When You Cut Prices, Usage Really Grows, T-Mobile US and Sprint Have Found

T-Mobile US and Sprint customers, who arguably have access to “unlimited usage” plans, consume more data, at least since the second half of 2013, according to Macquarie Capital. That is about what classical economic thinking would suggest about outcomes, when effective prices are reduced: people consume more of products they value.

In similar fashion, earlier research by T-Mobile US suggests that allowing U.S. customers to roam outside the United States without paying roaming fees does in fact significantly increase usage.

In October of 2013, T-Mobile US stopped charging subscribers international texting and data roaming fees and lowered the price of calls from more than 120 countries to a flat rate of 20 cents per minute.

T-Mobile US customers travelling abroad now make three times more calls, text seven times more often, and use 28 times more data than before the new plans that dropped roaming charges.

Data usage, meanwhile, is nearly doubling every month, the study, conducted in April 2014, also found.

The study was conducted by Kelton Research, a consumer research firm, between April 25th and April 29th, 2014, among 1,044 Americans ages 18 and over who have smartphones and have traveled internationally, using an email invitation and an online survey.

Some 88 percent of respondents said they were frustrated by the expense and challenge of staying connected while abroad.

Among customers of the big three carriers, nearly 20 percent leave their devices at home or never turn them on while travelling outside the United States.

Another 40 percent turn off data roaming to avoid high costs, and another 20 percent say they would turn off data roaming if they knew how.

To be sure, much of the time, that means users will default to 2G data, which is a behavior-changer. To be sure, business travellers use voice and texting services when they might not otherwise have done so, and use 28 times more data.

But if network access is at 2G or 3G speeds, that probably indicates people are doing less bandwidth intensive apps, such as social networks, not watching video or even doing too much web surfing.

Between the first quarter of 2013 and the first quarter of 2014, the amount of data used by its enterprise customers increased by four times, while small business data usage increased by 11 times.  

The top five countries where small businesses are using the most data are, respectively, Mexico, Canada, the United Kingdom, Colombia and France (though the number of gigabytes being used in Mexico is nearly three times that of the other top-five countries).

Big businesses, by contrast, are using the most data in Mexico, the United Kingdom, Canada, Germany and France, respectively.

For the most part, that roaming access occurs on 2G or 3G networks.

T-Mobile US also sells “Speed Passes” for limited access to overseas 4G networks, featuring one-day passes for 100 MB at a cost of $15, or a two-week, 500 MB pass for $50.

But it appears less than one percent of T-Mobile US customers actually buy such upgrades.

Since T-Mobile introduced Simple Global, more than two million customers have roamed using the feature.