US wireless market leader Verizon brought back unlimited plans in February 2017, with the Verizon Unlimited offering. Starting at $80 a month for one line, it gives new and existing Verizon customers unlimited data including HD video streaming, with 10GB of LTE data and unlimited 3G data after that for mobile hotspot usage. Verizon Unlimited is competitive in terms of both pricing and the plan’s elements, and the offer sparked an immediate price war.
Verizon succumbs to competitive pressure
With this move, Verizon has succumbed to competitive pressure from T-Mobile and Sprint – both of which were already offering unlimited plans at aggressive price points. Verizon came in with respectably competitive pricing at $80, compared with $70 for T-Mobile’s unlimited plan and $60 for Sprint’s.
However, Verizon’s plan differed in the details. First, T-Mobile’s and Sprint’s unlimited data offerings used mobile-optimized (480p) video streaming, whereas Verizon’s includes HD video streaming. T-Mobile offered HD video for an additional $15 per line, bringing the tariff to $85 for the first line, and Sprint did not offer HD at all. However, T-Mobile includes taxes and fees in its pricing, making its $85 unlimited plan including HD video less expensive than Verizon’s offering, whose $80 tariff incurs approximately $17 in taxes and fees.
Verizon Unlimited causing knock-on effects
Few industry watchers doubted that Verizon’s move to join T-Mobile and Sprint in offering unlimited data would have a significant impact on the market, predicting primarily that AT&T would extend its unlimited plan offer beyond its DirecTV customers – the only customers AT&T was offering unlimited data to at the time. In fact, this change only took three days to occur. And AT&T’s offer wasn’t the only change to follow Verizon’s unlimited launch.
The same day Verizon made its announcement, T-Mobile reacted by changing its unlimited plan to match aspects of Verizon’s. T-Mobile One now includes HD video streaming at no additional cost, and customers get 10GB of LTE data for mobile hotspots as well.
Three days after Verizon’s announcement, and the same day AT&T announced an unlimited offering to all its postpaid customers, Sprint fell in line with Verizon and T-Mobile to offer unlimited HD video streaming and 10GB of LTE hotspot data. By default, AT&T’s unlimited plan provides mobile-optimized video streaming, but customers can opt to have HD video streaming instead at no additional charge. AT&T doesn’t, however, include any hotspot data in its offer.
AT&T’s offer is the least competitive unlimited plan today. In addition to not offering mobile hotspot data, its prices are on the high end: The first line costs $100. Although this is down from its old pricing for DirecTV customers of $150, it is still $20 more expensive than Verizon, which is itself pricier than both T-Mobile and Sprint. At four lines of service, the pricing of the four major operators is more closely aligned AT&T offers four lines for $180, as does Verizon. Both T-Mobile and Sprint offer four lines for $160. However, Sprint has introduced a limited-time deal that reduces its pricing until March 31, 2018, offering four lines for $90 – a price no one is expected to match.
More market impact expected
Verizon’s offer sparked a good deal of activity immediately, but there is probably more to come. First, AT&T will need come down in price on its first line, and it is likely to match Verizon in doing so.
T-Mobile will probably step up its marketing emphasis on T-Mobile One’s inclusion of taxes and fees in its pricing, given that Verizon’s new offer appears to be just $10 higher than T-Mobile’s $70 for a one-line unlimited plan without taxes taken into consideration. Sprint’s limited-time promotional pricing, which undercuts T-Mobile by $20, is another reason for T-Mobile to ramp up its “taxes included” marketing messaging.
There is one approach that Ovum doesn’t expect to become commonplace even with the recent resurgence of unlimited offerings: eliminating metered data plans. T-Mobile has just one postpaid service plan, its T-Mobile One unlimited plan, but Verizon still offers its S, M, and L data plans, in addition to Verizon Unlimited. Sprint and AT&T have also maintained their metered data plans as they’ve reintroduced unlimited data. It is likely that different tiers of shared data plans are here to stay in the US market, despite the reintroduction of unlimited offerings.
“Un-carrier Next: Tweaks to T-Mobile One could weaken ARPU, profitability,” TE0001-001074 (January 2017)
Verizon Consumer Update, June 2016, TE0001-001041 (September 2016)
Kristin Paulin, Senior Analyst, North & South America