T-Mobile US: 'Zero Rates' Music Streaming

June 19, 2014
By: Gary Kim

Observers might disagree about which of the new T-Mobile US marketing and retail packaging initiatives—zero rating music services or the Apple iPhone (News - Alert) “free test drive” program is more significant.

Some might argue it is the zero rating of music streaming that is the more important, in a broad sense.

T-Mobile (News - Alert) US “Simple Choice” customers will now be able to stream Pandora, Rhapsody, iHeartRadio, iTunes Radio, Slacker, Spotify, Milk Music and Beatport music without such usage affecting their data plan usage.

Zero rating of this type essentially has T-Mobile US subsidizing consumption of those particular applications.

And with all the confusion about “network neutrality,” and the stated concern over “treating all apps equally,” one wonders how long it will be until some complain that T-Mobile US cannot provide this value to its customers, as it favors streaming music over all other apps.

The other reason the zero rating is significant is because it illustrates one way end user value can be created when an app or service provider effectively lowers the price of using a particular app or class of apps.

Though the analogy is not completely perfect, the prior AT&T (News - Alert) notion of offering sponsored data services to app providers on a voluntary basis, much as toll-free calling can be purchased by an organization, is largely apt.

Consumers win, T-Mobile US believes it wins, and the music streaming services arguably also win.

As has been the case in the past, a mobile service provider is able to take this approach because it has a new network, lightly loaded with traffic. Under those conditions, a service provider can afford to offer unlimited use of some feature because it has plenty of spare capacity, at the moment.

That ability to create a promotion taking advantage of a new and lightly-loaded network is not unprecedented. But the big unanswered question is whether some will challenge T-Mobile US right to offer such plans, because they are a “violation” of network neutrality.




Edited by Maurice Nagle