Tag: Wireless pricing

Abstract photo representing wireless technology

Variable-Rate Pricing, Network Switching, and Mobile X

Christian

Urban planners have a joke: “You aren’t in traffic; you are traffic.”

While most people consider how long they’d have to wait in traffic if they travel, almost no one thinks about how much worse they’d make traffic for everyone else.

Conventional tolls charge road users the same rates all the time. Variable-rate tolling is a clever alternative. Under that approach, people pay high tolls when roads are congested. Tolls are low (or non-existent) when roads are wide open. When managed well, variable-rate tolling can lead to huge improvements in efficiency.

Conventional cellular pricing is inefficient

Most of the time, cell phone networks are not at their max capacities. In these situations, a mobile subscriber can use data without degrading service quality for other users on the network or incurring substantial costs for the network operator. On the other hand, network capacity is a precious resource when networks are congested.

With conventional wireless price structures, a gigabyte of data use costs a subscriber the same amount regardless of how congested a network is. There’s a sense in which it would be way more efficient to vary the cost subscribers pay for a gigabyte based on how congested a network is.

With variable-rate pricing, people with money to burn and a need for high-performance could get great speeds all the time. Budget-sensitive consumers could get super cheap data most of the time, then reduce data use when bandwidth is in high demand.

Network switching

If a small town could have its entire population covered by one cell tower, multiple networks may still build towers. In some sense, this is horribly inefficient. On the other hand, it’s unsurprising given the structure of the wireless industry in the U.S. While roaming agreements allowing subscribers to use other carriers’ towers do a lot to reduce inefficiencies like these, the situation is far from optimal. Mobile phone subscribers are at the whims of whatever roaming agreements are in place between network operators.

Imagine an individual T-Mobile subscriber is out of the range of T-Mobile’s network and near another network’s tower. What if the subscriber could pay for temporary coverage from the tower? It’s not an option today, but there’s no technical obstacle making it impossible.

Google Fi uses a form of dynamic network switching that has huge benefits. While Google Fi typically uses T-Mobile’s network, Fi subscribers are automatically switched to Sprint or U.S. Cellular when those networks can deliver better performance.1 Currently, only a tiny portion of U.S. consumers have access to this kind of network switching.

If more carriers embrace dynamic network switching, consumers will benefit. If dynamic network switching is combined with variable-rate pricing, consumers will benefit enormously.

Mobile X

Yesterday, Peter Adderton, the founder of Boost Mobile, began to tweet teasing a new carrier he’s working on called Mobile X:

While the first tweet was vague, it seemed to hint at some of the unconventional features I’d like to see. Today, Adderton shared a more promising tweet:

The image is the part I find most interesting. While I don’t know what Adderton is building, the mockup interface sure looks like it fits with a service that involves both dynamic network switching and user-selected levels of service quality.

Picture of a broken phone

Is Phone Insurance Worth It?

Christian

Phone insurance usually isn’t a good deal. Companies offering phone insurance plans typically intend to make a profit. These companies profit when customers, on average, pay more into insurance programs than they get paid out.

When considering the costs of phone insurance, think in terms of a long time horizon. One of Verizon’s insurance plans, Verizon Protect, costs $17 per month. Imagine you purchase a new phone from Verizon for $600 then insure it with Verizon Protect. If you use the phone for three years and keep it insured the whole time, you’ll end up making 36 payments of $17. After three years, you’ll have spent $612 on insurance. That’s more than the original cost of the phone!

Considerations

Whether phone insurance is worth it will depend on your situation:

  • How much would you have to pay for insurance?
  • What would it cost to replace your phone without insurance?
  • What sort of deductible would your insurance plan have?
  • How risk-averse are you?
  • How careful are you about protecting your phone?
  • Would phone insurance offer any added conveniences (e.g., extra-fast repairs)?

Examples

High-end phones

I recently purchased a Samsung Galaxy S20 from Verizon. The phone has a list price of about $1,000. For $17 per month, I can cover the phone with Verizon Protect. While Verizon primarily pitches that protection plan, there’s another plan called Wireless Phone Protection that offers similar coverage for only $6.85 per month.

The Wireless Phone Protection plan comes with a $200 deductible on the S20. Since it would normally cost me $1,000 to replace the S20, the insurance plan could save me up to $800.

The protection plan’s monthly fee works out to be less than 1% of the amount I would save if I lost or destroyed my phone. I’m clumsy and tend to put my phones through a lot. There’s a greater than 1% chance I’ll break or lose my S20 in any given month. Accordingly, the insurance plan would offer me good value in the short term.

Depreciation

Today’s high-end phones will be tomorrow’s budget phones. While the S20 has a list price of about $1,000 today, it’ll be cheaper in the future. If Verizon still sells the phone in three years, it’ll cost far less.

