Analysts: T-Mobile likely to win over consumers with Binge On video streaming offer

T-Mobile US' (NYSE:TMUS) Binge On video streaming plan, in which video quality is optimized down to 480p but the streams from 24 different video services don't count against customers' data buckets, will help T-Mobile gain market share, according to research firm Strategy Analytics. Meanwhile, Binge On received a cautious endorsement from FCC Chairman Tom Wheeler, who said yesterday it promotes innovation and competition but that the agency would be keeping an eye on the program and how it affects consumers and the market.

In a new report, analysts at Strategy Analytics said that "T-Mobile is challenging its competitors by positioning itself as the most customer-friendly wireless operator in the U.S. market. Un-carrier momentum continues with the addition of the Binge On mobile video streaming service supported by zero-rated data over LTE and video optimization technology, strengthening T-Mobile's value proposition while challenging AT&T and Verizon Wireless to follow suit."

Strategy Analytics analyst Nitesh Patel said in a statement that T-Mobile is "removing consumers' concern about blowing their data allowance or incurring competitors' huge overage fees. Despite 24 video content services included today, the current absence of a few popular services from Binge On, especially YouTube -- which according to Strategy Analytics' consumer telemetry is generating the largest amount of data traffic among all mobile applications used -- could be a disappointment, in particular for millennials who typically go on YouTube and social networks to catch the latest videos."

Meanwhile, Strategy Analytics analyst Susan Welsh de Grimaldo added that T-Mobile needs to market the fact that its LTE network is getting much closer to par with AT&T (NYSE: T) and Verizon (NYSE: VZ), largely thanks to the deployment of its 700 MHz A Block spectrum to around 176 million POPs. T-Mobile's overall LTE footprint now covers 302 million POPs, only six to eight million fewer than Verizon and AT&T.

"The Un-carrier also needs to keep the pressure on Sprint as the latter promotes its 'LTE Plus' network improvements with its latest cut your rate in half promotion," she said in a statement. "Binge On is adding value for customers and creating the buzz to showcase the 'data strong' network to retain T-Mobile's current subscribers and attract new customers in the Q4 holiday shopping season."

"A crucial element to Binge On is video optimization, which can actually enhance the viewing experience while helping T-Mobile get in front of the huge anticipated growth in video traffic," she added. "With Un-carrier, T-Mobile has consistently outperformed on phone net adds and has reduced its churn rate. Un-carrier X is a bold step to expand the value proposition."

Net neutrality advocates have said that T-Mobile retains too much power with Binge On and should not be the one to determine which video services get zero-rated. T-Mobile executives have said any video service can join as long as they meet the carrier's technical requirements and that it is working with YouTube to get it to be a part of Binge On.

"T-Mobile wants to suggest it's saving customers by exempting video from its data caps. But we have to remember that T-Mobile imposed these caps in the first place. It's a cheap sales trick: First you fabricate a problem for customers; then you make that problem go away and act like you've done them a huge favor," Matt Wood, policy director with public-interest group Free Press, said earlier this month. "Exemptions for selected streaming-video services prove there's no legitimate reason to impose data caps. Data is data. There's nothing about a gigabyte of Netflix content that makes it more or less of a drain on the carrier's network than a gigabyte of some other data."

Added Wood: "The real question is why T-Mobile would discriminate in favor of its customers who watch a lot of video, and against those who don't -- especially when we've heard excuses so many times about the supposed strain that video puts on networks."

Wheeler said yesterday at a press conference after the FCC's November meeting that he saw positive aspects of Binge On. "It's clear in the Open Internet Order that we said we are pro-competition and pro-innovation," Wheeler said, according to Ars Technica. "Clearly this meets both of those criteria. It's highly innovative and highly competitive."

Wheeler said that it appeared the plan does not violate the bright-line rule against paid prioritization, but said the FCC would be studying Binge On to see if it violates the FCC's "no-unreasonable interference/disadvantage standard." The standard is designed to protect the ability of consumers and content providers to use the Internet and connect to each other without being unreasonably interfered with or disadvantaged. 

The FCC has laid out several factors it will consider in determining whether a practice meets the standard. Those include whether the new plans "empower meaningful consumer choice;" the effects the plans will have on market competition, whether consumers are protected; the plans' effect on innovation, investment and broadband deployment; whether the plans threaten free expression; whether the practices are "application agnostic" and unreasonably harm content providers; and whether the plans conform to best practices as set by industry standards.

According to Multichannel News, Wheeler said the rule means that carriers "should not unreasonably interfere with the access to someone who is trying to get to an edge provider and an edge provider who is trying to get to a consumer. So, what we are going to be doing is watching Binge On, keeping an eye on it, and measure it against the general conduct rule."

For more:
- see this release
- see this Ars Technica article
- see this Multichannel News article 
- see this The Verge article

Related articles:
The reality behind T-Mobile's Binge On strategy
T-Mobile execs: Binge On uses proprietary adaptive bitrate optimization technology
T-Mobile makes Netflix, Hulu and other streaming video services free with Binge On
T-Mobile: Throttling policy for unlimited customers who hit 21 GB is OK under net neutrality