Wait! Unlimited Mobile Broadband May Not Doom Operators

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 (s nyt) 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 (s vz) because the network quality meets my needs, instead of paying much less for T-Mobile or Sprint (s s) 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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