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Summary:

T-Mobile is reinstating the unlimited plan for smartphones with just one restriction: you can’t use your phone as a hotspot. Anything else is fair game. T-Mobile insists that the new policy is viable business model, despite what AT&T and Verizon say to the contrary.

T-Mobile has pulled off a mobile industry first: it has reinstated the unlimited data plan after a year’s hiatus, showing that there may be a plausible business case after all for unfettered access to the mobile internet. Starting Sept. 5, it will begin offering an unlimited option to its smartphone plans.

Before you get too excited there is one big caveat: you are not allowed to tether your smartphone or use it as a mobile hotspot. T-Mobile’s not crazy. It doesn’t want to open up its network to the full brunt of the PC-and tablet-driven internet. But whatever you can do on your smartphone — short of sharing your connection — is fair game: Netflix, YouTube, massive file sharing, you name it. According to T-Mobile, it won’t throttle or cap.

Director of Marketing Harry Thomas said T-Mobile is revisiting the unlimited plan simply because that’s what its customers want. The issue wasn’t megabyte stinginess –- T-Mobile already offers the biggest buckets of smartphone data for the cheapest prices in the U.S. with the exception of Sprint. Instead, T-Mobile is targeting the customer that frets over his monthly data consumption -– the one that worries about whether he can still download a video or stream music without breaching his data cap, Thomas said.

“We’re going where our customers are leading us, and unlimited is where they’re telling us to go,” Thomas said.

The unlimited plans will come in two flavors depending on whether you paid for your phone up front or took advantage of one of T-Mo’s subsidized devices. Value plan — or unsubsidized –- customers pay $20 a month, while classic –- subsidized –- customers pay $30. The value plan is pretty much the cheapest data plan in wireless data among the nationwide operators. Sprint’s unlimited plans cost $30 and are still restricted primarily to its 3G CDMA network, while T-Mobile offers much faster HSPA+ speeds in 229 markets. At AT&T, $20 will get you a measly 300 MB, while Verizon Wireless has stopped selling individual data plans entirely.

T-Mobile is keeping its metered plans in place for customers that do want to use their phone’s hotspot capabilities. Ironically, that means you would pay more for a 5-GB plan ($25 for value, $35 for classic) than you would for an unlimited one.

A lot of people in this industry have opined — myself among them — that the unlimited data plan is endangered species, an untenable business model in a world where mobile capacity is so constrained. But Thomas said T-Mobile believes that unlimited is still a viable strategy. It’s not a limited promotion or some loss-leading pricing gimmick to stem its customer losses, he said: T-Mobile expects to make money off these plans.

That’s a bold statement coming from T-Mobile considering just how much data its customers consume. The carrier recently revealed that its average smartphone customer eats up 760 MB a month, far higher than the industry average. On its 42-Mbps dual-carrier HSPA+ network that number increases to a whopping 1.3 GB a month.

If Thomas is right about unlimited being a viable business for T-Mobile, then that raises a very interesting question: If unlimited can work for T-Mobile, why can’t it work it for AT&T and Verizon?

T-Mobile image courtesy of Flickr user swruler9284Buffet image courtesy of Flickr user Wesley Fryer

  1. Build more towers & more bandwidth. A lot of companies wish they had your problem – too many customers !!!

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    1. These items don’t increase capacity and may not improve things as much as you think. While tower presence is important the higher in frequency the spectrums bands are, there is only so much bandwidth those towers will transmit.

      But, as has been proven by Verizon, when you DO invest in your network infrastructure and managing capacity utilization, mass use of unlimited plans do not crush capacity as much when high-in-demand devices are ubiquitous across networks. The iPhone has done little to inflict pain on Verizon’s operating expenses outside of subsidies. I personally know 7 “data hogs” who lucked out when the HTC Thunderbolt was released with unlimited data and unlimited hotspot options were available. So all those guys have to do from now on to keep those options is buy their devices at full retail until these carriers offer a better balance of price:data for subsidized devices. Sadly, I missed the Thunderbolt boat.

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  2. How are they going to block stock android devices, like the Galaxy Nexus, from tethering? Or any android phone with a third party app?

    In any case, it’s great news, hopefully it will put pressure on ATT and VZ.

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    1. Hi Keninca,

      T-Mo likely has some kind of deep packet inspection technology that allows it to sniff out hotspot use. It’s network, not handset based, so it doesn’t matter if you bring an outside device.

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      1. Kevin, that’s an interesting possibility (using deep packet inspection to sniff out hotspot use), but in principle, hotspot use / tethering can be done in ways that cannot be reliably sniffed out by the network – all packets go to/from the mobile device that is doing the tethering, so it may be that only that mobile device knows. Looking at higher layers would not help

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      2. Hi Daniel, wouldn’t DPI be able to detect whether a video packet is bound for say a PC video player vs. a mobile video player? Certainly not a perfect science, I realize, but definitely a way to flag users.

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      3. Kevin, they would have to put those systems at every mobile gateway – that’s too expensive. I don’t believe they will be able to enforce this, other than through non-stock Android devices. That shouldn’t be a problem, as stock android phones probably comprise less than 1% of all phones on their network.

