Market Insight

Deutsche Telekom brings T-Mobile USA’s data-free video and music service to Germany

April 06, 2017

Abel Nevarez Abel Nevarez Research Analyst II, Mobile & Telecoms, IHS Markit

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  • StreamOn users can access on-demand music and video on mobile networks without using up their mobile data allowance
  • StreamOn is available free of charge starting April 19 for customers on MagentaMobil plans
  • The offer is available or all customers currently on MagentaMobil M, L and L Plus rates, as well as for MagentaMobil L Premium and L Plus Premium customers. Mobile M plans start at €35.95 up to €67.45 for L Plus plans.
  • So far five audio partners (Apple Music, Amazon Music Unlimited, Napster, Juke!, Radioplayer.de) and 16 video partners have enlisted into Deutsche Telekom’s partner program.

Our Analysis

Zero-rate services help carriers differentiate services  

The German launch follows T-Mobile USA’s Music Freedom service which debuted in June 2014 and BingeOn in November 2015.

Although zero-rated music and video offers are not a new concept for mobile operators, service launches in Europe have been relatively limited – with most operators looking to partner premium content providers for bundled subscriptions, trials or discounts rather than data innovations. T-Mobile USA’s “Uncarrier strategy” which includes Binge On and Music Freedom, alongside other innovations around device pricing, roaming, and termination fees, has proved valuable to attract new customers and retain existing subscribers by differentiating services from competitors. Since launching Music Freedom in mid-2014 T-Mobile USA’s subscription market share has grown from 14.4% to 17.5% by the end of 2016, over which time it has added more than 20m subscriptions.

Deutsche Telekom’s position in Germany is different. In the US it was a challenger operator and used a disruptive marketing campaign to try to capture share from the more established leaders AT&T and Verizon. T-Mobile USA is also a mobile only operator unlike in Germany where it offers multiplay services, was the fixed incumbent and was the clear mobile subscription market leader until O2’s 2014 acquisition of rival E-Plus.

IHS Markit notes there have been over 100+ such over-the-top music and video partnerships worldwide since 2009, which include a combination of zero-rated, discounted, and bundled offers. IHS Markit research indicates that rather than provide their own content services, operators are now opting to attract and retain customers through premium third-party content partnerships. These partnerships include video and music deals with over-the-top players such as Netflix and Spotify.

In Germany, operator partnerships with third-party content providers include Vodafone’s partnerships with Netflix, Deezer, and Sky and Telefonica’s partnership with music provider Napster. It is notable that T-Mobile’s music partners do not include many of the leading services in Europe: Deezer, and Spotify – which may reduce the attractiveness of its proposition.

Operators focus on mobile video with partnerships and zero-rated offers

Deutsche Telekom’s StreamOn service has so far partnered with 16 video providers, which include Netflix, Amazon Prime Video, Sky Go, and YouTube. The partnerships should help Deutsche Telekom push higher value data plans. In Germany, Amazon and Netflix have over 3.2 million customers together as of 2015.

Mobile video has increasingly played an important role in operator’s overall strategies. In the US, Verizon offers its own Go90 service, AT&T offers its DirecTV Now, and in Europe, Vodafone partnered Sky to offer its Sky Sport Mobile TV service.

Carrier zero-rated offers must still contend with net neutrality concerns

Deutsche Telekom’s move to introduce unlimited data-free video and music streaming in Germany is not without some concerns. In December 2016, Dutch regulators ordered T-Mobile to stop offering free zero-rated music streaming in the Netherlands due to violations of net neutrality rules. The Dutch regulator noted zero-rating practices employed by T-Mobile places other competitive services (Pandora and Spotify) at a distinct disadvantage.

In the US, T-Mobile USA is able to offer its streaming video service BingeOn and music service Music Freedom, because it claims no money changes hand between the content service provider and the operator and all content is delivered at the same speed as any other content.

In Europe, however, the sentiment towards zero-rated offers is not the same as in the US. Countries throughout the European Union have their own distinct policies and regulations concerning net neutrality. 

 

Geography
Germany
Organization
Deutsche Telekom
Research by Market
Mobile & Telecom
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