Monday, February 20, 2017

The reasoning why the four major cell carriers came back to unlimited data plans

It’s been a weird week in the world of major cell providers. After years of moving away from offering unlimited plans after the rise of data-hungry smartphones, Verizon announced out of the blue on Sunday that it would be offering a new unlimited plan to customers again. T-Mobile, who had previously led the way by removing tiered data back in January, updated its own unlimited plan to match. The move was followed by Sprint and AT&T by the end of the week.

Verizon’s unexpected move in offering unlimited data — for the first time since discontinuing the plan back in 2011 — seems to be the factor that caused the rest of the carriers to follow suit. But the question remains: why? Verizon has famously spent the past several years doing everything in its power to limit and raise prices on the last few grandfathered unlimited plans. It even recently ran a TV ad campaign arguing that unlimited data plans were costly and cause consumers to pay for data they’d never use.

So what prompted this about-face that offers not just its first real unlimited plan in over half a decade, but one with prices and perks so generous that T-Mobile, Sprint, and (to a lesser extent) AT&T spent the week scrambling to match it?

The simple answer is competition. T-Mobile, for all its underdog nipping at Verizon’s heels, is slowly catching up to Verizon — while it still doesn’t have nearly the customer base, T-Mobile is at the very least putting up a fight with Verizon when it comes to coverage, speed, and reliability.

“Verizon’s perceived network advantage is no longer strong enough to keep its best customers on unattractive rate plans and it was forced to respond,” reports BTIG analyst Walter Piecyk, which, along with T-Mobile announcing a record porting ratio against Verizon in Q1 2017, may explain Verizon’s sudden change in attitude.

That’s supported by T-Mobile’s own reports — the company specifically noted that porting rates from all other carriers have improved since it started only offering unlimited plans with taxes and fees included in the plan price on January 22nd. Last quarter, T-Mobile also gained around 1.2 million new subscribers, nearly doubling Verizon’s 591,000 new customers. Verizon has also experienced a decline in wireless revenue every quarter in 2016 when compared to the numbers from 2015, while T-Mobile saw year-over-year growth in the same time period.

After Verizon dropped the news, everything else was reactionary. The company announced an unlimited plan to better keep up with T-Mobile, which is generally viewed as more consumer-friendly and increasingly competitive. Less than 24 hours later, T-Mobile upgrades its own unlimited plan to match Verizon’s, and adds HD video streaming and 10GB of LTE tethering along with a limited-time discount. Sprint, which previously offered a more restrictive unlimited plan similar to T-Mobile, adds similar tethering and HD video features, with an even cheaper deal (albeit a temporary one) to try and stand out from the crowd.

Comparing the plans by feature, Verizon and T-Mobile have roughly the same offerings — unlimited, full-speed data on everything, including HD video and 10GB of LTE tethering backed by unlimited 3G speeds. T-Mobile was quick to one-up Verizon in a few ways: it de-prioritizes data after 28GB are consumed compared to Verizon’s 22GB soft cap, and currently is the cheaper plan at $70 for a single line, $100 for two, and $160 for four lines (including all taxes and fees). Verizon, on the other hand, charges $80 for one line, $140 for two, and $180 for four.

Sprint’s is a watered-down version of that: unlimited data, but game streaming is capped at 8Mbps speeds. While music tops out at 1.5Mbps, the plan does offer HD video. Once you’ve used up your 10GB of LTE tethering, Sprint bumps down to 2G speeds, not 3G. Still, it’s currently the cheapest, starting at limited-time promotion of $50 per month (plus taxes and fees) alongside an even more spectacular deal that gets five lines for $95 (plus taxes and fees) per month. Both of those prices will only last until March 31st, 2018, after which they go up.

As for AT&T? It seems it’s not keen on playing the game. The company previously only offered a $100 per month (plus taxes and fees) unlimited plan, but only to DirecTV customers. Following the announcement of improved unlimited plans from other major carriers this week, AT&T made that unlimited plan open to everyone, but it’s still the most expensive and least featured of all the four major carriers. It looks as if AT&T is simply trying to maintain an appearance of feature parity to keep their existing customer base satisfied.

And on a purely speculative note, it’s possible the shift to unlimited plans now could be a savvy move by carriers as the future 5G transition somewhere down the line begins. By offering unlimited 4G internet now, carriers can get the loyalty and service of new customers with plans that in all likelihood won’t transfer over to the new, faster standard. But given that any kind of usable, consumer 5G is still years away, this isn’t really anything more than an interesting observation for now.

Looking at this past week, one thing is clear: competition is good for consumers — at least on the surface level. When forced to operate in an actual, open market where consumers have access to multiple services and can choose between them, companies are forced to improve their services they offer. It’s a lesson that we can only hope one day trickles to wired internet as well.

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