SmarTone's unlimited gamble not so smart

John C. Tanner
23 Mar 2012

The general wisdom in the mobile industry is that unlimited data plans are an unsustainable business model in a world of smartphones and throughput speeds of HSPA+ and above, and that tiered capped models are the future. Numerous operators have already made that transition, typically using the launch of 4G to introduce new volume-based plans.

In the case of Hong Kong, a potential catalyst for dropping unlimited data was the onset of new rules announced by local regulator Ofta in November on fair usage policies (FUPs), under which cellcos claiming to offer "unlimited" plans couldn't limit them via FUPs or throttling unless such techniques were clearly outlined to consumers. The rules took effect last month, and as the industry in general knows that unlimited plans have to go sometime, this looked like the perfect excuse for HK cellcos to make that shift.

Local operator SmarTone was first out of the gate, announcing a couple of weeks before the FUP rules took effect that it would drop unlimited plans for capped plans (albeit at a controversially low 2GB a month).

The day the FUP ruled kicked in, SmarTone completely reversed course, saying it would stick to unlimited plans after all "in the light of market and regulatory developments".

In this case, the "market developments" were the announcements earlier that day by rivals CSL and 3 Hong Kong that they would keep their unlimited plans. Only PCCW Mobile dropped its unlimited plan in the end.

Ironically, CSL launched volume-based packages with its new LTE service last year, and said at the time it intended to phase out its unlimited package option by the end of 2012. But last month, CSL pointedly refused to accelerate that timetable in the name of easier compliance with Ofta's FUP rules. Apparently SmarTone was banking on CSL doing the opposite.

If so, that strategy backfired spectacularly. CEO Douglas Li has said he has no regrets over the sudden about-face, but according to the South China Morning Post, many customers switched to the capped plan and locked themselves into fresh two-year contracts as a result of SmarTone's original announcement, only to discover they'd done so for no reason. In terms of customer experience management, that's a failure of epic proportions that could well haunt SmarTone in the coming months.

However, there's another interesting dynamic worth highlighting here: the challenge of quitting unlimited data plans in a hypercompetitive mobile market.

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