O2 scraps unlimited data for smartphones
By Andrew Parker
Published: June 10 2010 13:57 | Last updated: June 10 2010 13:57
O2 heralded a significant change to the UK mobile phone market on Thursday by announcing that its bandwidth-hungry smartphone customers will pay more if they surf the web a lot.
O2, the second-largest UK mobile operator, which is owned by Spain’s Telefónica, is scrapping so-called “all-you-can-eat” data plans under which smartphone customers can do as much web browsing as they want for a fixed monthly fee. Instead, customers will now pay according to how much data they consume each month.
Analysts said they expected other mobile operators to follow suit, and welcomed O2’s move as a sign that telecoms companies could generate more revenue from the explosion of smartphone usage led by Apple’s iPhone.
From June 24, when O2 starts selling the fourth version of the iPhone, the mobile operator will introduce monthly charges for smartphone customers under which their data usage will be capped. The charges will apply to new customers as well as existing ones who upgrade to a new smartphone.
For example, a smartphone customer paying £35 a month on a two-year contract will be allowed to consume up to 500 megabytes of data. After that, it will cost £5 for every additional 500 megabytes of data consumed.
Under typical data usage, 500 megabytes amounts to watching 60 YouTube videos. It also amounts to downloading 50 music tracks or looking at 5,000 web pages.
Ronan Dunne, head of O2, said the move to cap data usage was prompted by the need for the mobile operator to continue to make large investments in faster networks.
He denied suggestions there could be a customer backlash against the new charges. “If this provides the model for continued investment in infrastructure ... it has to be a great thing for customers,” he said.
O2 expects only 3 per cent of its 21.4m customers to have to pay additional charges because they breach the data usage caps. Many of the customers facing extra charges will be iPhone owners.
Mobile operators in many countries introduced all-you-can-eat data plans for the iPhone because they saw it as a key way to persuade customers to buy the smartphone.
Some consumers were concerned at the risk that they could run up large charges on their smartphones while surfing the web.
Mobile operators are now starting to scrap the unlimited data plans because bandwidth-hungry smartphones are threatening to overwhelm their networks.
AT&T in the US (and O2 in the UK) suffered network failures in large cities that were blamed on iPhone users, although both companies have taken steps to fix the problems.
AT&T last week announced that it was scrapping its unlimited data plans for smartphone customers. Morten Singleton, analyst at Collins Stewart, said: “At least we are starting to see industry players shifting towards an attempt at charging appropriate prices for data products.”
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