O2 has abandoned its policy of allowing customers to use unlimited amounts of data on their mobile devices, in response to a rapid increase in data consumption on its network.
Until now, the operator gave customers on any of its mobile plans unlimited data usage, subject to a 'fair use' policy that said anyone with excessive use would be asked to cut down. On Thursday, the operator said it is replacing this with three monthly data bundles, beginning 24 June.
From that date, new and upgrading customers will get up to 500MB of data on tariffs of £25-£35 a month; or 750MB on £40-£45 a month; or 1GB on £60 a month. Anyone who signs up or upgrades before 24 June will have no cap on their data. Those starting a new contract on or after that date will get unlimited data until 1 October, after which the caps will kick in.
People who are still in contract will retain their unlimited data bundles for the life of the contract.
We can't build a six-lane highway every time the traffic increases.– O2 spokeswoman
Those with capped data bundles will be able to purchase bolt-ons, at £5 for 500MB and £10 for 1GB. "O2 will ensure customers have the ability to easily monitor their use by sending them regular text messages," the operator promised in a statement.
In the statement, O2 chief executive Ronan Dunne said the shift to capped data usage was a response to customers "looking for clarity in pricing". A spokeswoman for O2 told ZDNet UK that the unlimited plan had contained "an excessive use policy that our customers told us wasn't clear".
The mobile industry is currently debating what to do about the explosion of data usage, with many calling for pricing to be tiered not just in terms of monthly usage, but also according to bandwidth. In May, Vodafone responded to the situation by starting to charge for out-of-bundle data usage, at around the same price as O2's bolt-ons. Vodafone gave similar reasoning, suggesting that the shift was needed to protect the network from "data abuse".
Asked whether O2's network was unable to cope with the rising levels of mobile data usage, the company's spokeswoman said such an analysis was "easy and oversimplified".
"We have to be able to manage demand," she said. "We can't be building a six-lane highway every time the traffic increases — which it is, doubling every four months."
According to O2, the changes will affect less than three percent of its smartphone customers. It maintains that 500MB is more than two-and-a-half times the average O2 smartphone customer's monthly usage of data. "0.1 percent of our customers, or around 21,400 people, are using 29 percent of the total network data traffic," O2's spokeswoman said.
"Most people will not notice the slightest difference — except possibly a better experience — because we can manage the network," she added.
O2's move is part of the end of unlimited mobile data usage, according to telecoms analyst Dean Bubley of Disruptive Analysis. "The dropping of complete flat-rate [data pricing] is a theme across the industry," he said. "There are costs associated with providing data, [but] the tiering needs to be looked at carefully."
Regarding O2's claim that less than three percent of its smartphone users will be affected, Bubley noted that users of BlackBerrys and old Nokia smartphones are unlikely to be using much data anyway. However, users of recent handsets such as the iPhone will be harder hit, as they use a lot more in comparison, he suggested.
"There's an increasing number of devices on the network and an increase in the capabilities of those devices," Bubley said. "It's also a consequence of the fact that [operators] are building their networks out. The larger the network and the more cell sites it has, the more it will get used."
Bubley suggested, however, that O2's new data pricing appeared "more reasonable and fair" than that of US operator AT&T, which also abandoned flat-rate pricing earlier this month. According to the analyst, AT&T's two new price tiers — $15 (£10) a month for 200MB and £25 a month for 2GB — were "cleverly constructed to put most midrange users at least at fear of breaking their limit", thereby forcing them onto the higher tariff.
"It's inevitable you'll see caps where there aren't any at the moment," Bubley said. "The market over time will compete for higher caps."