T-Mobile USA fights falling subscriber growth with free Netflix

‘Straight to Netflix’ is the latest initiative from T-Mobile USA on its path of disruption. This offers subscribers to its T-Mobile One family plan free subscriptions to the video streaming service with unlimited data – but this is a move that will come at quite a cost to the Uncarrier.

New or existing subscribers with two or more T-Mobile One lines (costing $40 a line) can qualify for free, all-you-can-eat Netflix.

Disruptive and pro-consumer, definitely; desperate to revitalize growth after being handed its smallest number of phone additions in three years, in the last quarter – perhaps.

This takes nothing away from yet another cleverly sculpted marketing strategy. TMO  has once again broken the mold, as not many operators in the US have been pushing Netflix with the same enthusiasm as those in Europe. But offering it completely free came as an unexpected move, even from a maverick CEO like John Legere.

No financial terms have been disclosed, but analysts at Wireless Watch’s sister service, Faultline Online Reporter, which covers the digital video industry, suggest that TMO could be paying as much as 50% of a full subscription price to Netflix. The wireless provider has a total of 69.5m subscribers, but has not broken out how many are on the One family plan – although this is not likely to be substantial as the plan is just one year old.

Legere famously doesn’t shy away from calling out competitors for being stuck in the mud, and TMO’s press release resorted to that tactic again this week. It attempted to shame US operators for what it calls the carrier bundle, citing the way AT&T and Verizon push “bigger, fatter, pricier packages” as being a major pain point for consumers today and simply a way for operators to drive up ARPU.

TMO says that network speeds for AT&T and Verizon have plunged since they rolled out unlimited offerings earlier this year, and it specifically slammed Verizon for capping all video speeds as its network struggles to cope with usage. “I mean, you can’t make sh*t up like Go90,” said Legere, in a video announcing the Netflix partnership last week.

Backing up its own corner, TMO claims its network has actually increased in speed, according to a report from wireless mapping firm OpenSignal, which ranked TMO number one in all three categories – speed, latency and LTE availability.

To the dismay of AT&T and Verizon, TMO’s 600 MHz LTE network was switched on last month and is expected to roll out countrywide by the end of this year, opening up even more capacity using the large haul of low band spectrum it won in the incentive auction earlier this year.

However, it is a tough job to keep poaching customers from these larger players. In the second quarter of this year, TMO claimed it was up by a net figure of about 2m customers year-on-year, but from the previous quarter it had actually dropped 3m subs, with 4m being lost to wholesale.

Some have suggested that the arrival of T-Mobile One marked the death of Binge On, its uncapped plan encapsulating multiple over-the-top video services, but Binge On actually triggers any WiFi service for which the user has credentials, in preference to cellular – cutting down the video burden on the TMO network. Perhaps this Netflix deal will do the same.

The operator claims the US experienced a tipping point this year, as more than 50% of consumers spent more time on smartphones and digital devices than traditional TV – and it forecasts this mobile usage will more than double by 2020.

“The future of mobile entertainment is not about bolting a satellite dish to the side of your house or resuscitating faded 90s dotcoms. The future is mobile, over-the-top and unlimited,” said Legere. “While the carriers spend billions on their franken-strategies to cobble together carrier–cable–content mash-ups, the Uncarrier just leapfrogged them all by partnering with the best and giving it to customers at no extra charge. Because that’s what we always do. Give more to you without asking more from you.”

Netflix CEO Reed Hastings said: “This is the right move at the right time – for all the right reasons. More and more fans are bingeing on mobile, so we’re bringing together Netflix’s award-winning TV shows and movies with T-Mobile’s award-winning, unlimited network.”