T-Mobile today announced it was boosting the amount of data its “unlimited data” customers can use before they are subject to speed throttling from 32GB to 50GB, effective Sept. 20, 2017.

“Meanwhile, Verizon and AT&T sit at a meager 22GB, meaning Un-carrier customers can use more than 2x the data before prioritization kicks in,” wrote Neville Ray, T-Mobile’s chief technology officer. “Now, 50GB of data usage means a T-Mobile customer is basically the top 1% of data users, and to put it in context, you could stream a full two hours of Netflix every single day – that’s 30 SD movies – and never even reach that point! You’d still have roughly 8GB to go.”

Like other wireless companies, “unlimited data” does not actually mean “unlimited.” Providers allot a certain allowance of truly unlimited data which, once exceeded, subjects the customer to speed-reducing “throttles” until the next bill cycle begins. T-Mobile claims it only throttles customers when a customer exceeds their “prioritization” allowance — 50GB as of tomorrow — and the cell tower they are using is currently experiencing congestion.

“When T-Mobile customers who use the most data hit these prioritization points during the month, they get in line behind other customers who have used less data and may experience reduced speeds,” Ray wrote. “But this impacts them only very rarely, like when there is a big line, and it resets every month. If you have a lot of congestion in your network (I’m looking at you, Verizon & AT&T), these lines can be long and deprioritized customers can be waiting a long time.”

No wireless company will provide data on which cell towers are likely to experience the most congestion, how many customers are speed throttled, or what speeds customers will get for how long before the throttle usually drops. But it is definitely harder to hit 50GB than 22 or 32GB, which means fewer customers are likely to find their wireless data connections throttled.

There has been no response yet from T-Mobile’s competitors — AT&T, Sprint, and Verizon.

OpenSignal’s State of American Wireless Networks – Aug. 2017

Verizon Wireless customers are seeing declining wireless internet speeds and the greater potential for congestion because Verizon Wireless is experiencing the impact of some overburdened cell sites in some of its largest markets.

Walter Piecyk from BTIG Research reports over the last few weeks, Verizon has begun using the last 10MHz of PCS spectrum left in its inventory in New York City, nine months earlier than expected.

Verizon’s reserve spectrum in PCS Band 2 near 1900MHz is not as ideal as lower frequency spectrum better able to manage inside buildings in a city as densely packed as New York, but if that is all the company has left for immediate use, that is what it will use. The newly activated frequencies, first uncovered by Milan Milanovic, are not yet operational across all of Verizon’s extensive cell network in the Big Apple. Verizon’s need to activate its last remaining PCS frequencies suggests former chief financial officer Fran Shammo may have been overly optimistic when he claimed Verizon was only using 40% of its spectrum inventory. That may be true in smaller cities, but is no longer the case in large metropolitan areas.

“This latest action also means that the only spectrum Verizon has left to convert to LTE in NYC is the 25MHz of 800MHz spectrum that the FCC gave it for free in 1984,” wrote Piecyk. “Unfortunately, that 800MHz spectrum is being used to support CDMA voice traffic and legacy 3G data for enterprise/IoT applications. Meanwhile, Dish sits on 125MHz of vacant spectrum in NYC.”

BTIG Research has been carefully tracking Verizon’s deployment of its spectrum for years. In New York, LTE expansion has depended heavily on spectrum acquisitions and enabling LTE+, which bonds frequencies together to increase speed and capacity.

BTIG Research Tracks Verizon Wireless’ LTE Deployment in NYC

• 20 MHz: December 2010 – launched LTE on the 20MHz of 700MHz spectrum it bought in the 2008 700MHz auction for $0.46/MHz/POP for the Northeast regional license and $0.77/MHz/POP nationwide.
• 40 MHz: December of 2013 – XLTE-branded rollout of AWS spectrum, which mainly included the spectrum it bought from Cable in 2011 for $0.69/MHz/POP, but also the spectrum it acquired in the 2006 AWS-1 auction, where it spent $1.33/MHz/POP for the Northeast regional license and $0.73/MHz/POP overall.
• 20 MHz: December of 2014 – LTE conversion begins on PCS spectrum. Verizon purchased 10MHz from Northcoast as part of a larger transaction valued at $1.58/MHz/POP in 2003, 10MHz covering NYC from NextWave for $4.63/MHz/POP in 2004, and 20MHz from NextWave in 2005 as part of a larger transaction valued at $2.85/MHz/POP. (Link)
• 10 MHz: Q1 of 2016 – This enabled Verizon to deliver 15MHz x 15MHz connections on Band 2, thereby improving speeds. When this happened we predicted the remaining PCS spectrum would be used in early 2018. (Link)
• 10 MHz: Q3 of 2017 – Once again, this was spotted by Milanovic (Link), who notes that it has not been deployed on all sites. This effectively expands the Band 2 deployment to a 20MHz x 20MHz deployment.

