Is Australia’s unlimited data war sustainable? Either way it’s risky

The launch of unlimited data plans by all three major mobile operators in Australia this week should be good news for consumers and spell the demise for monthly mobile plans defined by data caps. However, that doesn’t seem to be the case, as operators in Australia look to have their cake and eat it.

Breaking down the offers by carrier, they look similar, with initial data offerings followed by ‘unlimited’ data at a lowered speed.

• Vodafone. Vodafone’s ‘Unlimited’ data plans offer the first n GB of data at an undefined Max data rate, with subsequent megabytes throttled to 1.5 Mbps. This does away with the incremental charge for additional 10MB chunks of data once you go over the cap, which is good news. Vodafone offers three different Max data levels. Vodafone’s critical information summary doesn’t mention any limitation of speed for tethered devices.
• Telstra. Its ‘Endless Data BYO plan’ offers 40GB at max speed and the rest at 1.5 Mbps. Telstra also offer an unlimited data home broadband plan. Telstra’s press release announcing the plan notes that “The Endless Data BYO plan is for personal use in a smartphone only”, which suggests that tethering applications may be restricted to a slower speed.
• Optus. Optus is rewarding ‘eligible’ customers with its Unleashed plan, offering a SIM only plan with unlimited data once 40GB is hit. Streaming video and music downloads will, however, be limited to 1.5 Mbps, so throttling is still in play. Optus also noted that tethered internet would be limited to the slower speed.

So, it’s not totally good news, though users of multiple tens of GB of data per month on their phones will be pleased.

Perspective: Is this sustainable?

Data delivered over mobile networks is the lifeblood of mobile revenues. IDC’s Telecom Services Database 2017 shows:

• 9.5 million mobile data connections in Australia
• Around $9 billion in 2017 in revenue annually.
• The number of connections has been levelling off since 2015, though spending is forecast to increase at a modest 5.3% CAGR from 2016-2021.

The ‘unlimited’ plans seem to be splitting hairs, failing to offer a continuation of ‘max’ speed for a fee (as previously) and instead offering high volume users (at least in the Vodafone case) the ability to upgrade their plan to get more fast data. Telstra doesn’t offer that, meaning the first 40GB are fast, the remainder will go slower (allowing streaming of standard definition video). Though the press interest from these plans will bring some attention to mobile data plans (since unlimited voice and texting plus international free minutes has become routine), the risk of their life being short is always present.

What about other markets?

Back in May last year, China Mobile’s CEO warned that unlimited data plans were good for short term revenue but ultimately unsustainable as consumer data appetites continued to grow and investments in infrastructure (Telstra noted they had invested A$5.5 billion in their mobile network over recent years) continued to grow to meet that demand).

We’ve seen unlimited plans launched elsewhere in the world – US, Europe, parts of Asia. Some areas to consider

• Although, it sounds good for the consumers, initially, there might be considerable impact on the customer experience
• By offering unlimited data (with some restrictions on tethering, etc), operators are increasing the burden on their networks, and increasing data traversing those networks, leading to congestion and a less than ideal user experience.

Some examples of unlimited initiatives in other markets

• Reliance Jio: It entered the Indian market with a bang (100 million+ subscribers in a month or so thanks to its aggressive offers), offered virtually unlimited data to all subscribers, but couldn’t guarantee a reliable user experience. Things are better now, but definitely operators will need to keep an eye on their networks to ensure it doesn’t impact the customer experience.
• AT&T and Verizon: In the US, both carriers introduced unlimited plans in Q1 2017, and there was a significant impact on the network speeds available to the customers. In the six months following the introduction of the plans, customers of both operators reported experiencing lower average speeds: Verizon’s speeds dropped by 18% and AT&T’s by more than 14% (I got this from a couple of news articles – not mentioned by AT&T/ Verizon officially though). Although they were able to address the issue in the following months and make amends, this could be a real issue for the CSPs in Australia in the initial months.

Once everybody starts offering some sort of unlimited plans, it starts to get even more aggressive on the price front and no one would want a price war at this stage, where there’s already so much pressure on them on the financial side.

Overall, if you can grab the local new faster plans and the operators continue to support them, then all is well. But don’t expect this data bonanza to truly deliver an unlimited, high speed experience any time soon.

Written by Hugh Ujhazy, associate vice president of IOT & Telecoms at IDC | Originally published on LinkedIn