Over the past week, the four big US wireless carriers have made two things clear: They’re easily spooked, and competition works.
From Feb. 12 through Feb. 17, a cascading series of rate cuts and service-plan liberalizations have seen the price of unlimited data plans tumble from a high of infinity to, at worst, $100.
Unlimited-data domino theory
The pricing battle started when Verizon (VZ) made a surprise announcement on Feb. 12 saying the company would start selling unlimited data plans for $80 for a single line without the kind of video streaming and hotspot limits T-Mobile (TMUS) imposed on its $70 unlimited plan.
T-Mobile then quickly responded by saying it would lift both of those restrictions, adding a 10 GB tethering allowance and letting subscribers stream high-def video.
The next two dominoes fell when Sprint (S) announced that it would also enable high-def video on its $60 unlimited plan and double its Wi-Fi tethering allotment to 10 GB. Then AT&T (T) said it would open its $100 unlimited plan to all subscribers instead of reserving it only for those who also pay for its DirecTV or U-verse TV services.
The carriers’ plans still have their individual downsides, of course. AT&T, for example, bans tethering on its “unlimited” plan, while Verizon’s offering requires that you give up any employee or educational discounts and enable autopay from a checking account or debit card to qualify for the lowest monthly price.
And all four carriers reserve the right to “deprioritize” your data — send it to the back of the digital line behind other users’ — if you use too much. AT&T and Verizon set that limit at 22 GB, while Sprint draws the line at 23 GB. T-Mobile starts to slow things down at 28 GB should the company’s network becomes congested in your vicinity.
But overall, things are looking far more customer-friendly. And that didn’t happen because AT&T, Sprint, T-Mobile and Verizon magically supercharged their networks or anything.
Wireless customers can walk
One of the biggest reasons for the changes came last month, when Verizon announced that its quarterly earnings and wireless subscriber additions both fell below analyst predictions. One big factor: growing competition from T-Mobile and, to a lesser extent, Sprint.
“All the signs for the complete return of unlimited were hiding in plain sight,” said Recon Analytics founder Roger Entner, who pointed to the increasing capacity of Verizon’s network, as well as the shrinking gap between Verizon and T-Mobile’s coverage areas as evidence for the change.
AT&T, meanwhile, couldn’t just ignore Verizon’s moves considering Big Red is the company’s closest competitor. “When one does something significant, the other cannot fight the urge to respond in kind,” Entner said. “It just highlights how vigorous and intense the competition is in wireless.”
Don’t expect these lower unlimited data costs to rubber band back to their highs, either. In this four-company market, there’s too much competition for any one carrier to expect others to follow suit if it raises rates.
The market didn’t build that on its own
This isn’t entirely a triumph of private enterprise, though. Imagine a wireless market in which you couldn’t take your phone number from one carrier to another at will, something the Federal Communications Commission only issued a directive on in late 2003, years after the Telecommunications Act of 1996 mandated the move.
Then imagine a market in which AT&T had been allowed to purchase T-Mobile in 2011. If the Feds didn’t quash that deal and free T-Mobile (armed with a $4 billion merger-breakup fee from AT&T) to blow up business as usual, we might still be stuck with two-year service contracts tying us to bloatware-riddled, carrier-crippled phones.
It’s worth thinking about that as news circulates of Sprint’s corporate parent Softbank readying yet another bid to get its carrier merged with T-Mobile — in the latest chapter of of a story that’s been simmering since 2014, Softbank is now signaling its willingness to have T-Mobile buy Sprint instead of the other way around.
We already know what a telecommunications market without sufficient competition looks like. For many American households, residential broadband remains a two-company proposition at best. In fact, in most cases, consumers have just one option after subtracting the phone company’s sluggish digital-subscriber-line service.
That’s not to say home broadband represents some sort of American nightmare. Most of us have connections that seem fast enough, get faster every year and work most of the time. But if our Internet provider disappoints us, we can’t fire it.
To put things another way, if wired broadband were half as competitive as wireless, do you think that the AT&T now selling unlimited mobile broadband would still impose data caps on its DSL and fiber-optic residential broadband?
Disclosure: Verizon is in the process of buying Yahoo Finance’s parent company, Yahoo.
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