The data dilemma

The data dilemma

The strain put on the networks through an explosion of data usage has forced the operators to re-examine their policies on fair usage and unlimited data allowances.

O2, the original launch network for the iPhone, has suffered over the last few years with intense pressure put on its network. The company continues to invest heavily in its network –around £1m per day – and it recently broke away from its ‘excessive use’ policy, which will be replaced with capped data amounts for new and upgrading customers.

News of O2 changing its data policy came as no surprise to industry observers. Network insiders had been talking about the unsustainable nature of offering unlimited data, saying it was just a matter of time before someone broke ranks and decided that something had to change.

O2’s turnaround


O2’s decision to cap the amount of data it offers customers was a big turnaround. The network currently has around two million iPhone customers and continues to produce strong results. In the last quarter, O2 reported a 4.6% increase in revenue and grew its contract customer base by 5.6%.

However, it still faces the challenge of remaining competitive and profitable.

O2 head of consumer mobile Jonathan Earle says: ‘The days of unlimited data access have come to an end. Over the last four months, we have seen usage increase. We have moved to a capped amount of data and for 97% of our customers it will make no difference whatsoever.’

Earle claims that the decision to change data policy will benefit customers as it ‘puts customers completely in control’.

But despite his positive outlook, Earle acknowledges that the move is ‘bold’. He says: ‘We were the first to give unlimited data and we did that on the back of the iPhone. We want to give our customers the best experience possible. If you have someone hammering a cell site it can affect other people’s experience and it is unsustainable.’

Will consumers pay more?

O2’s journey through the data explosion raises a number of questions about data policies. One of the most important questions is: how will consumers accept a reversal from ‘excessive usage’ policy to capped amounts of data – where they will be charged if they exceed their allowance?

Earle explains that customers buying the new iPhone on 24 June were still keen as ever to get their hands on the device, regardless of the change in data policy.

He says: ‘The O2 stores were fairly rammed and when we explained to them that they got 500MB of data and unlimited Wi-Fi they seemed to be fine with it.’

Earle’s experience comes from talking to a handful of customers, but it seems to correlate with a recent survey carried out by mobile
data company Acision and YouGov on consumer attitudes to mobile data and fair usage policies.

The findings of the survey demonstrate the difficulties for operators offering internet services through their networks. There is a clear tension between the technology on offer and customers’ expectations.

Operators were once clambering to get as many customers as possible onto their networks and using 3G technology to access the internet; however, they might not have been prepared for the strain it would cause their networks.  

Acision head of mobile broadband Steven van Zanen said at an event about the survey: ‘The volumes the operators are facing are unheard of and there are no measures to compare voice and data. There is a disconnect between subscribers and the limited resource available. For the first time, the industry is willing to take bad press.’

At the end of 2009, 3 suspended mobile broadband sales in certain geographic areas. 3 sales and marketing director Marc Allera said at the time: ‘There has been a steady drip of customer feedback, which tells us we need to be more honest, open and transparent about mobile broadband capacity and this initiative is at the heart of that.’

And 3 and O2 are not the only networks that are having to deal with network strain.In May this year, Vodafone changed its fair usage policy for all its customers. The network outlined costs for customers using more than the allowance of data given with their bundle. Similarly to O2, the operator pointed out the change was only likely to affect 3% of its customers. It is understood that around 3% of O2’s customers account for 36% of its data traffic.

Acision’s van Zanen indicates that usage trends amongst mobile internet users are continually changing. The operators’ change in policy suggests a pre-emptive move to tackle their network and revenue dilemmas before the problem gets completely out of hand.

Zanen says: ‘The traffic mix is moving away from what it was. We are seeing person to person, such as bit torrents, being added to the mix.’
As the traffic mix changes, consumers are continuing to migrate to handheld devices to access the internet.

The findings of the survey make interesting reading. From a mixed sample of 1,073 customers using UK mobile broadband and mobile internet, 71% were not aware of the impact of excessive internet use on a network. Meanwhile, less than half of consumers were aware of their fair usage policy.

For many dongle users, there has always been a fair usage element in their terms of service, but handset users may not be as familiar. The results of the survey show that dongle users have the lowest ARPU, highest churn potential and are less likely to use the service on a daily basis. In contrast, 72% of customers accessing mobile internet through their phone do so on a daily basis.

Results

The results of the survey show that customers are not yet fully informed on using the mobile internet. Fair usage policies have been around for a while, but there may have been a lack of information available from the operators on exactly how much customers would be charged if they exceed their allowance. Now that devices are more mature and customers become familiar with using the mobile internet, the networks have to inform them of their policies clearly and transparently. The policy of imposing caps on data allowance creates solid boundaries and guidelines that previously were not always available.

Another key discovery of the survey was that some customers may be willing to pay extra for differentiating services. Respondents to the survey said they might take up the option of purchasing additional bandwidth, service optimisations and roaming bundles if they were available.

The results of the Acision and YouGov survey will make reassuring reading for operators, keen to test the water with data capping. However, there is still a long way to go in educating customers and ensuring they are aware of the new guidelines. Consumers are becoming more tech savvy, watching video and uploading and downloading content through a 3G connection.

The operators are having to balance consumers’ needs through their own. It is going to be a long journey, and capping is just the start of it.

Written by Mobile Today
Mobile Today

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