The company has also attempted to increase capacity with network densification, which adds more cell sites to divide up the traffic load. But activating a new cell site can take years, especially if Verizon encounters zoning and permitting problems or public opposition. Small cells can ease congestion in particularly dense traffic areas, but are not enough alone to deal with increasing network traffic.

Verizon’s own business practices have also complicated things for the wireless company. Ditching two-year contracts and subsidized phones in favor of customers acquiring devices at retail prices financed through wireless carriers like Verizon have led to a slowdown in subscriber upgrades as consumers hold on to their devices for longer.

Most phones acquired in the last year or two now support Voice over LTE (VoLTE), which means phone calls travel over Verizon’s LTE network, not the legacy CDMA network Verizon has used for well over a decade. Verizon has to dedicate a significant amount of prime spectrum in the 850MHz band for its CDMA network. Although Verizon claims it has migrated “more than 50%” of its voice traffic to the newer, more efficient VoLTE standard, that is below analysts’ expectations.

Piecyk thinks it may be possible Verizon has been slow to convert because of the record low phone upgrade rate of its customers. As a result, it cannot repurpose its CDMA spectrum for LTE use. Discussions with Verizon engineers suggest the company may eventually cut back CDMA spectrum, but will likely still keep 5 x 5MHz reserved for CDMA voice calling for at least the next four years to support its customers with older devices.

As part of its network densification effort, Verizon is once again relying on fiber optic buildouts, some of which it may take on itself in areas where it does not provide landline service. Verizon will be placing cables with 1,700 strands of fiber, so it is obviously thinking about future network demands.

Before it can deploy additional upgrades or acquire more spectrum, customers can anticipate more “network management” techniques, suspects Piecyk, especially now that unlimited data plans are for sale again. Verizon already limits its “unlimited” plan to 22GB of usage per month, before wireless data speeds are throttled. OpenSignal believes Verizon’s recent speed drops are a result of its unlimited plans putting more pressure on its network.

“We suspect management will now follow T-Mobile’s lead and suppress video quality like BingeOn to help with the rise in network traffic,” Piecyk wrote. “They might also discuss control of overall peak data speeds. However, if no mobile applications require more than 10Mbps service, would it make any sense to suppress the speeds on your customers’ phone? What’s the benefit other than offering a convenient excuse on why your speed tests are slower than the competition?”

T-Mobile’s 600MHz coverage map — assuming it builds out its full spectrum purchase.

One of the most consequential and visible spectrum auctions ever is over, and it will have a significant impact on broadcasters, wireless carriers, and the future competitive landscape of the wireless industry.

The world’s first “incentive auction” paid television stations to voluntarily vacate or move their assigned channels to make room for the wireless industry’s desire for more spectrum to power wireless data services. Up for bid was 70MHz of spectrum currently used by UHF television stations. A total of 50 winning wireless bidders collectively agreed to pay $19.8 billion to acquire that space. The biggest winner was T-Mobile USA, which is paying almost half the amount of total proceeds to acquire 45% of the spectrum available in the current auction. T-Mobile managed to acquire enough spectrum to cover 100% of the United States and Puerto Rico with an average of 31MHz of available spectrum nationwide, quadrupling its current inventory of important “low-band” spectrum, which is excellent for covering rural areas and inside buildings.

Consumers are likely to benefit as early as later this year when T-Mobile begins lighting up cellular service utilizing the newly available spectrum. Unfortunately, customers will have to buy new devices compatible with the new bands of frequencies.

Having the spectrum alone is not enough to beef up T-Mobile’s network. The company will have to invest in a large number of new cell sites, particularly in outlying areas, to eventually rival the coverage of AT&T and Verizon Wireless. But with an ample supply of 600MHz spectrum, T-Mobile could soon challenge AT&T and Verizon Wireless’ perceived network and coverage superiority. After this auction, AT&T continues to hold the largest portfolio of <1GHz spectrum — 70.5MHz. Verizon is second with 46.2MHz and T-Mobile has moved up in its third place position with 41.1MHz.

