O2 Dumps Unlimited Data Bundles

British mobile operator O2 is scrapping its “all-you-can-eat” unlimited data plan, in order to better manage the effects of bandwidth-hungry smartphones that are threatening to overwhelm its network.

The company is launching its new mobile data pricing model on 24 June – the same day that O2 starts selling the fourth version of Apple’s iPhone. Smartphone tariffs will range from £25 per month, for 500MB of data, to £60 per month for 1GB. (Prices are for 2-year contracts).

New and upgrading customers will continue to receive unlimited data as a promotion until 1 October, but from that date they will have to buy additional data “bolt ons”. Full details of O2’s updated smartphone data plans are available here.

“With the wide range of Internet-based services now available on mobile devices, we’re providing customers with generous clear data bundles that give customers freedom,” said O2 chief executive Ronan Dunne. “This enables us to provide a better overall experience for the vast majority of customers and to better manage demand.”

Sustainable data experience

Based on current usage patterns, O2 claims that only three percent of of its smartphone customers will need to buy additional data allowances, as the lowest bundle (500MB) provides “at least 2.5 times the average O2 customer’s current use”. 500MB amounts to watching 60 YouTube videos, downloading 50 music tracks or looking at 5,000 web pages.

“By doing this, we are laying the foundation for a sustainable data experience for all customers and the huge possibilities that technology will create over the coming years,” added Dunne. He also dismissed suggestions of a customer backlash against the new charges, in an interview with the Financial Times.

The risk of mobile data outages has been well publicised over the last year. Analyst firm Informa warned in October that mobile data traffic is set to increase 25 fold by 2012, and said that mobile operators need to take action in order to imminent data traffic jams.

“Revenues from data are increasing much slower than traffic,” warned Informa mobile network analyst Dr Dimitris Mavrakis at the time. “Where operators are experiencing exploding data traffic, revenues are not following them.”

O2 is only too aware of the problem of network overload, after it suffered embarrassing network failures in London over the Christmas period. The operator was forced to admit that the crash was caused by the bandwidth strain from the increasing use of smartphones.

The tablet effect

Following the launch of Apple’s iPad in the UK in May, operators Vodafone, O2, Orange and 3 have all offered data plans ranging from £7.50 for 1GB to £25 for 10GB. However, unlike AT&T in the US, no operator is offering an unlimited plan, suggesting that operators are increasingly wary of the effect of increased data traffic.

The current estimate from Broadpoint AmTech analyst Brian Marshall is that Apple will sell 2.5 million iPads in June 2010, 10 million in calendar year 2010, and 17 million in 2011. With a slew of new tablet devices entering the market this year – from Dell, Hewlitt-Packard and possibly Google and Sony – existing data models are likely to become increasingly unsustainable.