Analyst Angle: How much data is T-Mobile US giving away with Music Freedom?

Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
On June 18, T-Mobile US announced its latest challenge to the other big operators by announcing it was giving away free data for streaming music. If a customer uses T-Mobile US’ Simple Choice and is using LTE, they can stream any of the popular music services (including Pandora, Rhapsody, IHeartRadio, iTunes Radio, Slacker and Spotify) without hitting their LTE data bucket – free data. Note that the customer must be using LTE.
When T-Mobile US made its announcement, the immediate question was “how much data are they giving away?” Obviously, music streaming services can use a lot of data in a day, depending on how many hours they are streaming. The various services also use different compression algorithms, affecting how much data is required per hour. For example, Rhapsody and Pandora appear to stream at 192 kilobits per second, which gives “good” sound quality. Google Play and Beats Music, however, stream at 320 Kbps, which gives “excellent” sound quality. Obviously, the ultimate quality depends on a host of other factors aside from streaming data rate, including the device at the other end and the quality of the speakers.
Once the data rate is known, all it takes is an assumption about how much music people listen to to calculate the amount of data used per month. For example, if a service is streaming at 192 Kbps and the customer listens to just 10 hours per month, that equates to about 844 megabytes per month. Remember that 10 hours per month is just 30 minutes each work day – not much.
For a customer that listens to 40 hours per month (two hours per work day), then 3.37 gigabytes will be used – far more significant. And if the streaming rate increases to 320 Kbps, then the usage jumps correspondingly: 1.4 GB for 10 hours per month and 5.6 GB per month for 40 hours of music.
IGR’s most recent consumer survey asked people how much they listen to music on their smartphones. While 22% said “never,” slightly over 50% said “often” or “very often,” defined as more than once per day. And no prizes for guessing that the amount of music people listen to is directly proportional to age; those under 35 listen to music on their smartphones twice as much as those over 55 years.
So, if 50% of T-Mobile US’ customers listen to music for just 10 hours per month (and let’s assume a 192 Kbps streaming data rate), then T-Mobile US is giving away about 16.8 million GB of data per month. This is not insignificant – the average consumer in the U.S. today consumes about 1.1 GB per month. So T-Mobile US is giving away data equivalent to the entire data usage of approximately 15.2 million consumers. T-Mobile US’ LTE plans offer buckets of 1 GB, 3 GB, 5 GB and unlimited, so it is likely that by offering free music streaming, customers will not have to move up to the next plan. This will cost T-Mobile US potential additional revenue. The hope, of course, is that sufficient new subscribers will switch to T-Mobile US as a result of the music offer to make up for the loss of data revenue.
One final note: T-Mobile US is not original in this approach. Cricket (now owned by AT&T, of course) started offering its Muve Music download service in early 2011. Muve is a download (not streaming) service and offers unlimited downloads to Cricket customers; the number of songs is limited by the storage on the mobile handset. Whether the other big operators (notably AT&T Mobility and Verizon Wireless, who no longer offer unlimited data plans) follow T-Mobile US remains to be seen. The proof will be in the churn rate, as they say.
Iain Gillott, the founder and president of iGR, is an acknowledged wireless and mobile industry authority and an accomplished presenter. Gillott has been involved in the wireless industry, as both a vendor and analyst, for over 20 years. IGR was founded in 2000 as iGillottResearch in order to provide in-depth market analysis and data focused exclusively on the wireless and mobile industry. Before founding iGR, Gillott was a Group Vice President in IDC’s Telecommunications practice, managing IDC’s worldwide research on wireless and mobile communications and Internet access, telecom brands, residential and small business telecommunications and telecom billing services. Prior to joining IDC, Gillott was in various technical roles and a proposal manager at EDS (now Hewlett-Packard), responsible for preparing new business proposals to wireless and mobile operators.