While the replacement cost of my phone will decline over time, the rate I pay to insure it won’t. In some cases, it can make financial sense to (a) insure a high-end phone briefly after purchase and (b) drop the insurance at a later time.

Budget phones

Most companies don’t closely match the cost of insurance plans to the value of a phone. My favorite budget-friendly phone right now is the Motorola G7 Play. It costs $130 from Motorola. Verizon’s Protect plan still costs $17 per month for the G7 Play. The Wireless Phone Protection plan still costs $6.85 per month.

The G7 Play is not worth insuring. The phone has a $9 deductible. Verizon’s insurance would only save me $121 if I lost or broke a G7 Play. In just eight months, the Verizon Protect plan would cost more than a brand new device.

Self-insurance

In most cases, I recommend that people self-insure their phones. While the peace of mind you can get from an insurance plan is nice, the companies offering the plans usually come out ahead of consumers.

Some people will argue that self-insurance isn’t always reasonable. Today’s fancier phones are expensive. Many people would have trouble covering a big, unplanned hit to their finances. In my view, most people who cannot afford to self-insure are buying phones that are too expensive. Some of today’s budget phones are great. Self-insuring is easier with a low-cost device.

AT&T Matches T-Mobile’s $15 Plan

Christian 2 Comments

Last week, T-Mobile began offering a plan with unlimited minutes, unlimited texts, and 2GB of data for only $15 per month. A few days later, AT&T responded by offering its own $15 per month plan with unlimited minutes, unlimited texts, and 2GB of data.

Plan terms

I dug around to learn about the plan’s policies. Here are my impressions at the moment:

  • New subscribers need an AT&T prepaid SIM (costs $4.99).
  • Mobile hotspot and tethering are permitted.
  • Unused data rolls over for one month.1
  • Taxes and fees are not included in the $15 base price.
  • Unlimited international texting to over 100 countries is included.
  • Streaming video traffic will be throttled by default, but subscribers can turn the throttle off.
  • The plan is not eligible for AT&T’s discounts for paperless billing or automatic payments.
  • Data has a soft cap—once 2GB of regular data has been used, additional data can be used at significantly reduced speeds.

Limited time offer

AT&T has repeatedly described its new $15 plan as a promotion and a limited time offer. I don’t know when the plan will cease to be available.2

T-Mobile Connect vs. AT&T’s plan

AT&T’s $15 plan has a handful of substantial advantages over the $15 T-Mobile Connect plan:

  • AT&T has better nationwide coverage.
  • SIM cards are cheaper from AT&T ($5 vs. $10).
  • Only AT&T offers data rollover.
  • AT&T has a soft cap on data, while T-Mobile Connect has a hard cap.

However, it’s not clear how long AT&T’s plan will be around. People who take advantage of AT&T’s offer today won’t necessarily get the same great deal each month for the foreseeable future. On the other hand, it looks like the T-Mobile Connect plans will continue to be available to new and existing subscribers for years.

Update: The $15 plan from AT&T is no longer available.

Image representing the idea of a network

T-Mobile Connect Launches With $15 Per Month Service

Christian 11 Comments

In November 2019, T-Mobile committed to offering a new, budget plan if a merger between T-Mobile and Sprint was approved:1

[The New T-Mobile will offer a] competitive $15 per month prepaid option– half the price of the lowest T-Mobile plan today – to EVERYONE, especially lower-income consumers.

T-Mobile launched that plan last week. I didn’t expect it to be available so soon. It looks like the plan’s rollout was accelerated in response to the coronavirus:2

T-Mobile Connect was announced in November of 2019 as part of 5G for Good – the first planned Un-carrier moves for the proposed New T-Mobile – but in response to customer needs in these trying times, the Un-carrier is launching it this week.

Plan versions

The new T-Mobile Connect plans come with unlimited minutes and texts. Subscribers have two options for their data allotments:

  • 2GB plan – base price of $15 per month
  • 5GB plan – base price of $25 per month

Taxes and fees are not included in the base price of either plan. T-Mobile plans to boost data allotments by 500MB each year:3

T-Mobile Connect also has an Annual Data Upgrade, giving customers an additional 500MB of monthly data, every year, at no additional cost, for the next five years.

Plan terms

I’ve read through a lot of detail’s T-Mobile’s published about the plan. Here are my biggest takeaways from that reading:

  • New subscribers must purchase a T-Mobile SIM card for $10.4
  • International roaming is not available for T-Mobile Connect plans.
  • Data has a hard cap. Subscribers who’ve used all their regular data cannot continue to use the internet at reduced speeds.
  • Up to five T-Mobile Connect lines can be combined on a family plan. Line prices stay constant regardless of the number of people on a plan.
  • Mobile hotspot and tethering are permitted.
  • Video is throttled to 480p by default, but subscribers can turn off throttling.

