Virgin Mobile, which last year excited a number of our readers with the introduction of its Broadband2Go unlimited mobile broadband plan, has continued to evolve the meaning of “unlimited,” to now mean just 2.5GB of usage per month before speeds are reduced to the very un-broadband level of 256kbps.

It’s just another in a series of limits Virgin Mobile has placed on its 3G “unlimited” pay-as-you-go service since last August.

Last summer, customers paid up to $100 to purchase the mobile broadband device used with the service, and promptly discovered a lot of people were doing the same thing, which promptly overloaded the network and drove speeds downward.  Within months, our readers reported Virgin had quietly implemented a “fair access policy” that began reducing customers’ speeds after as little as 200MB of use daily, usually to 256kbps or less.  By February 2011, Virgin announced a 5GB usage cap, after which speeds would be permanently throttled until customers either paid an additional $40 or waited out the end of their billing cycle.

Apparently, even 5GB of usage per month is considered too much, so now Virgin Mobile is slashing that in half to 2.5GB.  Despite the ongoing decreases, company officials insist whatever level they are, they are still generous.  The company said less than 3 percent of its customer base will be impacted by a 2.5GB limit on their supposedly “unlimited” plan.  Virgin Mobile, now a wholly-owned subsidiary of Sprint, gets around that pesky contradiction by calling their plan “unlimited access,” which means you can access it day or night at speeds that either might be fast, or heavily throttled.

What used to cost $40 a month for truly unlimited service today costs $50 for 2.5GB.

Virgin Mobile's Broadband2Go "Before" Pricing from August, 2010

Virgin Mobile's Broadband2Go "New and 'Improved'" Pricing

The days of "Sugar Mama" are long gone.

Virgin Mobile is also hiking rates for two budget handset plans that include data:

• 300 minutes, including unlimited texting and data up $10 to $35 a month
• 1,200 minutes, including unlimited texting and data up $5 to $45 a month

But competition does occasionally deliver some benefits to consumers as Virgin recognizes it is being killed by cheaper unlimited smartphone plans from MetroPCS and Cricket, so it has cut the price on its own unlimited calling, texting, and data smartphone plan by $5 to match its competitors’ $55 monthly price.

Virgin Mobile is in the process or repositioning itself away from being a prepaid budget-priced carrier towards a smartphone-oriented provider for customers who do not want to sign lengthy service contracts with Verizon, AT&T, or even parent company Sprint.

This certainly means the days of Virgin Mobile’s Sugar Mama are long gone. 

Thanks to Bones and several other Stop the Cap! readers for sharing this news with us.

Unless you own Sprint’s premiere smartphones — the Evo 4G and the Epic, get out your wallet — Sprint is increasing the price on its unlimited data plan by $10, effective later this month.

Evo and Epic owners already pay the $10 “premium data” fee that will be extended to all smartphone customers Jan. 30 (customers on existing contracts will not be affected).

The reason for the price increase?  Heavy usage on its wireless network, which partly includes Virgin Mobile (ending its unlimited service Feb. 14) and Clearwire, which heavily throttles speeds of customers deemed to be “using too much.”

Chief executive Dan Hesse says Sprint will retain its unlimited service plans, which the company calls the best value in the wireless industry.  But the pricing change will present minor challenges as Sprint markets themselves as the least costly.

Sprint's marketing focuses on its unlimited use offers, some of which are about to get more expensive.

Sprint’s “Everything Data” plan, which also includes unlimited cell-to-cell calls will now cost $79.99 per month.  Comparable plans from T-Mobile are priced at $99.99 for that company’s 4G network and $119.98 on Verizon Wireless’ slower, but more ubiquitous 3G network.

“Sprint has been the price leader in the market,” said Jennifer Fritzsche, a Wells Fargo & Co. analyst in Chicago who has an “outperform” rating on the stock. “Sprint may be more confident in the pricing power it has with customers.”

The Wall Street Journal also shares positive views of the price increase from Wall Street:

Wall Street applauded the move, with many seeing it as a sign of pricing power returning to the wireless industry. “It is more likely that Sprint believes that consumers value unlimited and that they can get away with higher pricing,” said Jonathan Chaplin, an analyst at Credit Suisse.

The price hike also suggests that Sprint has seen stronger smartphone growth over the past three months, he added, noting that the carrier likely wouldn’t have made the change if it were still concerned about stabilizing its base on contract customers.

But some other analysts are less impressed with Sprint, especially because of challenges the company faces with its Clearwire partnership.

Patrick Comack from Zachary Investment Research has downgraded Sprint stock, particularly because of technology issues Clearwire faces.

Comack told CNBC Clearwire is stuck with defective spectrum for much of its wireless broadband service.

“It can’t penetrate walls,” Comack said, noting most Clearwire customers are trying to use wireless broadband in the 2GHz range, which presents plenty of problems from obstacles between the tower and the customer.

