The reality behind T-Mobile's Binge On strategy

Mike Dano

LOS ANGELES -- T-Mobile US (NYSE:TMUS) CEO John Legere has wisely phrased T-Mobile's newest Binge On announcement as the carrier giving its customers what they want. But Uncarrier X is just as much about strengthening T-Mobile's business and network management as it is about serving "uncarrier" customers.

The reality is that Binge On will be imposed on all of T-Mobile's customers starting Sunday, including the ones who have signed up for its unlimited data plans. Customers who don't want the service will have to opt out of it. Yes, Binge On gives T-Mobile's customers free streaming video, but it also reduces the resources T-Mobile needs to employ to deliver that video. It's a smart move, but it's not as altruistic as Legere might imply.

Moreover, T-Mobile is also raising the price of its unlimited data service from $80 to $95 per month. That's a significant move and, not surprisingly, it was not mentioned during Legere's glitzy, 1.5-hour Binge On media event here at the Shrine Auditorium. The increase in the price of T-Mobile's unlimited data service may indicate both the carrier's desire to get more money from new customers as well as reduce the number of customers who opt for unlimited data, and thereby reduce potential strains on its network. (T-Mobile executives are clearly trying to proactively appease the carrier's unlimited customers by doubling the amount of data they can use while tethering, and by giving them a free Vudu movie rental every month in 2016.)

In its fine print, T-Mobile notes that it might "de-prioritize" unlimited data customers who use more than 23 GB in a month. At its Binge On event, T-Mobile executives said around 8 percent of the company's cell sites nationwide occasionally suffer from enough congestion for this stipulation to be implemented. Thus, data usage -- likely from video -- may be a growing concern for a company that has added around 2 million new customers every quarter for the past few years.

To be clear, T-Mobile is not alone in carefully managing its network. All of the other major U.S. wireless carriers employ various network management strategies and technologies. Further, the FCC's new net neutrality guidelines specifically permit network management practices. But with Binge On, Legere has turned what would appear to be a challenge into an opportunity.

And it is worth contrasting T-Mobile's Binge On with Verizon's Go90 approach to mobile video. Whereas "video streams free at T-Mobile," Verizon Wireless' (NYSE: VZ) Go90 app won't work at all until users input their email address, password, username and birthday. Naturally, the "send me news and offers" box on the Go90 signup screen is checked for you.

Legere wasted no time making this same comparison. He sarcastically labeled Verizon Communications CEO Lowell McAdam as a "millennial expert" and pointed to McAdam's statement in September that Go90 can "extend the profitability of a smartphone customer" because "the more people watch, the bigger bundles they buy and that's what we are in business for."

It's certainly entertaining to watch Legere at work against "the duopoly" of AT&T (NYSE: T) and Verizon, but T-Mobile's new Family Match promotion is clearly designed with the same goal in mind. With Family Match, T-Mobile is encouraging family members to simultaneously move to higher data buckets by cutting $5 per month from each 4 GB increase they make to their data allotment. At least, I think that's how it works. For a pricing plan called "Simple Choice," T-Mobile's Family Match options are surprisingly complex.

Although video optimization has been a hot topic in the wireless industry for more than a decade (does anyone remember PacketVideo?), Binge On nonetheless represents an impressive network innovation and business strategy. It will probably help T-Mobile maintain its momentum in the market. But it's not quite the David-versus-Goliath story that Legere and the hundreds of cheering T-Mobile employees that were bused in to the Shrine Auditorium would have customers believe. --Mike | @mikeddano

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