iPhone data cap spreads to the U.K.

O2, the largest iPhone operator in the U.K., announced it is following AT&T's lead by ditching its unlimited data plan for smartphones.

AT&T isn't the only wireless operator that is doing away with unlimited data plans for smartphones. Telefonica's O2 in the United Kingdom is also dumping its unlimited data offering, the company announced Thursday.

O2, the second-biggest mobile operator in the U.K., said in a press release that the change in pricing will give customers "a more transparent pricing model tied to usage."

Here's what has changed: Customers on plans costing 25 pounds, 30 pounds or 35 pounds a month will get 500 megabytes of data downloads. Plans costing 40 pounds or 45 pounds a month will get up to 750MB. And customers paying 60 pounds a month will get 1 gigabyte of data per month.

Customers who exceed their limits will be charged 5 pounds extra a month for 500MB of data, while 1GB of data will cost 10 pounds more a month.

O2's new pricing only applies to new customers and customers who are renewing their contracts with O2. Customers with existing O2 contracts won't be affected by the changes, the company said.

O2 claims that 97 percent of its smartphone customers do not exceed 500MB a month of data usage. So most customers won't be affected by the change, the company argues. In fact, the 500MB is about 2.5 times more data than current smartphone customers use on O2s network, the company said.

O2's CEO Ronan Dunne said in a statement that the move laid "the foundation for a sustainable data experience for all customers."

"We know that customers are looking for clarity in pricing as too many offers have clauses and catches which are not easy to understand," he said. "With the wide range of Internet-based services now available on mobile devices we're providing customers with generous clear data bundles that give customers freedom. This enables us to provide a better overall experience for the vast majority of customers and to better manage demand."

O2's pricing changes come a week after AT&T, the exclusive carrier for the iPhone in the U.S. announced a similar plan. AT&T is offering two tiers of data service for new smartphone subscribers. The company has done away with its $30 unlimited plan for new smartphone subscribers. The 200MB plan costs $15 extra a month while the 2GB service is $25 a month.

AT&T and O2, which were among the first wireless operators in the world to start selling the iPhone 3G when it came on the market initially, have each experienced network problems largely brought on by an explosion in data usage on their networks.

Like AT&T, O2 has said that a small minority of customers are using a bigger proportion of the network resources, which is putting a strain on the company's network.

"Nearly a third of our data traffic is accounted for by just 0.1 percent of our customer base, for example; a stark imbalance by any conceivable measure, and one which often affects network performance for the rest of our customers," O2's CEO Dunne wrote in a blog post. "We don't think it's fair that the many should subsidise the behaviour of the few, and we think that we have a responsibility to our customers to address this kind of imbalance."

It's likely the move toward tiered pricing will be copied by other carriers. Orange, the first U.K. operator after O2 to get the iPhone , might follow O2's lead, according to an unnamed Wall Street Journal source. There's been no word yet if Tesco, the discount retailer also selling the iPhone in the U.K., will follow suit. Tesco currently offers the best deal on iPhone service in the U.K. with its lowest priced plan of 20 pounds. This includes one year of unlimited data.

Telefónica, O2's parent company, told the Journal that it has no immediate plans to introduce similar mobile-data pricing in other parts of Europe.

The new iPhone 4 that goes on sale in the U.S. on June 24 and will be available in Europe later this summer is expected to be an even bigger bandwidth hog than the current version of the iPhone 3GS. The introduction of the new phone, which offers high-definition video recording, might be why carriers are making changes now. New streaming video and audio apps for the iPhone 4 will also likely drive data usage for consumers all over the world. In the U.S., Netflix, the DVD video subscription site that also provides on-demand movie viewing via the Web, has created an app for the iPhone.

 

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