Metro’s offer

T-Mobile’s flanker brand, Metro, will temporarily offer a plan similar to T-Mobile’s $15 plan:5

For the next two months, Metro is offering a $15 plan – that’s half the price of the current most affordable plan. For 60 days after customers activate, it’s just $15 per month for unlimited talk and text plus 2GB of high-speed smartphone data.

Unless I’m missing something, it seems like anyone who’s torn between the T-Mobile’s $15 plan and Metro’s plan should go with T-Mobile.

My take

T-Mobile’s Connect plans will be a great option for budget-sensitive consumers that don’t use a ton of data. Based on what I’ve seen so far, it looks like subscribers on the Connect plans will have a level of priority on par with most of T-Mobile’s postpaid subscribers. If my speculation is accurate, that may give the Connect plans a big advantage over the budget-friendly plans offered by many of the MVNOs that operate over T-Mobile’s network (e.g., Mint Mobile).

Earlier today, I placed an order for the $15 per month T-Mobile Connect plan. I’ll write more about it once I’ve had a chance to trial the service.

U.S. Telecom Companies Take The “Keep Americans Connected” Pledge

Christian

In response to coronavirus-related threats, the FCC recently asked a large number of U.S. broadband and telephone companies to take the Keep Americans Connected Pledge. Companies that take the pledge commit not to cut off subscribers who fail to pay their bills for reasons related to the coronavirus. Companies further pledge to waive late fees for subscribers that fail to pay.

From a document on the FCC’s website:

The Keep Americans Connected Pledge reads as follows:Given the coronavirus pandemic and its impact on American society, [[Company Name]] pledges for the next 60 days to:(1) not terminate service to any residential or small business customers because of their inability to pay their bills due to the disruptions caused by the coronavirus pandemic;(2) waive any late fees that any residential or small business customers incur because of their economic circumstances related to the coronavirus pandemic; and(3) open its Wi-Fi hotspots to any American who needs them.

In a very short period of time, a ton of American telecom companies took the pledge. Here’s an incomplete list of players in the wireless industry that have already pledged:

  • AlticeUSA
  • AT&T
  • Comcast
  • Sprint
  • T-Mobile
  • TracFone Wireless
  • US Cellular
  • Verizon

It will be interesting to see how these companies’ commitments play out.

Reviewing Altice Mobile’s “Unlimited” Policies and Pricing

Christian 1 Comment

Alice Mobile recently increased its prices by $10 per month. Service now costs $30 each month for Optimum or Suddenlink customers and $40 per month for everyone else.

In September, I argued that Altice Mobile was doing a lousy job of disclosing the limitations that came with the carrier’s supposedly “unlimited” plan. Given the recent price increase, I figured now would be a good time to revisit Altice Mobile’s policies.

Limits continue

Altice is still imposing a lot of limits on its “unlimited” plan:1

  • Mobile hotspot speeds are still throttled to 600Kbps.
  • Video is still throttled to about 480p.
  • Roaming data is still throttled to 128Kbps.

Previously, video and hotspot traffic would be throttled more intensely after 50GB of use. It looks like Altice has decreased that threshold to 20GB.

“Unlimited Everything” continues

Altice continues to advertise “unlimited everything.” Here’s a screenshot from Altice’s website today:

Altice Mobile screenshot

As before, it’s misleading for Altice to suggest subscribers can stream an unlimited amount of video or use an unlimited amount of mobile hotspot data. After 20GB of use, subscribers will be throttled to a maximum speed of 128Kbps for video and hotspot traffic. At 128Kbps, continuous streaming of conventional video won’t be possible.2 Many activities subscribers will want to do over a hotspot connection will be frustratingly sluggish if not impossible.3

Improved disclosures

To Altice’s credit, it looks like the carrier is doing a bit better disclosing limitations. With a single click, website visitors can view additional information:

Altice’s Broadband Disclosure Information seems easier to find than it was previously. While the disclosures still fall short of being explicit or easy-to-understand, Altice is moving in the right direction.

AT&T Paying $60,000,000 For “Unlimited Data” Claims

Christian

AT&T has settled with the Federal Trade Commission (FTC) and agreed to pay out $60 million to current and past customers that may have been affected by misleading claims about unlimited data. The settlement is in response to the FTC’s 2014 accustation that AT&T failed to adequately disclose that customers on unlimited data plans could have their speeds throttled substantially. Here are a few bits from the 2014 FTC complaint:

The FTC’s complaint alleges that the company failed to adequately disclose to its customers on unlimited data plans that, if they reach a certain amount of data use in a given billing cycle, AT&T reduces – or “throttles” – their data speeds to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video – become difficult or nearly impossible to use…AT&T’s marketing materials emphasized the ‘unlimited’ amount of data that would be available to consumers who signed up for its unlimited plans…AT&T, despite its unequivocal promises of unlimited data, began throttling data speeds in 2011 for its unlimited data plan customers after they used as little as 2 gigabytes of data in a billing period. According to the complaint, the throttling program has been severe, often resulting in speed reductions of 80 to 90 percent for affected users. Thus far, according to the FTC, AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times…consumers in AT&T focus groups strongly objected to the idea of a throttling program and felt ‘unlimited should mean unlimited.’

