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Summary

The US market's return to unlimited data has the rest of the globe's operators spooked. This Ovum analyst has been inundated with questions about whether the rest of the world will also introduce unlimited data for mobile. The short answer is no. The US is the anomaly, and we urge operators to keep the ultracompetitive US market situation in context when thinking tariff strategy. The US has a highly aggressive challenger, T-Mobile, whose Un-carrier strategy is to disrupt on price, but also attempt to out-innovate on value adds. It's a strategy that's working, gaining T-Mobile market share over the past four years. That has rattled Verizon and AT&T to return to unlimited data plans. That's right – return to unlimited data, as both have spent five-plus years trying to move away from flat-rate data and toward shared data. But fear not, the rest of the world is not on the verge of dismantling volume-based pricing, which is by far the most sensible tariff strategy to keep.

Unlimited data plans in context – it's not world domination

Unlimited data plans are not widespread across the globe. They are mainly contained to disruptor telcos in a market – for example, new operators in a market (e.g., Malaysia and Taiwan) or longer-term mobile disruptors (e.g., Three UK or Finland's Elisa). The other exception where unlimited data has emerged is because a pro-consumer government insists on it (e.g., Korea) or where a government indirectly insists on unlimited data (that country shall not be named). Further, the vast bulk of operators that offered unlimited for 3G used the launch of 4G to transition away from unlimited data.

Until recently, the US fit the category of unlimited data plans being "contained to disruptor telcos"; now all four of the main operators offer unlimited data. The offers do include usage caps of 22GB or 28GB, but users are throttled only when they reach these limits in areas where there is network congestion. That makes these new unlimited data plans more akin to true unlimited data plans, which have no fair usage stipulation.

Avoid unlimited data on a mobile network, where possible

Verizon was traditionally not overly concerned with what T-Mobile did. However, as T-Mobile grew in its Un-carrier strategy, it became innovative on more than price – it launched such benefits as zero-rated music streaming, zero-rated video streaming, and added rollover data – and grew its market share. Verizon's new unlimited offer is relatively low priced, and a good proportion of its customers may well churn to it from shared data plans, which are expensive in comparison (the new unlimited data offer is a multiple line offer).

To reiterate, the US market is not a test bed for other markets globally. It is characterized by two challenger mobile operators (T-Mobile and Sprint), both of which have championed aggressive unlimited data strategies, and both of which have scale (enough to invest in content, for example). T-Mobile's disruption has earned it market share, and it is not backing down – matching offers from rival operators on the same day if it needs to.

Moreover, we again strongly recommend operators do not launch unlimited data on a mobile network where competitive dynamics allow. Unlimited data puts the operator at risk of overburdening the network, and it does not align costs with revenue.

Appendix

Further reading

"Verizon's new unlimited plan sparks price war," TE0001-001078 (March 2017)

Author

Nicole McCormick, Practice Leader, Broadband and Multiplay

nicole.mccormick@ovum.com

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