Although the FCC claims the current auction was among the highest grossing ever conducted by the FCC, industry observers claim companies got the new frequencies at a bargain price. A 2015 spectrum auction attracted $44.9 billion in bids, more than double the amount bid this year. The average price wireless companies paid per megahertz per person this year was just shy of 90¢, compared with $2.72 in 2015.

Where bargains are to be had, Charles Ergen and his Dish Network satellite company are sure to follow.

Few companies have as much unused wireless spectrum in their portfolio as Dish. Ergen loves to bid in auctions and has also picked up excess spectrum available on the cheap from other satellite companies that have since gone dark or bankrupt. Dish spent $6.2 billion on spectrum during the latest auction, puzzling investors who drove Dish’s share price down wondering what the company intends to do with the frequencies.

Investors were hoping Dish would eventually sell its spectrum portfolio at a profit, something that could still happen if other wireless carriers see a deal to be made. But some Wall Street analysts fear Dish might actually build a large wireless network of its own to offer wireless broadband service. Wall Street dislikes big spending projects and the competition it could bring to the marketplace, potentially driving down prices.

The other possibility is that Dish is making itself look more attractive to a possible buyer like Verizon, which could acquire the satellite company to win cheaper cable programming prices for its FiOS TV and an attractive amount of wireless spectrum for Verizon Wireless. The nation’s biggest wireless carrier notably did not participate in this spectrum auction.

Another unusual bidder was Comcast. Craig Moffett from Wall Street firm MoffettNathanson called Comcast’s $1.7 billion bid “half-hearted” and said it was unlikely to be enough spectrum for the company to begin offering its own wireless service. Comcast plans to rely on Verizon Wireless to power its wireless service, at least initially.

Comcast targeted its bids only in cities where it already provides cable service, which also nixes the theory Comcast and Charter might have been working together to form a cellular joint venture. Moffett expected Comcast would seek at least 20MHz of spectrum across most of the country. It ended up with 10MHz and only in select cities. Moffett thinks that may signal Comcast’s interest in buying an existing wireless carrier is still on the table.

The days of wine and roses from wireless data profits may be at risk, according to some Wall Street analysts, after Verizon Wireless on Monday brought back an unlimited data plan it vowed was dead for good in 2011.

The “Cadillac” wireless network reintroduced unlimited data, phone, and texting this week at prices that vary according to the number of lines on your account:

• $80 a month for one line
• $70 a line for two lines
• $54 a line for three lines
• $45 a line for four lines

Verizon Wireless last enrolled customers in its old unlimited data plan in 2011, and a dwindling number of customers remain grandfathered on that plan, which began increasing in price last year and has since been restricted to no more than 200GB of “unlimited” usage in a month.

Verizon’s new unlimited data plan is a response to pressure from increasing competition, especially from T-Mobile and Sprint. All of Verizon’s national competitors have unlimited data plans with varying restrictions, and Verizon’s lack of one is likely to have cost it new customer signups last year. The company only managed to add 2.3 million postpaid customers in 2016, down from 4.5 million signed up in 2015.

CEO McAdam swore unlimited data was dead at Verizon

Causing the most irritation is T-Mobile, which near-constantly nips at Verizon’s heels with innovative and disruptive plans designed to challenge Verizon’s business model. BTIG Research analyst Walter Piecyk noted Verizon’s claims it does not need to respond to T-Mobile’s marketing harassment just don’t ring true any longer.

“Verizon has a long history of rebuffing T-Mobile’s competitive moves as non-economic or unlikely to have an impact on the industry for more than a quarter or two, only to later replicate the offer,” Piecyk said. “That was true for phone payment plans, ETF payments for switchers, overage etc. We can now add unlimited to that list. How long will it be until Verizon offers pricing that includes taxes? Despite those delayed competitive responses, T-Mobile has maintained industry leading growth while Verizon’s has declined.”

Piecyk believes Verizon Wireless rushed their unlimited data plan into the marketplace and its introduction seemed not well planned.

“We asked Verizon what has changed to explain such an abrupt reversal, but have yet to receive a response,” Piecyk said. “They had recently been running an advertisement promoting the 5GB rate plan that argued why customers do not need unlimited. The rate plan remains, but it is not clear if the advertisement will. The launch of unlimited seemed rushed, coming a week after the exposure they could have secured with a Super Bowl advertisement. The ad run last night during the Grammy’s did not appear to have taken much to produce.”