Comack also believes Sprint’s network simply cannot compete with Verizon Wireless, which he suspects could pick up a number of Sprint customers once it fully activates its 4G network nationwide.

Verizon Wireless network delivers significantly better coverage than Sprint, which focuses on urban and suburban markets, and the major highways that connect them.

[flv]http://www.phillipdampier.com/video/CNBC Sprint 1-12-11.flv[/flv]

CNBC: Debating Sprint and Clearwire, with Todd Rethemeier, Hudson Square Research and Patrick Comack Zachary Investment Research.  (6 minutes)

(Thanks to Stop the Cap! reader PreventCAPS for sharing the news.)

Virgin Mobile has begun notifying their Broadband2Go customers of how they plan to continue delivering “an outstanding customer experience”: by throttling the speeds of any customer who exceeds 5GB of usage per month.

Many Virgin Mobile customers have been in touch with Stop the Cap! about they feel is bait and switch pricing engaged by Sprint’s prepaid mobile division.  At issue — customers who invested $75-150 in equipment to sign up for a service they were sold on being “unlimited.”  Virgin Mobile made the “unlimited” part of its service the focus of its marketing.

The company characterizes the decision to adopt an Internet Overcharging scheme “a difficult choice,” but it’s one that that will ultimately help the company’s bottom line while costing many of their customers a substantial amount of money for a service they might never have purchased had they known it was going to be limited.

As is the case with almost every Internet Overcharging scheme we’ve seen, the same marketing that promised an “unlimited” experience now promises that such usage limits won’t impact most customers.  In fact, the company’s notification states, “you can send over 500,000 e-mails or browse the web for 250 hours a month!”  Of course, nobody except spammers send that much e-mail, so that kind of boasting is ultimately meaningless to customers.

What is more meaningful is that Virgin’s new 5GB cap will effectively mean customers have to heavily ration their online experience, especially if it includes multimedia.  In fact, customers won’t be able to watch more than a handful of HD movies using the service.  That’s a $40 movie pass some customers would have passed up had they known it came with limits.

This notification arrived in our e-mail box this morning. Despite the spin, the e-mail is likely to enrage customers, especially those who only recently invested money in Virgin Mobile equipment they can no longer return for a refund.

In fact, Virgin Mobile’s return to the land of Internet Overcharging is nothing new for the company.  Customer response to the company’s earlier prepaid wireless broadband plans were, to say the least, underwhelming.

Virgin Mobile’s new usage limits are less about “delivering the same quality service you’ve come to expect” and more about protecting Sprint’s more lucrative postpaid mobile data customers who pay more to use the same 3G network.  While Stop the Cap! agrees delivering an unlimited wireless broadband service remains a difficult challenge with the current limits on wireless capacity, Virgin Mobile’s about-face comes uncomfortably fast — just six months after unveiling and heavily promoting its “unlimited” service.  Just as with Clearwire, Sprint has managed to oversell its network and not invest sufficiently in expanding it to meet customer demands.  Nor has either company educated customers about the inherent limitations wireless broadband has, especially on an overcrowded network.

Sources tell us Virgin Mobile, much like Clearwire, suffered from some customers trying to use peer to peer software, sometimes for days on end (simply a ridiculous endeavor on most of the wireless networks we’ve experienced).  But the company did little to explain to customers that such software often does not work well on these types of networks, and using it 24/7 is likely going to create issues not only for that customer, but for others as well.  Instead, blanket usage limits punish everyone.

Customers deserve more than platitudes from Virgin Mobile.  Any customer that wants to cancel their service should be given a full refund by Virgin for equipment costs they incurred when signing up.  Further, Virgin Mobile’s customer policies do not generally allow money on account, but as of yet unspent, to be refunded to departing customers.  That policy should be waived in this instance.  Any unspent funds should be credited back to the customer’s credit card or refunded by check.

Your unlimited experience is about to hit a roadblock.

Sometimes being popular isn’t the best thing in the world.

When Virgin Mobile introduced an unlimited, prepaid wireless broadband plan in August, it created a small media frenzy and shocked an industry that assumed usage-capped wireless broadband was the only way to survive the incredible demand for wireless data.

The company’s introduction of a $40 monthly unlimited-use broadband plan, with no term contract and month-to-month billing was a dream come true for casual vacationers and business travelers who don’t need a two year contract for pricey broadband-on-the-go from one of the major carriers.

When the company unveiled the unlimited broadband plan, as Stop the Cap! reported last summer, the demand was so great it brought the company’s network to its knees.  The prepaid provider, a division of Sprint, has struggled ever since to keep up with customer demand.  This week they announced they were throwing in the towel, quietly notifying would-be customers in the fine print of Radio Shack ads effective with all renewals after Feb. 15, a monthly limit of 5GB would be enforced on its Broadband2Go service.  Several of our readers noticed, including Greg, Sam, Jenny, and others.

