Welcome to ZenUnwired; a blog dedicated to tracking developments in technology and strategy, and to deciphering the impact of these developments on wired and wireless ISP's, device manufacturers, OS and application developers, and most importantly - you.

Thursday, May 17, 2012

The End of Unlimited Data

Verizon Wireless struck another nail in the 'unlimited data' coffin today when it announced that it plans to eliminate the $30 per month unlimited data plan that it still provides to 3G customers who were "grandfathered" into the plan because they were data customers prior to the company's switch to tiered data pricing last July.

How did we get here?
Just a few years ago, all carriers were touting their unlimited data plans, and were ecstatic whenever a customer signed up for one of these plans. Then came the iPhone, followed by a multitude of Android devices, and being data hogs, they decimated carriers data-related margins. In just a couple of years after these devices launched, the data business went from being highly profitable to one in which carriers now have to fight to retain their profitability. And to make matters worse, the onslaught of these devices is far from over. We now have iPads, Android tablets, connected game consoles etc that are still consuming data at record speeds. However, the main offenders are still smartphones.  

The carriers reaction
Carriers are now rapidly moving away from unlimited data. About a year ago, both AT&T and Verizon started offering only tiered data packages to new customers (new customers paid for what they consumed vs. old customers continued to have full access to the buffet). T-Mobile followed suit shortly thereafter. Sprint however, continued, and still continues to offer unlimited data. But towards the end of last year Sprint quietly pulled its unlimited offering from all of its data devices except for on handsets (incl. Smartphones).

Therefore, at the end of last year, this is how things looked:
  • On AT&T, Verizon & T-Mobile, existing customers were "grandfathered" into their unlimited plans, meaning, they got to stay on their unlimited plans whereas new customers got only tiered data plans, meaning, customers had to estimate how much of data they would use prior to signing up for their contract, and then stay within their limit each month, or paid overage charges if they went over their limit (just like in a voice plan - you bought say, 900 minutes, and you had to limit your calling to 900 minutes or less each month)
  • On Sprint, old and new customers alike could buy unlimited data plans
Now, with Verizon's announcement, the tides seem to be shifting once again. Verizon is now forcing existing customers - the ones who were grandfathered in - to choose a tiered data plan. The Twitterverse exploded today with mostly negative comments on Verizon's move. Assuming Verizon sticks to its guns in the face of all of this negative publicity, and is able to move the grandfathered customers over, then I am willing to bet that AT&T will follow suit. Its an open question however, whether T-Mobile and Sprint will also follow. T-Mo is hurting for growth, and Sprint is using 'unlimited' as a differentiator, and therefore it might be difficult for both these carriers to move away from their current offers.

Where do we go from here?
The Industry seems to be moving closer to a concept called 'shared plans'. This is how it will work - say you have a laptop with embedded 3G, an Android phone and an iPad. Today, you probably just have one data package from your carrier for your phone, and all of your cellular data consumption occurs on that phone. In the (near) future, carriers will let you buy data packages that you can use across all of your devices. So say, you buy a 5GB plan, you can use the 5GB across your laptop, phone and iPad. Taking this a step further - say instead of having an individual plan, you have a family plan. In the (near) future - you would just end up buying a voice (minutes) package and a data package from your carrier, that you and your family can then just use on any device of your (family's) choosing. Makes you wish you bought that 3G/4G enabled iPad now instead of the Wi-Fi only model that you bought right?

How much will this cost?
Verizon's data share plan is scheduled to launch in mid-summer but no pricing details have been announced. But if current plans are anything to go by, you should expect to see pricing in roughly the $8-$10 per Gigabyte range (based on the 10GB plan from Verizon, AT&T & T-Mo). Of course, if you buy fewer GB's, you will pay a higher price, and vice-versa.

So how much data will I need?
  • Start - Smartphone Bill: The best place to start is your current smartphone bill. An analysis of a few of your bills will give a rough estimate of how much you really use on average. 
  • Add - Connected Devices: Do you want a 'connected' laptop? do you want a connected iPad? what other devices do you want to want to have connected? (Note: laptops and iPads consume infinitely more data than smartphones).  
  • Deduct - Wi-Fi Offload: what percentage of your data needs will be met by Wi-Fi? 
  • Add - Family Usage: what devices does your family own? What devices would your family members like to have connected? 
  • Add - Usage Escalation: Finally, see this chart below from Nielsen to estimate how much usage tends to increase in ONE year

Voila! You have your estimated usage!

In the final analysis, Verizon's move today was surprising, but not unexpected, especially to Industry observers. With Sprint being the lone holdout, it looks like the days of 'Unlimited Data' are finally over.