UK operator EE is launching shared data plans, similar to those seen in the United States with Verizon and AT&T:-
- All plans feature unlimited calls and texts along with different price levels determined by different data caps. The basic plans are the same costs as EE single device plans.
- Adding additional devices costs £5 per month for tablets, £11 for other mobile broadband devices or £12 per month for phone SIM cards. Subsidised handsets will also be available for secondary devices but the additional cost would then be £22 or £32 depending on the device.
- Users may connect up to five devices to a single shared account. Shared accounts also get a £5 per month discount to EE's home broadband service.
In addition to the shared plans, EE also announced a range of other initiatives:
- EE is now employing a 2x20MHz channel for its 4G service in 12 cities in the UK and is doubling the speeds available for all devices. This upgraded service is available for free to all existing customers and to new customers signing up during its summer promotion, but EE has indicated that speed based price tiers will be implemented once the promotion ends. EE also announced plans Pay as you go 4G plans but only for data-only devices.
- A summer promotion where EE will double the data limit on almost all its plans, with higher increases on the most expensive plans.
- A 'tap to pay' mobile payments scheme in partnership with MasterCard. Consumers may make payments of up to £20 at over 230,000 UK retail outlets by touching the phone against a contactless terminal. EE is offering £10 credit to encourage people to start using the service.
- EE also introduced a new 802.11ac Wi-Fi router for its home broadband service.
EE is correct to launch shared data plans in the UK given the success Verizon and AT&T are having with them in the US and the potential to benefit from first mover advantage. Shared data plans have formed a central part of the US operators' ability to stave off decline in average revenue per user seen in almost every other market in the world. EE is attempting to increase differentiation through shared data plans because it will not be the sole UK 4G operator for much longer.
EE is aiming its shared plans at two segments in particular: families and multiple device owners. EE hopes that benefits of the shared plan to families will be simplicity as well as perceived cost savings. However, IHS believes the prevalence of prepay in the UK means that this cost saving will often be less clear cut and lower than for US consumers. 47 per cent of all UK mobile subscriptions are prepaid, compared to only 36 per cent in the US. Similarly, as anyone can purchase top-ups to the data cap, parents lack control over the bill, which weakens EE's proposition for this segment by complicating the proposition.
Shared data plans increase revenue for operators in two ways. Firstly, by lowering the cost of cellular enabled tablets, more people are encouraged to purchase cellular enabled tablets and sign them up for the service where they may have simply opted for the cheaper Wi-Fi only option or at best a pay-as-you-go payment plan previously. Secondly, by pooling data between many devices, operators hope that accounts will need to move up in data tiers faster than they would need to individually.
Shared plans are a tougher sell in the UK where prepay is more entrenched and where price competition is more intense. The £12 additional cost per additional phone that a consumer adds to a shared plan is almost double the UK pre-pay ARPU in 2012 so this plan will only really appeal to families where most accounts are already on postpaid plans.
However, the likely variable timing of users' contract expirations will prove a barrier to consumers switching all a household's phones onto a shared plan. Each added device carries its own 24 month commitment which raises complexity for consumers that adopt shared data plans because different devices on a plan may have a different contract expiry. This will add reduce the likelihood that consumers add additional tablets and children's phones in particular mid-contract.
IHS expects other operators to launch shared data plans in the UK and across Europe. To improve on EE's current package, operators should consider simpler rules for adding additional data-only devices. Notably, operators should allow tablets to join a shared plan with a one-off activation fee - not an on-going monthly fee - and instead use the presence of those additional data devices to drive consumers to higher priced data plans. Similarly, IHS believes that other operators should simplify the terms around commitments if consumers choose to add an additional device within the first year of a two year contract.
By providing upgraded 4G speeds, EE aims to maintain its position as the technology leader in the UK when its rivals launch their own 4G services later in 2013. It also provides EE with a platform to both offer competitive 4G pricing while reserving a premium, high-speed tier to generate more revenue. While newer phones with category four LTE will be necessary to fully benefit from the speed upgrade, all current devices should see average download speeds increase from around 12Mbps to 24Mbps.
Unlike almost every other 4G network in the world, EE's large amount of contiguous spectrum in the 1800MHz band means it can provide significant speed increases without needing to implement carrier aggregation. Aggregation typically only requires a software upgrade on network equipment, but existing 4G user devices that lack LTE Advanced support would not be able to benefit. As a result, this speed upgrade is positioned as a key strength of EE's proposition for a few years at least. EE will be able to offer faster speeds on cheaper handsets than its competitors.
The Cash on Tap mobile wallet is the fruit of a five-year partnership between EE and MasterCard first announced in August 2012, and aimed at increasing the visibility and adoption of mobile payments. The service, however, faces a number of challenges. Stored value accounts still need to be topped-up from a pre-existing credit or debit card first in order to be used. Until other top-up mechanisms like direct debit from a bank account are implemented, the service's potential appeal as a card substitute is limited to very specific use case scenarios, such as providing a child who does not have a card to his or her name with a limited allowance controlled by the parents for small, discretionary purchases on the handset.
A more significant challenge, however, is the availability of suitable payment terminals at the till. According to IHS estimates only one in ten point-of-sale (POS) terminals in the UK are currently capable of accepting contactless payments. As it stands, the wide availability of chip-and-PIN cards and payment devices, and the limited convenience afforded by the service will continue to represent the most significant obstacles preventing the wider adoption of contactless mobile wallets.