“Customers who use BB2Go for typical email, internet surfing and reasonable downloading will likely not be impacted/notice any difference,” Virgin Mobile’s Corinne Nosal told PC Magazine by email.

But those who manage to consume just over 200MB daily will notice when the network speed throttle kicks in for those who “use too much.”  Speeds will be slashed to as low as 256kbps.  If you can’t live with that speed, you can pony up an additional $40 to “renew your account” (even if your month isn’t up yet) and the speed throttle will be removed, until you hit 5GB of usage again.

“So much for Virgin Mobile — 5GB means the service is no better or worse than the other players in the market, and considering the problems Virgin has had with reliable service, I’ll probably go back to using Cricket,” writes our Buffalo reader Lance.

Virgin Mobile relies on Sprint’s 3G network which already gets quite a workout from existing Sprint customers, as well as those using Clearwire (and several “private label” wireless broadband services).  Cricket owns and manages their own network, exclusively for the use of its own customers.

“Cricket will also throttle you if you hit 5GB, but you rarely run into overwhelmed cell tower sites like you do with Sprint’s network,” Lance says.

PC Magazine’s Sascha Segan notes the new usage limits makes using Virgin Mobile broadband a difficult proposition if you love multimedia:

The problem comes if you like video or downloads. Streaming Netflix at 1000kbps (if you can get that speed on the Virgin/Sprint 3G network), you use up about 450MB per hour. Some Windows updates can be up to 200MB alone. Want a TV show from your favorite legal downloading Web site? That’ll be 350MB, thanks.

While there are some small wireless ISPs in some parts of the country, Virgin’s abandonment of truly unlimited high-speed data leaves Sprint 4G/Clear as the only remaining major player willing to take on the wired-Internet oligopoly with an unlimited high-speed, wireless solution.

Last week, Stop the Cap! took a look at Virgin Mobile’s new unlimited $40 prepaid wireless broadband service.  Early testing looked promising, with speed test results that were well within economy tier DSL service and better than expected.  But by early this week the story began to change.

We’ve continued testing the service here and have noticed that while Virgin Mobile’s service turned in respectable performance during the business day (East Coast time), once people started heading home, it’s a completely different story.  For the last five days the service has deteriorated to the point of unusability by dinnertime.

It had gotten so bad, we went back to using Cricket’s wireless broadband.

So what’s happening?

First, it’s important to distinguish that these problems are impacting only Virgin Mobile.  Sprint’s postpaid customers can use the same cell tower and backbone network and not experience any performance issues.  Virgin Mobile’s home location on Sprint’s data network is in San Francisco, and until September 2nd, all traffic headed for the Bay Area to what is basically a virtual LAN on Sprint’s network.  The IP address we were assigned was actually an internal address for that virtual LAN.

Our problems started appearing Monday afternoon when we noticed web pages refused to load completely.  Since many web pages are composed of content from a variety of different web hosts (Google Analytics, advertising, embedded content, etc.), if parts of the page refuse to load, the page itself may not appear at all.  Advertising blocks were the worst problem, often leaving one staring at a blank web page waiting for the ad content to render.

By Wednesday, this problem simply made using Virgin Mobile for broadband untenable.  Few pages — even Google’s home page, refused to load reliably.  When pages did appear, they took longer than dial-up in many cases.  We tried to perform some diagnostics but found trace-routing impossible after the third hop and speed tests could not be loaded, much less run reliably.

The fact the worst problems occurred in the late afternoon and evening hours point to a network completely overloaded with customers.

And indeed, Virgin Mobile admitted as much when it replied to some tweets indicating it had quadrupled capacity by the end of this week.  Some users also reported they no longer connected exclusively through the San Francisco (Walnut Creek) location.

As of Thursday, anecdotal reports indicated some service improvements, but the service is still prone to slowdowns during peak usage times.

A few things are evident now that a week has passed:

1. Virgin Mobile Wireless Broadband does not share the better performing Sprint postpaid data network those customers receive.  Virgin Mobile customer traffic shares a much smaller “pool of bandwidth” because of the limitations imposed by its routing.
2. The company needs to either abandon its current routing scheme or dramatically modify it to accommodate the traffic.
3. Refunds for disgruntled customers are often available for the hardware, but don’t expect to get a refund for data usage.
4. The service problems come regardless of the device used or the number of signal bars you receive.
5. New routing cities have popped up since Thursday to supplement San Francisco — Charlotte, N.C., New York, Atlanta, Boston, Southfield (Mich.), Los Angeles, Philadelphia, and a few others.  Feel free to share yours in the comments section.

On Friday, Virgin Mobile suffered a major outage caused by a power failure that has stopped or seriously delayed delivery of text messages.  The outage is also affecting some data connections and customer service availability.  Angry customers have been pelting the company’s Facebook page with hostile remarks since the outage began.

If you signed up for Virgin Mobile wireless broadband, please share your experiences in our comments section!