9 Comments

Summary:

Republic Wireless is dropping the “so-called” from its so-called unlimited data plan, revealing that it has lifted all restrictions on smartphone Internet use. While Republic’s customers are sure to be happy, let’s see how long it lasts. Unlimited is a hard business model to make work.

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Republic Wireless is dropping the “so-called” from its so-called unlimited data plan, revealing in its company blog it has removed all restrictions on Internet use for its Android smartphone customers. While Republic’s customers are sure to be happy with the change, let’s see how long this experiment lasts. Unlimited is a hard business model to make work, especially if you’re a mobile virtual network operator (MVNO) like Republic.

Republic, the cellular arm of Bandwidth.com, launched last month with a bang, marketing $19-a-month unlimited voice, text and bandwidth plan. That sounds nuts but Republic had a unique strategy. It planned to make extensive use of public and private Wi-Fi to offload not only its data traffic, but calls and SMS as well. The details, however, were in the fine print.

Since Republic is a mobile operator it needed a cellular network to connect customers when out of range of Wi-Fi, so it contracted with Sprint to buy voice and data capacity on its CDMA network. Those wholesale minutes and bytes cost Republic money, and the more of them a customer uses the more likely Republic’s $19-a-month bargain turns into a loss-making machine. So it instituted something called a cellular usage index (CUI), which used an ever-evolving set of byzantine rules to determine what combination of voice minutes, text messages and megabytes warranted Republic booting customers off its network.

As you might expect this led to a lot of confusion and anger among Republic’s customers (or members as it calls them), so on Thursday Republic posted a refreshingly honest blog entry acknowledging that the usage index wasn’t working and announcing its plans to go truly unlimited. Republic general manager Brian Dally wrote:

This is what being in beta is really all about. We’re here to learn and innovate or fail trying. And as we’ve said before, we’re not here to sell you but to build a new wireless business together with you. You helped us realize that we didn’t get this right on our first try with the CUI, that we can and should do better.

…Rather than revising our fair use policy, we’ve decided not to have one at all. There will simply be no thresholds, and no risk of losing service. We’re doing away with all of that to keep all of the focus instead on where it really belongs: Creating a new wireless future together. A future that is simple to understand, unfettered to use, and an amazing value for all. That’s what we started down this path to do. That’s where the power of this vibrant community, dynamic Wi-Fi ecosystem and revolutionary technology should be invested. We’re all-in.

There is a catch, but a perfectly reasonable one. Republic said that the unlimited plan is technically in the beta stage, meaning it’s still determining if the concept is economically viable. “We won’t end beta until we either achieve economic sustainability or become convinced that doing so is impossible,” the Dally said.

I wish Dally and Republic the best of luck, and laud them for their willingness to test the boundaries of unlimited in a very public experiment. But I’m not very confident they can pull it off. Other MVNOs have tried and failed. H2O Wireless was forced to cap off its unlimited data plan within a few months of launching it. Sprint is the only major operator with an unlimited service, and it charges a lot more than $19 a month for it.

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  1. Joshua Goldbard Friday, December 23, 2011

    While I’d love to see this work, I’m not holding my breath as the Telecom graveyards are littered with the bones of forgotten MVNO’s. Anybody remember Disney Mobile?

    If Republic’s architecture previously only allowed for 550 minutes of off wifi usage, it’s seems likely that they’re betting or gambling that the ratios of actual usage will cover the risk of removing the cap.

    I don’t buy it.

  2. The model here is interesting because bandwidth.com is leveraging all of it’s other assets – i.e. it already has a VoIP network that costs near-nothing, already has billing and support infrastructure, already provisioning.

    But the reality is this company is also riddled with tons of products they “try out” but they never really go anywhere. Phonebooth.com hasn’t had a significant upgrade since it launched. If you look carefully at the “About Us” team members on the Phonebooth team and the Republic Wireless team, many of them are the same. FreePBX v3 died a quiet death. Their “bundled” Box-Set Voice, Data, etc package is pretty much just a marketing term.

    Bottom line, this company loves to make big announcements to get attention and has a lot of really good ideas, but they don’t seem very sustainable and they almost always promise things that don’t exist.

