On Wednesday, T-Mobile announced phases 5.0 and 6.0 of its long-running Uncarrier strategy, including a free seven-day test drive of an iPhone 5S running on its network, and zero-rated music services on its data plans. The comment below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan may also be reached at (408) 744-6244 or jan@jackdawresearch.com.
T-Mobile’s latest event – and the announcements it made there – were more of what we’ve come to expect from the carrier. There was brash, foul-mouthed trash-talking of T-Mobile’s competitors from John Legere, and announcements which combine giveaways with clever marketing. The test drive offer resurrects an age-old concept in the US wireless market, one all the major carriers have long since put to bed, but it does it with a new twist, lending the customer a high-end device instead of signing them up for a contract on a trial basis. T-Mobile badly needs to convince the US population as a whole that its network has got better and is now very competitive in certain markets, and the best way to do that is to get live devices running on the network into consumers’ hands. The new test drive offer is a fantastic, low-risk way to do that, and it should be met with significant demand, especially because of the lure of using an iPhone 5S for a few days. It would have been easy to use a cheap Android device for the testing to reduce costs, but the partnership with Apple is a win-win for both companies, as Apple gets some marketing out of the deal and may increase its penetration of the T-Mobile base in the process. The downside is that, for all the progress T-Mobile has made in major metropolitan areas, its overall network coverage still lags competitors significantly, and in-building coverage can be spotty even in markets where it does well outdoors. Some people who try the test drive may merely confirm what they already suspect: that T-Mobile doesn’t cover their area very well. But overall the test drive program will likely lower the barriers to switching still further and help keep T-Mobile’s conversions from other carriers going.
The music initiative is above all else great marketing. For a carrier which talks up its unlimited plans, it’s somewhat surprising for T-Mobile to promote a feature that’s mostly appealing to those on limited tiers. The genius is in the fact that video, and not music, is what really causes people to go over their data plans. Sandvine data suggests that the most-used music service on mobile only accounts for 5% of downstream traffic, while YouTube and Netflix combined account for over 20%. Zero-rating music services (i.e. carrying them without dinging the customer’s data plan) is therefore a low-risk strategy which will have relatively limited impact on T-Mobile’s costs while making for good marketing material. It also announced a partnership with Rhapsody to provide a new radio service for free to T-Mobile unlimited data customers, who of course don’t benefit from the free music streaming offer. T-Mobile therefore joins AT&T and Sprint as carriers who’ve signed deals with major music streaming services, though the only one that isn’t offering a fully-fledged subscription music service. Verizon is now the lone holdout among the major carriers in forming such a partnership, though it’s likely that it will have limited impact on its growth.