O2 Ireland won’t rule out change to data tariffs

11 Jun 2010

While Telefónica O2’s Irish operation has no immediate plans to scrap its flatrate data tariff and replace it with a tiered system, the company said it will continuously review its price plans in accordance with changing customer needs.

Yesterday O2 in the UK replaced the unlimited data tariffs offered with the iPhone in 2007 with a new tiered set, including 500MB, 750MB and 1GB data packages, as well as unlimited Wi-Fi time via The Cloud and BT OpenZone services.

The company said that 97pc of smartphone users use less than 500MB per month and the changes would really affect the 1pc of high volume users who are using 36pc of its total mobile data traffic.

The arrival of the iPhone in 2007 provided mobile operators with an unexpected surge in data traffic – typically a doubling within the first two weeks – and the same can be expected again with the arrival of the iPhone 4 in the UK in June and in Ireland in late July. Analysts have warned that operators are considering abandoning the flat rate tariffs.

“While Telefónica O2 Ireland has no immediate plans to introduce a new pricing model for mobile data, we continuously review our price plans in accordance with changing customer needs,” a spokesperson said in response to questions from siliconrepublic.com.

“All of our O2 Advance price plans include 2GB of data to cover mobile data and tethering, with additional options for data add-ons if higher volumes are required. This amply caters for customer demand in this area at present,” she said.

O2’s decision to switch from an unlimited model to one tiered based on usage is of no surprise to those that have studied mobile data usage patterns, said Thomas Wehmeier, principal analyst at Informa Telecoms & Media on O2’s new data pricing model.

“Just like AT&T in the US, O2 UK had become the industry poster-child of the capacity crunch era. What’s been galling for these operators is that a small band of bandwidth hogs have been the cause of lots of the problems – sometimes as few as 5pc of users account for as much as 80pc of the traffic originated in certain locations of the network.

“These new tariffs are designed to profitably manage this small percentage of users, whilst also offering attractive pricing for the overwhelming majority of users whose usage is much lower.

“There’s a lot of talk about the hunger for data of iPhone users, but our analysis shows that the majority of users will be comfortably served by 500MB of data per month. Indeed, there will be many users that end up paying less with the new tariff structure since they aren’t forced to take the top-end tariff plan.

Spectrum wars

“O2 wants to be known as the ‘home of the smartphone’, but in trying to achieve that ambition it was always likely to be forced to make two big steps. The first was to ensure its network was ready to cope: pumping stg£500 million worth of additional investment into its network was that first inevitable step.

“The other was moving away from its unlimited, and from our perspective unsustainable, smartphone pricing plans. Whilst consumer appetite for mobile data seems unlimited, one thing that most definitely is not unlimited is spectrum.

“Spectrum will forever remain a resource both short on supply and high in demand. Although newer technologies are able to use that spectrum more efficiently to supply more bits of data per second through each chunk of spectrum, demand is outstripping that supply.

“It’s only natural therefore that O2 has felt compelled to switch to a pricing model built upon the principles of distributing a finite resource, rather than one that assumed an unlimited supply,” Wehmeier said.

“Differentiating based on usage volume is just the start, as operators dip their toes further into experimenting with new data pricing models we can fully expect to see more customised and personalised pricing plans come to the market,” he concluded.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years