Networks and Netflix: It's a Match

T-Mobile's Giveaway Highlights Growing Importance of Video


T-Mobile US, at least ostensibly, makes rebellious business announcements several times per year. Its previous Un-carrier moves include the elimination of service contracts, the introduction of device payment plans and the launch of unlimited LTE data plans. Each created aftershocks throughout the industry, requiring rivals to respond with similar measures at the risk of appearing reactive rather than innovative.

It's clear that T-Mobile has been setting the mood in the US wireless industry and that much of its strategy tends to stick.

Its latest Un-carrier effort, announced last week, is called "Netflix on Us". T-Mobile will offer a free Netflix subscription to customers on its One family plan with two or more lines. The bundle is available to existing and new accounts for a monthly fee of $40 per line for a family of four.

The cost of a multi-user Netflix subscription starts at $10 per month. T-Mobile certainly negotiated a discount with the company, but this is an expense for the carrier. It might not affect revenue per user, but it will hit the bottom line.

Nonetheless, the carrier is seeking to exploit the trend of rising video consumption on smartphones — about 70 percent of LTE data consumption in the US comes from video. The move is a sign of confidence in the capacity and capability of the T-Mobile network, particularly in light of the trend among carriers toward unlimited data plans.

T-Mobile is creating another reason for subscribers to pull together and join its network. The larger the account, the less likely it is to churn. With this latest giveaway, the company is creating an adhesive to keep customers around. Subscribers are used to unlimited connectivity and lots of content.

T-Mobile CEO, John Legere, confessed in a roundabout way that it cannot match the moves of AT&T, which acquired DirecTV and is in the process of buying Time Warner. He referred to such merger and acquisition activity as "franken-strategies".

However, T-Mobile's initiative with Netflix could also be a response to the partnerships its rival is forging. For the past few months, AT&T has also been offering customers free access to HBO content on its Unlimited Plus service. T-Mobile seems to be one of the few carriers without an Internet-based video service, so we expect it to announce tie-ups in this area and further subsidised costs.

It's notable that T-Mobile is in the process of building out its network on the 600 MHz spectrum that it spent $8 billion on. This is old television broadcast spectrum being repurposed for wireless services, much of which will be video unicast.

T-Mobile is creating its own bundle combining its expanding network with premium content from Netflix.

This entry was posted on September 12th, 2017 and is filed under Services. You can follow any responses to this entry through the RSS 2.0 feed or you can leave a response.

Posted By Raghu Gopal On September 12th, 2017


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