Here’s an excerpt from the FTC’s press release from today (emphasis mine):

As part of the settlement, AT&T is prohibited from making any representation about the speed or amount of its mobile data, including that it is “unlimited,” without disclosing any material restrictions on the speed or amount of data. The disclosures need to be prominent, not buried in fine print or hidden behind hyperlinks. For example, if an AT&T website advertises a data plan as unlimited, but AT&T may slow speeds after consumers reach a certain data cap, AT&T must prominently and clearly disclose those restrictions.

I’m glad to see the FTC cracking down on misleading practices. Bogus “unlimited” plans seem to be much more common today than they were in 2014.

Accountant calculating

Xfinity Mobile’s Pricing Strategy

Christian

Comcast’s cellular brand, Xfinity Mobile, appears awfully well priced. Somehow, Xfinity Mobile offers service over Verizon’s extensive network without the usual price tag. You can check Xfinity Mobile’s coverage at your location with the carrier’s coverage tool.

Unlimited minutes and texts are included for free in all of Xfinity Mobile’s plans. Subscribers just pay for data, and rates for data are reasonable. For $45 per month, a subscriber can get unlimited data. Alternatively, subscribers can purchase a set amount of data and share it among up to five lines:

  • 1GB data – $12 per month
  • 3GB data – $30 per month
  • 10GB data – $60 per month

A family could get five lines of service with 10GB of shared data, unlimited minutes, and unlimited texts for a base price of only $12 per line.1 Purchasing a comparable family plan from Verizon would be far more expensive. Even other mobile virtual network operators (MVNOs) that run over Verizon’s network charge far more for similar plans. Why is Xfinity Mobile so cheap?

(Added 5/17/2020: In the time since this post was published, Xfinity Mobile changed the 1GB option from $12 to $15 per month.)

Lock-in with other Xfinity services

Only customers with active Xfinity internet service are eligible to sign up for Xfinity Mobile. Some people who would have used internet service providers other than Xfinity may now choose Xfinity internet so that they can sign up for Xfinity Mobile. Similarly, potential fees incentivize Xfinity Mobile customers not to cancel other Xfinity services:2

$20 per line monthly charge applies if at least one of the following post-pay subscriptions are not maintained on the account: Xfinity TV, Internet or Voice service.

Competitors threaten Comcast. Like Comcast, Verizon’s Fios offers bundled TV, internet, and home phone service. Emerging technologies like 5G fixed wireless may create viable alternatives to conventional cable companies. By bundling several services together, Xfinity may make it more difficult for consumers to switch to competitors’ services.

Favorable MVNO terms

Xfinity Mobile is relatively new, but it already has a huge number of subscribers.3 While the agreements between MVNOs like Xfinity Mobile and host operators like Verizon are generally private, my impression is that MVNOs with large subscriber bases often receive substantially better rates than MVNOs with small subscriber bases. Xfinity Mobile may, in part, be able to offer low prices because it gets unusually good rates on access to Verizon’s network.

Future prices

While Xfinity Mobile’s service is well-priced today, it’s not guaranteed to stay that way forever. We’ve already seen one revamp in Xfinity Mobile’s price structure.

Other explanations

I haven’t seen Comcast executives explicitly explain their rationale for launching a mobile service, so all I can do is speculate. If you have other thoughts about Xfinity Mobile’s pricing strategy, please leave a comment!

Consumer Cellular Increases Data Limits

Christian

Yesterday, Consumer Cellular announced an increase in the data allotments it offers at different price points. The table below outlines the changes:

Monthly data costPrevious allotmentNew allotmentPercent increase
$50.25GB0.5GB100%
$102GB3GB50%
$205GB10GB100%
$3010GB16GB60%
$4020GB25GB25%

I spoke with a Consumer Cellular support agent who confirmed that these changes would automatically affect existing customers. For example, a customer who was paying $10 per month for 2GB of data will now be allotted 3GB of data per month at no extra charge.

It’s great to see a carrier improving customers’ plans without charging more or requiring customers to proactively opt-in to the changes. In some ways, it’s a bold business move. Customers who were paying $30 per month for 10GB could now downgrade to the $20 per month price tier and still receive 10GB of data. That said, I don’t expect a lot of customers will actually downgrade in response to the new pricing structure.