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Summary:

Britian’s mobile operator 3 UK has launched an unlimited broadband plan for smartphone subscribers, going against the tide of operators that are trying to both manage network congestion and squeeze out the most profits from subscribers who are itching for mobile data. It might work.

Frank Meehan on left at Mobilize 2008

Frank Meehan on left at Mobilize 2008

Britain’s mobile operator 3 UK has launched an unlimited broadband plan for smartphone subscribers, going against the tide of other operators who are trying to both manage network congestion and squeeze out more profits from subscribers itching to consume gigabytes of mobile data. Readers may recall that 3 was one of the first to launch 3G services in Europe at a tremendous loss for its wealthy investor Hutchison Whampoa. It was also one of the first to push apps as a way to boost usage of its data network, even going so far as to launch a Skype phone when other carriers cursed the thought of mobile VoIP.

At our Mobilize event in 2008, Frank Meehan — who at the time was a general manager at 3 — told us the Skype plan was generating large profit margins for the company. So I don’t necessarily think its plan to offer unlimited broadband on its phones is a folly that won’t affect the rest of the industry. Analysts, however, are unsure. Those quoted in the New York Times article on the topic are flummoxed by the effects of the unlimited pricing on 3 and on the industry at large, but I think in a competitive market (and Europe has a fairly competitive mobile market) 3’s decision to go against the grain makes sense. If it can sign up a boatload of consumers on more expensive, unlimited plans, (plus the One Plan is a contract plan for a provider with a lot of pre-paid subscribers) knowing that most won’t use more than a set amount of data each month, then it wins. Much as it used Skype to drive folks to higher plans and to boost loyalty, the unlimited effort seems designed to do the same thing.

If heavy users cause the network performance to degrade, many of those customers might stick around anyway, because they value the ability to pay for an unlimited plan (even if it is sometimes crappy) over paying per gigabyte, or paying for a restricted bucket of bytes under newer plans. Plus, those who want to shell out more for a better network that might be less congested can still do so. After all, I still pay more for Verizon because the network quality meets my needs, instead of paying much less for T-Mobile or Sprint service. If the network performance is fine, then 3 can still profit, because it will show the claims of other mobile operators — who are using the threat of a data deluge and network congestion to justify their data limits and higher pricing schemes — are a convenient lie.

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  1. You might consider that Three is still performing ‘traffic management’ regardless. If you exceed a certain but large volume (because of say BitTorrent or some other high volume activity) then you will go into a penalty box with low performance and much less bandwidth.

    And in peak times, they shape the traffic to create reasonable outcomes by slowing certain traffic types.

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  2. I suspect 3’s appproach is not only driven by a desire to differentiate but also to ensure it remains a “pain in the neck” for the other operators. Hutchison has still failed to generate an annual operating profit for it’s 3 Group (inc UK) eight or so years post launch. With the upcoming investment in spectrum/network for LTE, operating profit breakeven will again recede into the future and cumulative breakeven will never be reached. Forcing the pace of consolidation with inititatives like this is probably the value maximising route for 3

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  3. MarkP has a good point, 3 do tend to lead the way with these moves by increasing value and/or driving down prices forcing the hand of the other networks – obviously a good thing for us consumers though.

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  4. [...] more data use through machine-to-machine programs and new app stores. Meanwhile over in Europe a mobile broadband provider just launched a true unlimited plan, which will bear watching. Since the market is competitive 3 U.K.’s unlimited plan may expose [...]

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  5. [...] more data use through machine-to-machine programs and new app stores. Meanwhile over in Europe a mobile broadband provider just launched a true unlimited plan, which will bear watching. Since the market is competitive 3 U.K.’s unlimited plan may expose [...]

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  6. [...] modification from T-Mobile UK earlier today, which cut its 1 GB monthly plan in half. At this point 3 is the only mobile broadband provider in the UK testing the unlimited data plan waters while here in the U.S., only Sprint, and it’s WiMAX partner Clearwire, offer all-you-can-use [...]

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  7. [...] From a carrier perspective, issues like this are a pain. Because the operators have little control over which apps that people can download, when pissed off customers complain about unexpected data use, a carrier can either waive the bill, never knowing what the original problem was (or if it will repeat itself) or risk upsetting its customer. This is where apps and the app stores can wreak havoc on mobile operators. One can argue that the restrictive pricing plans play a huge role in this, but that’s a separate story and issue. [...]

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