Mobile carriers pushing 'limits' on unlimited data plans

Words have meaning – except when it comes to mobile data plans. In the recent past, carriers including TracFone, AT&T and T-Mobile have paid fines to the FCC and FTC for not being up front with customers that their unlimited plans throttled down data speeds after certain caps, at times after as little as 5GB of 'high-speed' usage. As unlimited mobile data plans reemerged again in 2016 to much acclaim, the limits on those new plans were made more clear, including caps on high-speed data (typically around 20-plus GB) and quality limits on video, music and gaming streams.

With competition as intense as ever, carriers are beginning to push out their unlimited data caps and add other features to unlimited plans – much as they expanded their shared data tiers when such plans were in vogue.

The 451 Take

The expansion of carrier unlimited plans to actually include an amount of data that truly might be considered unlimited – 50GB and up, more than even the heaviest users are likely to use – looks to be the next phase of mobile carrier competition. It's the same cycle operators went through with shared data plans several years ago. The first ones are announced, some initial price competition comes into play until that starts to hurt and then the competition shifts to delivering bigger caps enabling users to consume more network bandwidth. It's a continuum that makes sense; as long as there's excess network capacity to spare, upping caps keeps customers happy – or switching – while not taking a hammer to carrier ARPU (average revenue per user) or margins. But, and it's a big but, the current unlimited plans with increasing congestion de-prioritization cap levels assume carrier networks can absorb all that extra usage. That's going to present some real network engineering challenges. T-Mobile, in boosting its caps, says it's up to the challenge, claiming to have delivered 50% more data to customers in the past year while increasing data speeds by 25%. To keep ahead, T-Mobile and its rivals must push the limits of LTE-Advanced, including carrier aggregation and massive MIMO (multiple input, multiple output) antenna technology more quickly than ever. If they don't, networks will flood with data traffic, congestion will become more common and customers – even with bigger unlimited data caps – will begin to feel the impact. So far, US operators have been able remain one step ahead of that nightmare scenario. Competing via ever-increasing unlimited data caps will up that pressure significantly.

The biggest development in the mobile services sector in 2016 was the emergence – or reemergence – of unlimited data plans. One by one, starting with T-Mobile but quickly followed by AT&T, Sprint and eventually after some delay, Verizon, US mobile operators offered new unlimited data plans. Even a few prepaid carriers joined the party. After years of metering data consumption, in part to keep networks from becoming overwhelmed and in part to maximize revenue, carriers opened up the unlimited floodgates. The twist was that they did so with major limitations. Unlimited plans generally had a cap on 'high-speed usage' (typically about 25GB of usage give or take), after which customer speeds were slowed down, especially in times of network congestion. Carriers also capped streaming quality; for instance, limiting video streams to 480p levels. That quality of video is sufficient for viewing on smartphones while easing the load on carrier networks from higher-encoded – even up to 4K quality – video content.

The strategy appears to have paid off for US carriers. Per 451 Research's most recent Voice of the Connected Landscape (VoCUL) Wireless Service Provider survey, published August 2, interest in unlimited plans is growing, with 34% of respondents opting for unlimited plans, up four points since March. At T-Mobile, 65% of respondents said they were now on an unlimited plan; at Sprint, 67%.

Just as important, unlimited data plan users also reported they were more satisfied with their data plans. At T-Mobile, 46% of unlimited data plan users said they were very satisfied with their plan versus 38% on other plan types. At Verizon, the last carrier to join the unlimited party, the gap was even bigger, 43% vs. 33%. Surprisingly, unlimited plan users don't see a big downside to having their streaming quality limited, including video. For instance, customers at T-Mobile – which was the first and most aggressive in down-encoding video across its network – were the most satisfied with the quality of video streaming on their data plan, with 38% saying they were very satisfied, higher than the 36% very satisfied rating at Verizon, where down-encoded video is a much more recent strategy.

But as has become custom in the US mobile carrier market, things don't settle down for long. Once again, it is the 'uncarrier' T-Mobile making the disruptive move. On September 19, T-Mobile said it would raise its data prioritization/throttling cap for unlimited users to 50GB, about double its original cap. For now – or at least until they likely re-jigger their plans to catch up – AT&T and Verizon have a 22GB prioritization cap on unlimited while Sprint checks in at 23GB. Notably, US mobile carriers have also begun to include video services in with their unlimited plans – T-Mobile now bundles in free Netflix; AT&T, free HBO. Those bundles highlight two trends: one, carriers have to compete harder for unlimited customers, and two, unlimited caps will have to inevitably rise in response to competition and more video usage on the network.

Rich Karpinski

Principal Analyst, Mobile Operator Strategies

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