Verizon Wireless executives have argued for years customers don’t need unlimited data plans and Verizon would no longer offer one:

• “With unlimited, it’s the physics that breaks it. If you allow unlimited usage, you just run out of gas.“ — Lowell McAdam, Verizon CEO (September, 2013)
• “At this point, we are not going to entertain unlimited. Promotions come and go. We can’t react to everything in the marketplace.” — Fran Shammo, former Verizon CFO (January, 2016)
• “I’ve been pretty public saying the unlimited model does not work in an LTE environment. Unlimited is a very short-term game in the LTE market. Eventually unlimited is going to go away because you have to generate cash to reinvest.” — Fran Shammo, former Verizon CFO (March, 2016)
• Unlimited data plans were “not something we feel the need to do.” — Matthew Ellis, Verizon CFO (January, 2017)

Shammo: Unlimited doesn’t work on LTE networks.

The impact of not having an unlimited data plan appears to have convinced Verizon to change its mind, and that comes as no surprise to Roger Entner of Recon Analytics.

“In three to five years, unlimited plans will come back,” Entner predicted in 2011. He claimed back then wireless carriers were initially unsure how to predict data usage growth on their networks and placing limits on usage gave carriers more predictable upgrade schedules. But after several years of data, Entner said carriers can now better predict the amount of data an average subscriber will use in a month, giving them confidence to remove the caps.

Verizon Wireless’ unlimited plan includes several fine print limitations that provide additional network protection for Verizon and manage any surprise usage:

• Unlimited use is only provided on Verizon’s 4G LTE network. Limits may apply to customers using older 3G networks, which are less efficient managing traffic;
• Unlimited not available to Machine-to-Machine Services;
• Customers with unlimited data plans may find their traffic deprioritized on congested cell sites after 22GB of data consumption during a billing cycle. This speed throttle can reduce network speeds to near-dial up in some circumstances, at least until site congestion eases;
• Mobile hotspot tethering on this unlimited plan is limited to 10GB per month on Verizon’s 4G LTE network. Additional usage will be provided at 3G speeds. This is designed to discourage customers from using Verizon Wireless as a home broadband replacement;
• Verizon’s ultimate 200GB monthly limit is also presumably still in place. If you exceed it on Verizon’s legacy unlimited data plan, you were told to shift to a tiered data plan or had your account closed.

Piecyk thinks Verizon’s unlimited data plan may have been rushed out.

Although consumers clamoring for an unlimited data plan from Verizon are happy, Wall Street is not. Analysts are generally opposed to Verizon’s return to unlimited, with many suggesting it is clear evidence the days of high profits and predictable revenue growth are over. That is especially bad news for AT&T and Verizon Wireless, where investors expect predictable and aggressive returns. Verizon has already warned investors it expects revenue and profits to be flat this year.

Jeffrey Kvaal with Instinet believes Verizon’s traditionally robust network coverage is no longer an advantage as competitors catch up and unlimited data is the final nail in the coffin for wireless revenue growth. That means only one thing to Kvaal, AT&T and Verizon must pursue growth outside of the wireless industry. Verizon, in particular, is facing investor expectations it will do something bold in 2017, such as making a large acquisition like a major cable operator.

Evercore ISI’s Vijay Jayant believes unlimited data is bad news for all carriers from the perspective of investors looking for revenue growth.  Jayant told investors in the short term, unlimited data may help Verizon’s revenue because the plans are expensive, but in the long run Verizon is sacrificing the revenue potential of monetizing growing data usage in return for a high-priced, flat rate option. That guarantees “customers won’t see their bills rise, even as their usage does,” Jayant said.

Some analysts point out Verizon’s unlimited data plan is expensive, limiting its potential attractiveness to customers considering jumping to another carrier. While Verizon charges between $80-180 (for one to four devices), AT&T charges between $100-180 for unlimited plan customers, who must also sign up with DirecTV to get an unlimited data plan. T-Mobile charges between $70-160 and Sprint charges between $60-160. The cheapest is T-Mobile, because its plans are all-taxes/fees inclusive. All four carriers have soft limits after which customers may be exposed to a speed throttle. AT&T can temporarily throttle users at 22GB, Sprint can throttle above 23GB and T-Mobile after 28GB.

The Wall Street Journal discusses Verizon’s unlimited data plan and its caveats. (4:55)