  3. Kevin Fitchard Friday, December 23, 2011

    Hi Joshua,

    True, but there have been a lot of MVNOs that are fairly successful. Tracfone, Boost, Virgin (though both were bought by Sprint). The problem was Disney was that it was built behind a specific media brand (same with ESPN) and at the time there wasn’t any compelling well to make use of that brand on the smartphone (Mickey Mouse wallpapers don’t count). I agree it’s a tough biz for MVNOs, but if you build one around a business model rather than a brand, I think they have a longer half-life.

    You’re right about the gamble. I think they’re counting on their customers to seek out Wi-Fi for the betterment of the overall service. Sort of of a social contract, right out of Jean Jaques Rousseau. Not sure that will work.

    1. Assuming the beta testers do buy in to the “social contract” and consciously mitigate their cellular usage “for the betterment of the overall service,” can their behavior be counted on as representative of that of future average subscribers?

      I say not, unfortunately. Beta testers tend to be far more tech savvy than most and often invest themselves in the success of beta product. But post beta test, with an exceedingly low price point and seemingly no strings attached unlimited plan, Republic will attract more than its fair share of data “abusers” and generally oblivious users.

      AJ

      1. You’re such a curmudgeon, AJ. :)

        By the way are you on twitter? I need you to field random spectrum questions. @kfitchard

      2. Well, I am loath to be a curmudgeon about Republic Wireless, as I really do want to see its product succeed. If nothing else, it would give us greater insight into the real cost of providing unlimited voice, text, and data, since many of us on traditional postpaid plans already voluntarily Wi-Fi offload some of our data usage (yet get no monthly cost break for that), and the marginal cost of the VoIP element of Republic’s service should be almost zero.

        On the other hand, I do not want to see Republic get used as a political tool by VZW and AT&T to try to justify their current and future acquisitions. I could easily see VZW and AT&T pointing to Republic as the type of “robust, innovative competition” that they increasingly face, propping up Republic as some “paper tiger” threat to their continued existence.

        On another site recently, one poster did just that. He tried to use Republic as example of a maverick and consumer alternative in order to rationalize that the FCC should have approved the AT&T-T-Mobile merger. This was my response:

        “Republic Wireless is an MVNO, and it operates on the Sprint network. That is important for at least two reasons.

        “One, like all MVNOs, Republic is dependent upon the network of its host mobile operator. If no Sprint, then no Republic. And the increased anti competitive clout of a combined AT&T-T-Mobile threatened the future viability of Sprint.

        “Two, Republic is not an MVNO on the AT&T network. Why not? Would AT&T ever allow such an innovator on its network and possibly threaten AT&T’s own entrenched business model?

        “So, you could easily imagine a scenario in which the AT&T-T-Mobile merger is approved, then Sprint succumbs to immense anti competitive pressure and merges with VZW. The true national duopoly is formed. With no other national competition, AT&T and VZW independently work to hold up prices. Furthermore, VZW kills off Republic’s MVNO access. And neither AT&T nor VZW allow another innovator like Republic on their networks ever again.”

        AJ

  4. White spaces http://bit.ly/vwh2nc for broadband wireless are much more interesting with better upsides so IMO Republic should be working FCC Chairman Genachowski more ( because AT&T, Verizon and Sprint won’t ) so we can get to Super Wi-Fi faster.

    1. Hi Steve, The problem is white spaces today have to be used for fixed wireless purposes. Otherwise the interference concerns are too severe. That may change if the FCC awards more TV spectrum to unlicensed use.

  5. Whitey Bluestein Sunday, December 25, 2011

    Republic Wireless’ decision to remove restrictions on smartphone Internet use suggests that the traffic mix for customers using their $19.95/month unlimited voice, text and data plan has shifted enough voice and data traffic to WiFi that cellular network costs are manageable. Republic calls this “hybrid” versus true Fixed Mobile Convergence (where calls are seamlessly handed off between WiFi and mobile networks), but either way, preliminary results of this still-Beta-service suggests its sustainable, and is very exciting for MVNOs looking at true FMC solutions.

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