A Sprint executive said this morning that the company plans on keeping unlimited data plans as an option for consumers. Sprint sees unlimited data as a differentiator from AT&T and Verizon and is inline with the moral high ground that it has been trying to take in regards to the prospective AT&T takeover of T-Mobile. As good as unlimited data sounds in an advertisement, does it really matter?
At this point, "unlimited data" is a clever marketing ploy. Carriers are constantly learning how to upgrade their networks to handle data convergence better and then offload data use to local broadband networks. At the same time, the average consumer does not use as much data as they think. So, Sprint, it is great to keep your data options open (no throttling, no cap), but how much of this really means anything anymore?
Speaking at GigaOm's Mobilize conference in San Francisco, Sprint CTO Stephen Bye acknowledged that the carrier would indeed keep its network uncapped. According to CNET, Bye said that there are hidden costs with customer care and "support related to tiered data plans" that offsets the benefit reining in users data use.
Verizon and AT&T are both throttling users in addition to various tiered data plans. T-Mobile is throttling users after a set data threshold. Sprint is the standout from that trend and to a certain extent it will cost them dollars on their margins. The company hopes that the marketing program associated with unlimited data will offset what they lose on the margins by adding new users.
Sprint's network is in a state of flux. It owns a significant portion of WiMax provider Clearwire and it needs a significant upgrade to its 3G network infrastructure. One of the reasons that Sprint went with Clearwire in the first place was to offset data along its 3G network. There is hope for a significant network infrastructure boost through its partnership with bandwidth wholesaler Lightsquared to create an LTE "4G" network, but that is going to take time to build and implement, let alone add a significant number of devices offered through the carrier that will support LTE.
The CEOs of Verizon (Dan Mead), Sprint (Dan Hesse) and AT&T (Ralph de la Vega) on stage with Jim Cramer at CTIA in Orlando this spring.
Really what it comes down to is that Sprint has to scratch and claw its way to keep abreast with Verizon and AT&T. Watch how CEO Dan Hesse rails against the AT&T/T-Mobile merger and you understand the position that Sprint is in trying to compete. According to CNET, Bye acknowledged that the company is under pressure to keep its network open and free vis-à-vis the competition.
Unlimited Data: Worth the Cost?
When AT&T announced its data throttling, it said that it will only affect the top 5% of users. At the time, the guess was that a user will bump against that threshold near 2.5 GB of data used per month. The fact of the matter is that most users will never reach 2.5 GB a month. Sprint's margins do well by offering unlimited data for a flat rate and then users not actually using enough data to justify the plan. Granted, those margins are then in turn offset by the heaviest users, but not by that much. I have rarely met a person who exceeds 3 GB of data used on a device per month (let us know in the comments if you are one of those people and how you use your phone to consume data).
Sprint is known for its posturing and pushing the limits of acceptable marketing practices. It was the first to rollout a "4G" network with WiMax, but the fact of the matter is that WiMax is not "4G" but rather an "advanced 3G" network that Sprint is allowed to market as 4G because it is considered a precursor to actual 4G. Confused yet? AT&T does the same thing with its HSPA+ network, which is also not technically 4G.
Unlimited data falls into the same marketing category. Sprint will no doubt be able to get some politicians and federal regulators to buy up their marketing magic when it comes to the AT&T/T-Mobile acquisition, but the fact of the matter is that Sprint's network is in no better shape than AT&T's.
Will it stop Sprint executives and their marketing department from touting their supposed benefits over those from their competitors? Certainly not. But, digging through Sprint's claims, we know that they are not as altruistic as they would have us believe.