Market Insight

T-Mobile launches zero-rated Binge On video service

November 13, 2015


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T-Mobile USA has launched its 10th Un-carrier initiative “Binge On”, offering a new zero-rated streaming video service. Available free to all Simple Choice customers on qualifying plans (those with 3GB+ monthly data), the new service allows subscribers to stream optimize video without using up their high-speed data allowance.

The new service supports 24 video services at launch, including: Netflix, HBO Go, HBO NOW, Hulu, Showtime, Sling TV, STARZ, Crackle, ESPN, Vevo, and Vudu. It also includes rival operators Verizon’s Go90 and AT&T’s DirecTV streaming services.

Previous “Un-carrier” events have featured zero rated music streaming data, roll-over data allowances, international roaming, paying early termination fees, early device upgrades, Wi-Fi calling, and low-cost plans for businesses. 

Our Analysis:

T-Mobile hopes marketing value can offset costs

T-Mobile’s Un-carrier strategy is centered on marketing and differentiating itself from the big two US operators AT&T and Verizon. As with its earlier Music Freedom offer, T-Mobile can exploit the brand popularity of well-known launch partners to drive its appeal. It can also use future partner additions to generate additional marketing value.

T-Mobile’s Un-carrier initiatives have found some success.  Its market share has grown from 13% in 2013 to 15% in 2014. But ARPU has declined in 2015, its Q2 ARPU was down 15% on the same period in 2014 and growth in subscribers was not enough to limit the impact on overall revenues.

T-Mobile will hope its optimistation of video traffic will reduce the costs incurs from zero-rating data, but the new service will still hit margins more than previous less data heavy offers such as music streaming. Binge On is available at no extra cost to select T-Mobile customers with 3GB+ data plans so there is little direct revenue benefit for T-Mobile.

Operators increase their focus on mobile video

 Mobile video is playing an increasingly important role in US telcos’ strategy. Recent service launches include Comcast’s cross platform Watchable service and Verizon’s free ad-funded (at launch) Go90.

Operators can use mobile video to serve a variety of purposes: to drive mobile data usage and revenues; monetise through advertising or subscription revenues; add value and drive customer retention and acquisition as part of a bundled premium service; push customers on to higher value subscription plans.   For T-Mobile USA, in-line with its previous Un-carrier offers, it is all about marketing and differentiating from the big two US operators (AT&T and Verizon) to drive customer acquisition.

Launch partners generally offer longer form content

T-Mobile has partnered a broad range of subscription and ad-supported video providers for Binge On’s launch, but there are notable absentees. Facebook, YouTube and Snapchat generate a large proportion of US mobile video views and are not supported at launch. There may be technical issues preventing support for such services for example it could be difficult to detect in-stream Facebook video traffic.

Facebook’s auto-playing of newsfeed videos, services such as Snapchat discover, and the greater focus on short-form content mean these services are more likely to be consumed on mobile networks. Longer form TV and video content such as Netflix is far more likely to be viewed over a fixed / Wi-Fi network when the customer is stationary. So there is room for T-Mobile to provide further benefits to its customers, though potentially at a greater data cost.

T-Mobile hopes to avoid net neutrality concerns  

T-Mobile claims that it will investigate the feasibility of supporting any streaming video service that meets Binge On’s technical requirements and no money changes hand between the service provider and the operator. Users who wish to stream video at higher quality rates than 480p can also easily switch the service on or off. Moreover, all content is delivered at the same rate as any other content.

Battery life will also constrain usage

Video streaming doesn’t just consume a lot of data, it also hits battery life. Despite larger batteries on new smartphones, limitations on battery life mean that there are other limits on how much data a Binge On customer will able to consume over a mobile network. 

 

Geography
USA
Organization
T-Mobile US
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