- Then why make the cap 500MB? Why not make the Cap 1GB, 5GB or 10GB? If 97% are just going to continue to use under 500MB then why do you need to cap it so low?

You also say that just 3% use more than 500MB. A lot more according to you. Why not just cap these 3% at 500MB or 1GB or something.

My point is, why slap everyone with this limit? I may use only 5-10MB a day, but there will be specific days (like long trips) where I might use 700MB or 1GB. But I can't do that now. I'm not a heavy user but every once in a while a special circumstance may make me use my 3G Data an abnormal amount, now not possible.

May I make a suggestion to have the 500MB roll over? For example, Any MB you don't use in one month, gets put in to the next month and so on up to a total of like 3GB maximum. Not to high to scare you but high enough to give us some room for those times we need that extra overhead?

[Stu]

Hi O2,

I'll quote you: "Unlimited has never been truly unlimited and all companies have a fair usage policy"

If you have a fair usage policy on an unlimited plan why don't the 3% get capped due to their extremely excessive usage?

Thanks for taking the time to answer these questions, very impressed.

[Steve]

I notice other tariffs for other phones still offer unlimited data. Can you explain why?

[O2]

Osian: we're currently spending a million pounds a day on our network and part of introducing these tiers means that we can build our network for the future too.

John: thanks for the comments. As you mentioned, 97% of customers won't hit this amount so we think it's a fair place to set it - by applying it to all and not just a small percentage of customers we're being open and transparent about this. We understand there will be times you need to use more data and that's why there'll be data Bolt Ons available that can increase your data allowance when you need it the most. There won't be a minimum term on these so you can switch them on and off every month if you like.

Stu: We want to be fair to everyone so we're applying the rules to everyone as opposed to handpicking people. The 3% you mentioned will still be able to use more than the 500MB/750MB/1GB our tariffs offer if they like, they'll just need to get a Bolt On to do it.

Steve: These tiers will apply to everyone once they launch, whatever phone they purchase.

[O2]

moz: As you wouldn't be changing your tariff then yes, you'd carry on with unlimited data. Also the date you mentioned only applies to customers on the new tariffs.

[Mark Goldie]

You say 3% are going over the limit and 97% are not.
Why does the 97% have to suffer because of the 3%.
And I know your going to say 97% won't notice the difference on that I have to disagree with you I will be classed as one of the 97% the difference is although I probably won't go over the limit I will be conscious there is a limit and will be worrying about it. That's a stress I can do without.
What you might find is the 97% might vote with there feet and leave you with 3%, what's your thoughts on that.

[Louis]

I am a 3g user who has been advising to use O2 but feel any attempt to use 3% abusing your network to justify 97% losing there existing tariff seems crazy. Why did you fail to implement a fair use or "heavy use" package for over a gig a month and enforce the fair use policy?

equally if the tariffs are not being shutdown then how does this stop the 3% abusing the 3g sim in a pc and downloading to their hearts content.

I too was considering upgrading to an iphone 4 but may have to reconsider now. Sure you'll get enjough people buy them but it does feel like you are penalising the customer base for no logical reason.