The Reason Phone Companies Are Bringing Back Unlimited Data Plans

Smartphone market saturation knocks the legs out from under the big telecoms opposition to net neutrality. JL

Fortune reports:

The new plans come as growth is slowing in the U.S. wireless market, which already provides more phone lines than there are people in the country. With customers switching brands at record low rates, the carriers are looking for new promotions to attract switchers. All reported shrinking wireless revenue for the second quarter.

Just moments after T-Mobile unveiled a new wireless plan with unlimited data usage, rival Sprint announced its similar offering at a lower price.
The new Sprint plan, which includes unlimited voice, texting and data usage, will cost $60 for one line, $100 for two, and $130 for three. T-Mobile’s new unlimited plan starts at $70 for one line, $120 for two, and $140 for three.
The new plans come as growth is slowing in the U.S. wireless market, which already provides more phone lines than there are people in the country. With customers switching brands at record low rates, the carriers are looking for new promotions to attract switchers.
Sprint, along with market leaders AT&T and Verizon Communications, all reported shrinking wireless revenue for the second quarter. T-Mobile’s revenue grew, but its subscriber gains have been slowing compared to the past few years.
With the pressure on, all four carriers have revamped their pricing over the past month. Verizon announced increased prices in July, but also gave customers larger data allowances. Earlier this week, AT&T increased prices on its cheapest plans, cut prices on top-of-the-line plans and increased data allowances for all.

Then, T-Mobile and Sprint slashed prices from their prior unlimited data plans. But both also included a variety of limitations in the fine print of the new plans to cushion the blow to their networks.
Unlimited customers who use more than 26 GB per line on T-Mobile or 23 GB on Sprint could have their service slowed. Both carriers will limit the quality of video streaming to DVD equivalent quality on the new plans. Sprint will also limit bandwidth for streaming music and online game play. Finally, T-Mobile will dramatically slow any data used for tethering another device, such as a laptop, to pre-broadband levels, while Sprint will do the same only after providing five gigabytes of high-speed tethering in a month.
T-Mobile’s prior unlimited plan, which had fewer restrictions, started at $95 for one line. Sprint’s prior unlimited plan, also with fewer restrictions, started at $100.
Both carriers defended the trade-offs. T-Mobile, which is majority owned by German carrier Deutsche Telekom, said in the past when it offered a choice to let customers turn off the lower-resolution video while using more of their data allowances, 99% opted to stick with the lower quality. Sprint said 90% of customers did not notice a difference in media quality when it tested the limitations earlier this year.
Despite the similarities, there was one huge difference between the two carriers new plans, reflecting a major strategic split. T-Mobile said it would phase out all its limited data plans for new customers starting next month when the new unlimited plans are available. Sprint said it would keep its other offerings.
The T-Mobile strategy aims to attract more customers craving simplicity. The new unlimited plans are a better deal for people who use lots of data or have multiple family members on their account. But by raising the lowest price plan to $70, T-Mobile risks scaring off potential new customers with lower data needs or less money.
“A lot of people dab promotionally into these kind of offers,” T-Mobile CEO John Legere said on a call with analysts and reporters. “For T-Mobile, this is it.”
Company executives said that the vast majority of new customers were already signing up for plans costing about $70 or more and those who wanted cheaper plans could opt for one on the carrier’s prepaid MetroPCS brand. By targeting the higher end of the market, particularly family plan customers, the strategy is consistent with AT&T and Verizon’s recent changes.
Sprint, which is majority owned by Japanese carrier Softbank, said it would continue to offer more choices, and added an even cheaper version of the new unlimited plan to its Boost Mobile prepaid brand starting at $50 per month.
Among the two market leaders, AT&T currently offers an unlimited plan only to subscribers of its DirecTV satellite service, while Verizon has no unlimited offering. But analysts said the two larger carriers could start to feel pressure to better match the new unlimited deals.
“T-Mobile and Sprint have already been taking share from Verizon and AT&T at an unprecedented rate,” says longtime telecom analyst Craig Moffett of MoffettNathanson. “This will only accelerate that. And it will put tremendous pressure on Verizon and AT&T to follow suit.”

After Thursday’s dueling announcements, Sprint CEO Marcelo Claure got into a name calling spat on Twitter with T-Mobile CEO John Legere. Claure called the new T-mobile plan “crappy” and accused Legere of being a “con artist.” Legere said Sprint was copying T-Mobile’s strategy.
Investors didn’t show the same degree of passion about the new plans. Shares of Sprint s and T-Mobile tmus gained less than 1% each in afternoon trading on Thursday, while shares of AT&T t and Verizon vz were each off about 1%.