Attracting customers with free products and services is one of the most common tricks in marketing. But now Sweden’s largest mobile operators are focusing on a new trend: ‘zero rating’ offerings.
This is where the use of certain data services or apps do not count towards a user’s data cap, and is proving as controversial as it is popular.
Telia is Sweden’s dominant operator and in April it announced that customers can surf popular social media sites, such as Facebook, Instagram and Twitter, without it eating into data plans. The operator believes the offer, which applies to all post-paid subscriptions, will help it stay relevant after its research found two out of three Swedes use social media on a daily basis.
“We think this is a differentiator. We are delivering something others are not and it enables us to stand out in a very competitive market,” Jonas Hasselberg, head of consumer business at Telia, tells Computer Weekly. “The primary driver [for the offering] is that we continue to adapt and follow how people in Sweden use social media.”
Telia is not the first operator to tap into free social media surfing. In emerging markets, social media companies such as Twitter and Facebook have collaborated with mobile operators to offer their own zero-rated services (stripped down versions of their full mobile services), which users can access without data fees. However, Telia offers full services and claims its offering is the world’s most comprehensive package.
But Telia isn’t alone. A notable zero-rating rival is mobile operator Tre (part of the international 3 Group), which has taken a slightly different approach to free data. Last year it launched unlimited music streaming on selected services to all its private and business customers. Like Telia, Tre justifies its decision with customer demand and brand building.
“We saw through research done in relevant categories that music and, specifically, music streaming in mobile context were heavily used services,” says Per Schelin, vice-president of products and business development. “It was also the most appreciated service.”
Net neutrality criticism
While Telia and Tre both say customer feedback has been positive, not everyone has welcomed free data offerings. Several Swedish media companies have issued a joint statement claiming Telia (which is partly state owned) is violating net neutrality by guaranteeing access to Facebook even when users have run out of data.
This may sound like a minor offence, but the European Commission has stated it does not allow blocking or throttling of online content, applications and services, and that “all traffic will be treated equally. This means, for example, that there can be no paid prioritisation of traffic in the internet access service.”
Despite this the net neutrality regulation (which came into force in April 2016) leaves a lot open to interpretation, including zero-rating practices. While it remains to be seen whether either Telia’s free social media offering or Tre’s free music streaming are in breach of these laws, both are being scrutinised by the Swedish Post and Telecom Authority (PTS).
The companies are confident their offerings fall within the rules. Telia emphasises it does not prioritise any traffic from the services included in its offer, while Tre states it does not limit the speed or space in their network for any service.
“Free music streaming is part of the packaging we offer to our customers and our ambition is to include all music streaming services. We have a close dialogue with PTS and we are following the process,” Schelin says.
The criticism is familiar. In the US, net neutrality discussions are taking place over T-Mobile’s zero-rating music and video streaming partnerships. Meanwhile, Chile’s national telecom regulator has banned mobile carriers from offering access to zero-rated social media apps such as Twitter, Facebook and Whatsapp. Similar bans have also been announced in the Netherlands and India.
The zero-rated payoff
So what drives mobile operators to implement these services given the potential obstacles? Paul Viio, professor of sales management at Aalto University in Finland and a telecoms industry veteran, offers one specific factor: a saturated market.
“There is tight competition in Sweden particularly over how to keep customers. This has been a constant phenomenon in the mobile industry since saturation point was reached,” Viio says.
He describes offering data services without extra fees as a “new trend” that mobile operators hope will give them a key advantage.
Viio believes a major driver for this is the need to avoid further price wars. Competition has driven tariffs down, so mobile operators hope zero-rating services will stop further price erosion while boosting customer loyalty and brand image.
Better business bundles
But what might work for consumers must be tweaked when it comes to businesses. Hasselberg says Telia currently has no plans to introduce data freebies specifically for business customers, but the company focuses on services that are relevant to all of its customers.
“A freebie for the sake of a freebie is not a good thing, but to do it because it meets specific customer behaviour serves a purpose,” he said.
So what is the future of tech freebies for mobile operators, especially as net neutrality pressure increases? The emphasis is on finding new approaches. A prime example is T-Mobile, which launched in June a ‘Tuesday app’ offering weekly freebies, such as movie tickets and food, to customers. Furthermore, the mobile giant announced that all current and new account holders on a post-paid plan will receive one share of common stock in the company.
Schelin acknowledges tech freebies are a growing trend, but believes finding new ways of packaging services will be a key to longer-term growth in the telecoms industry, particularly in the B2B segment.
“For instance, we have been pushing free storage, primarily through document handling, and we talk about security packages, antivirus, firewall etc,” Schelin says. “We are likely to see more integrated services. Whether they are completely free of charge, that remains to be seen... The key thing is that if we can add value to our customers’ day-to-day activities and business beyond the basic connectivity, then that is positive.”