Tariff Wars: How T-Mobile have struggled against 3's unlimited data tariffs

The 3 network has being growing rapidly, and recently announced it has added 1 million customers over the past year, bringing its total customer base to 8.8 million. More impressively, it has put on 2.6m customer since its August 2010 reported base of 6.2m customers. It’s a huge jump in customers from a network with only 3.5 million customers in 2007 that was facing industry speculation it might close down.

A lot of 3's success can be attributed to “The One Plan” (TOP) tariff. Introduced in July 2010, TOP offered exceptional value of 2000 any-network minutes, 5000 text messages and 1GB of data for £25 per month on a 24 month contract. By comparison O2, the market leader during Q310, was offering only 300 minutes, unlimited texts and no data for the same £25 month price point on a 24 month contract.

The price point of £25 is significant. T-Mobile and 3 have historically battled for the “value” segment on the UK market - Pay As You Go customers and contract customers on tariffs of £25 or less. O2, Orange and Vodafone have sought to address the “premium” £25+  per month part of the contract market. 

By pricing TOP at £25+, 3 were signaling they were actively seeking to capture a significant chunk of the premium market that had previously been locked to them.

Not content with offering easily the richest deal in the market, 3 went a step further and introduced unlimited data to the TOP plan in December 2010. Not only did they allow unlimited data uploads and downloads, they also allowed “tethering” on the data allowance, i.e. enabled the handset data connectivity to be linked to a laptop allowing the data to be shared across both devices. 

Unlimited data had been a common feature in UK network operator tariff plans in 2009, but usually couched by small print indicating that a “fair use policy” existed - most commonly 500MB or 1GB. In other words - unlimited data didn’t really mean unlimited data. The intent of the marketing message of “unlimited data” reflected the experience at this point in time that the vast majority of customers struggled to consume anywhere near 500MB, so to them it was effectively “unlimited”.

2010 saw the mainstreaming of smartphones into the UK market, and a resulting uplift in data consumption patterns - especially from iPhone users. Most network operators took the opportunity to address this usage trend by removing “unlimited data* (*subject to fair use policy)” wording from their tariff structures, and replacing with a fixed amount of data allowance (e.g. 250MB, 500MB, 750MB or 1GB, with 500MB being most common) clearly communicated to customers as a data allowance.

Here’s a comparison of how the market evolved in terms of data allowance between 2009 and 2010.

  Source : Pure Pricing "UK Mobile Pricing Annual Review 2010"

Source: Pure Pricing "UK Mobile Pricing Annual Review 2010"

By the end of 2010, 3 and T-Mobile were the only two UK networks marketing unlimited data. 3 were being very clear that their unlimited allowance was truly unlimited - One Plan customers could download as much as they like and also tether their handset without restrictions.

T-Mobile were being a little more elusive with their marketing of unlimited data by the end of 2010. They had set a fair usage allowance of 1GB for their “unlimited data” tariff (and somewhat bizarrely, a 3GB limited for Android phones. I’m not sure of the logic for this.)

In January 2011, T-Mobile tried to normalise their data allowance with the general market position of a 500MB fixed volume allowance. 

Unfortunately for T-Mobile, rather than transparently reseting their communication of data allowance as a fixed volume of data as Orange, O2 and Vodafone had done, they chose to keep the “unlimited data” marketing message and reduce the fair usage allowance to from 1GB (3GB for Android customers) to 500MB. Cue a major outcry from angry customers and consumer groups who felt this positioning of a 500MB allowance as “unlimited” was misleading.

T-Mobile backtracked and kept the old 1GB / 3GB fair usage allowances for existing customers, and imposed the new 500MB fair usage policy onto new customers. 3 was then left as the sole operator to offer truly unlimited data allowances.

In July 2011, T-Mobile decided to match 3 and offer “truly unlimited” data on their £25+ tariffs. However T-Mobile’s, terms and conditions for “truly unlimited” data excluded tethering from the tariff..

In October 2011, the UK’s advertising body, the Advertising Standards Authority, ruled that T-Mobile’s advertising of the tariff as “truly unlimited internet” was misleading due to the restriction on tethering and required T-Mobile to cease advertising this claim.

In January 2012, 3’s continued growth lured T-Mobile back to seeking a marketing message around truly unlimited data, and “The Full Monty” tariff range was launched offering truly unlimited data including tethering.  

By the end of H1 2012, something about the usage profiles for Fully Monty customers must have made T-Mobile feel uncomfortable, and in August 2012, tethering was removed from the Full Monty package for new customers joining the tariff.

T-Mobile's gyrating position on unlimited data allowances over 2010-2012 can be summarised as follows.

  Source : Adventures In Mobile 2012

Source: Adventures In Mobile 2012

It can't be easy for T-Mobile or parent company Everything Everywhere (EE) to watch 3 add over 2 million customers since The One Plan tariff launched in 2010. T-Mobile's attempts to build a competing offer to "The One Plan" have been characterised by loud publicity announcements followed by quiet tactical retreats. T-Mobile have been unwilling or unable to maintain a fully unlimited data component to their competing tariffs.

The reasons why T-Mobile / EE don't wish to maintain a fully unlimited data tariff is understandable. All you can eat data leads to crippling network performance issues and prevents a network operator from correctly monetising the value of mobile data. 

Why 3 choose to keep a fully unlimited data tariff now they have a base approaching 9 million customers is a perplexing question that will be examined in a future post.

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