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  3. will there be any traffic shaping and/or throttling? if so this is just a renaming of existing plans that throttle instead of cut off data.

    how exactly will they detect tethering?

    also what happens if people get caught? will the service be terminated? the bill adjusted with overages added?

    as a computer/phone person i am always surprised that among normally law abiding and non-rule-breaking people i always have lots of people ask me about getting around tethering restrictions/ particularly from people trying to get the most from unlimited data plans.

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    1. Hey Tom,

      T-Mo says no throttling, no restrictions. More subtle traffic shaping I’m not so sure of. We’ll have to see. As for the hotspot capabilities. If you use the on-board Wi-Fi hotspot apps T-Mo is notified. If you use a different hotspot app, T-Mobile has ways of figuring it pretty easily. Most carriers have deep packet inspection technologies that allow them to sniff that kind of use.

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  4. this make me think about the whole ‘phablet’ concept. with unlimited data available for phones but not tablets and/or tethering people may start shopping for the device with the largest possible display that still qualifies as a ‘phone.’ the idea of a Samsung note instead of a regular tablet becomes interesting if its the only way to have unlimited data. as the line between phone and tablet blurs it will certainly be interesting if people start to choose hardware based on how the specific device qualifies for rate plans.

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    1. Good point tom,

      Carriers are making these big distinctions between tablets and phones for their pricing policies. What happens when phones and tablets start blurring? Do carriers come up with different data plans for every individual device?

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      1. where can i get a 10 in phone with a processor powerful enough to run windows 7 in a virtual machine?

        OK i does not exist, but i can attach an external monitor, mouse and keyboard to a high end android phone and run ubuntu linux. it would still(technically speaking) be a phone without a computer tethered and should qualify for this plan.

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    2. Jessica Obermayer Thursday, August 23, 2012

      Agreed! And the answer is probably one of the Samsungs…

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  5. this does not mean much without a long term commitment. for all we know this is just a short term marketing thing. i remember about two years ago virgin mobile announced unlimited hotspot for $40/month. the networks was quickly congested and everyone was moved to a capped plan.

    if this turns out to be a bait and switch there should be consequences for t-mobile, and not some payout or being let of the contract to deceived purchasers. everyone should be grandfathered in for as long as they want with no possibility of throttling.

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  6. “…unlimited is where there telling us to go…”

    Unlimited is where THEY’RE telling us to go. Someone is having trouble with his homophones today.

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    1. Thanks Chris. Late night post. Typo corrected.

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  7. That 1.3 GB average usage per customer on their HSPA+ network is not the most meaningful statistic. What’s the average usage of customers who pay for 5GB instead of 2GB? I bet it’s close to 5GB…

    You only need a handful of data abusers on any given cell tower to severely drop the speed for everyone using that tower.

    I don’t think T-Mobile can go through with this notion of “unlimited data at max speed” for too long. Their brand will hurt bad due to deteriorating service.

    It’s already hurting. I was planning on getting back to TM on an S3 but now I don’t have confidence that the network will be good enough for me in a few months. So I’m waiting, and if I see the trend is for worse data rates/overall service, I’ll obviously go elsewhere.

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    1. Hi Victor

      I see your point, but even if the usage for 5 GB users was close to 5 GB that wouldn’t be much of a useful statistic either. All of T-Mo’s customers that use their devices as mobile hotspots are on 5 GB plans, so they’re racking up some big data usage. T-Mo’s unlimited plans don’t allow hotspot usage, so those numbers wouldn’t give us any insight into how customers would consume data.

      In general I agree with you though. Unlimited is a dangerous game.

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      1. I found out it’s not really unlimited…

        Harry Thomas, T-Mobile’s director of marketing says T-Mobile retains the right to slow transmission speeds for very heavy data users. But that’s “very rare,” Thomas says.

        http://www.usatoday.com/money/industries/telecom/story/2012-08-22/tmobile-data-plans/57195400/1

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    2. Kevin Fitchard Friday, August 24, 2012

      Hi Victor,

      I asked Thomas this question this well. T-Mobile said its fair use policies were still in place. I asked him what that means in five different ways, and from what I understand there very much like the shared use policies on Sprint. Sprint says if you abuse the network it can cut you off. But so far the only people they have cut off — or at least publicly admitted to — are users that have tethered (which is isn’t allowed) or people who use a lot of data while roaming on Sprint’s partner network (which is also spelled out in Sprint’s policies).

      T-Mo might interpret fair use differently. But I asked Thomas specifically about soft caps. He said there are none. I asked about user consuming 20 GB or 30 GB a month. He said there would be no restrictions.

      Bottom line if you want to get academic, I’m sure you can get T-Mobile to shut down your service to prove a point. You could park your phone at the edge of a cell and rig it up as a video server, basically sucking up the entire capacity of the cell 24 hours a day (bet that would spark an e-mail). As you point out it only takes a handful of abusers to ruin a network.

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  8. they should not be calling this ‘unlimited’ is they are reserving the right to slow heavy users.

    they should advertise it as what it is and come clean about the built in ‘soft cap’

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  9. Anthony Wordlaw Thursday, September 6, 2012

    5GB is enough for me, I went to the 10GB and still when over it in 2 1/2 weeks. Thanks PSN for letting me download 2gb games..lol

    But honestly, I think using the hotspot uses 2x more data. To get around this mess, I call Tmobile and have them reset my phone for different reasons and BAM, my data usages gets reset too. And by the way, back up all your apps before doing so.

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  10. why tmobile hotspot works on mac and not on windows without paying the $15 fee

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