Author(s): Raghu Gopal
Spectrum is a scarce commodity, so it's natural to be suspicious when carriers begin offering limitless deals of this limited asset.
Last Thursday, both T-Mobile USA and Sprint announced new unlimited 4G data packages for new and current subscribers. Now voice, texts and Internet are all open-ended for customers, though there are several fair-use rules in place.
T-Mobile introduced a package called T-Mobile One. Under this plan, subscribers get all the LTE data they can eat, starting from $70 for one line. The offer is clearly priced for volume: the second line is $50 and each additional line is $20. T-Mobile's CEO, John Legere, pointed out that a family of four would pay $40 per line for unlimited everything. Taking the mathematics further, a group of eight would pay $30 per month.
Sprint, the number-four wireless carrier in the US, introduced an even more ambitious unlimited deal the same day as T-Mobile, demonstrating that the escalating price war in the US shows no signs of subsiding. Sprint's plan is called Unlimited Freedom and prices start at $60 for one line, $50 for two and $30 for the next eight lines.
AT&T offers unlimited 4G data packages, but only for accounts that bundle in their fixed-line TV services (see AT&T Announces Unlimited Data Plans — with a Catch). Verizon offers an unlimited 2G data feature called Safety Mode, which customers exceeding their LTE data allowance can move to, thereby eliminating the possibility of overage fees. However, the carrier stands out for not offering a high-speed unlimited data plan.
Consumers will have to dig into the details of these offers as "unlimited" tends to have many meanings. For example, T-Mobile already offered its post-paid subscribers a feature called Binge On, which allows unlimited video and audio streaming for most popular services, though at scaled down quality. Those T-Mobile customers who want high-definition video will have to pay an additional $25 per month, which brings the cost up to the current offer's pricing. Mobile hot spots cost extra and are not unlimited.
US carriers are selling their own forms of "unlimited" as a peace-of-mind feature, certainly with some merit, and this may be the key selling point.
But we can wonder how this unlimited trend will affect consumer behaviour going into new generations of wireless services as the market prepares for 4.5 and then 5G. Expectations can be upward sticky, and it's unlikely that this is just a temporary experiment. Voice calls and messaging have become boundless for most post-paid accounts in the US and in many other markets. Unlimited data — at least in some form — could be here to stay.
This brings us back to network complexities, particularly in the age of cord cutting. Carriers will have to manage their spectrum carefully, offloading whenever possible to open frequency technologies such as Wi-Fi and LTE-U.
It would be premature to label "unlimited" as a Pandora's Box that will grow out of control. Operators in countries such as the UK have juggled around with all-you-can-eat 4G data plans, and Three is currently the only major carrier to offer such a deal ($43 per month on contract). But in general, plans have adjusted to reasonable modern-day data use. It’s worth pointing out that Three has really pulled back from unlimited. It has a major challenge in its lack of spectrum as we have previously stated (see Three Proposes Protection in UK Spectrum Auction).
The US wireless market is reaching maturity, and for the past three years, the challenger carriers (Sprint and T-Mobile) have been trying to poach subscribers from their larger rivals (Verizon and AT&T). It will take a competitor's churn to grow, though reported churn rates in the US are near historic lows (around 1 percent for AT&T and Verizon). Subscribers tend to act rationally and irrational behaviour by carriers is unlikely to change that. While there will be a shift in data deals, we don't expect unlimited panic.