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Another unlimited mobile data plan bites the dust

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H2O Wireless, a bring-your-own-phone virtual mobile operator, has canceled the service that was supposed to be its big competitive differentiator from the larger operators: unlimited smartphone data. The company confirmed with FierceWireless that it has stuck a 2 GB cap on data for users of its $60 “unlimited everything” plan — though customers can still text and talk to no end – within just a few months of launching the service. H2O going back on unlimited data shows just how untenable the all-you-can-eat business model is becoming no matter what unique spins operators are applying to the concept.

While H2O does sell some phones, one of its biggest attractions is its SIM-only service, allowing customers to take almost any unlocked GSM phone onto its network, including the iPhone(s aapl) and Android(s goog) devices. Owned by Locus Telecommunications, H2O is a mobile virtual network operator (MVNO) using AT&T’s (s t) GSM and high-speed packet access (HSPA) networks, which should have been a good indication unlimited data wasn’t going to work. AT&T was the first operator to rein in unlimited plans, requiring new customers to sign up for a 200 MB or 2 GB smartphone data buckets. If AT&T can’t (or won’t) make unlimited data work, it’s highly unlikely one of its MVNOs could.

H2O would be forced to pay AT&T by the MB, while its customers consumed it at a flat rate. That may not have been a big issue when H2O primarily was selling its customers feature phones, which don’t engage in the data orgies of their smartphone counterparts. But as H2O started selling smartphones like the Palm Pixi Plus(s hpq) on its own, and customers started bringing BlackBerry(s RIMM), Nokia (s nok) and especially iPhone(s aapl) and Android(s goog) devices onto the network, data consumption on those plans must have skyrocketed.

Getting hard to find a decent unlimited plan

These days, there’s no such thing as unlimited without an asterisk. T-Mobile (s DT) throttles back connection speeds if you exceed a set cap in a given month. While both AT&T and Verizon Wireless(s Vz) have grandfathered in their unlimited data customers, both have now implemented ‘soft caps’ on their consumption: If any customer’s gross tonnage of MBs in any given month reaches a point either operator considers excessive, their speeds are throttled back for the remainder of the billing period. Some MVNOs like Republic Wireless try to work around the restrictions on unlimited usage by aggressively using Wi-Fi, but ultimately when customers move back onto the cellular network,, their MBs are counted.

The one big exception is Sprint (s S). The operator claims its unlimited 3G and 4G smartphone plans are one of its biggest competitive differentiators, but Sprint may be forced to change its tune once the data pressures from the new iPhone and its in-suspended-animation 4G build come to bear. There are also a few smaller holdouts. MetroPCS(s PCS) still offers unlimited data plans over its new LTE network, though its smaller line up of devices and the limitations of its networks provide some constraints.

MVNO Simple Mobile, which, like H2O, offers a bring-your-own phone service, also offers a $60 unlimited talk, text and data plan, using T-Mobile’s networks rather than AT&T’s. Simple, however, does have an ingrained advantage. There are relatively few smartphones out there that can tap into the frequency bands of T-Mobile’s HSPA+ network. A customer would have to secure an unlocked version of one those devices if they want to access anything besides T-Mobile’s slow-paced EGDE service. Still, some customer is going to get his or her hands on an unlocked version of one of T-Mobile’s new 42 Mbps Android phones, which would blow that unlimited plan out of the water.

5 Responses to “Another unlimited mobile data plan bites the dust”

  1. A few things to consider here:

    1. Everyone knows about AT&Ts network congestion. They are probably not the best carrier to have done an MVNO deal with if you were looking to make unlimited data work. The parent company will always prioritize its own customers over an MVNO’s, and AT&T was not even offering smart phone data to MVNOs a couple years ago.

    2. Wholesale pricing can vary wildly within a country depending on two things: A. the operator and B. the volume commit from the MVNO. I can see a market leader with congestion problems not offer the best wholesale rates to an MVNO.

    I wouldn’t necessarily preclude an MVNO from successfully launching an all you can eat data plan because this company could not. Partnering with a company that has a busy data network and not in need of wholesale customers tends to result in bad pricing for the MVNO.

    Start following where unlimited data works and where it does not. If you look at it by 3G vs. 4G, device type, underlying network, network capacity in a given country, etc…you will see the ability to offer unlimited data is very situational.

    • Kevin Fitchard

      Hi Chris, thanks for commenting. I just see any operator willing to sell “unlimited usage” to an MVNO at least not at the prices an MVNO could use. That said, I do see your point that an MVNO could offer unlimited data even if it is paying the network operator by the unit. But it seems like you’d have to know your customers and the services they use quite well to pull that off.

  2. It is too bad that yet another effort at unlimited data has fallen to “the cap”, but it is very tough to fight the economics of the current system. However, there remain other alternatives to stretch out one’s data cap if the carrier’s decide to evolve a bit on the billing side. If the carriers allow for third parties to pay for bandwidth that is “pre-bundled” within a particular app then customers can see their capped plans go much further (and the carriers can still preserve their margins). This 1-800 “toll-free” approach has been discussed before, but has been too difficult to implement within the carrier network (DPI complexity, BSS/OSS limitations, etc.). However, by associating the free bandwidth (perhaps paid for by Netflix, the Dept of Education, Disney, etc.) in the app itself (all monitoring, audit, and reporting functions handled within the app on the phone itself) the end users can choose to save their “out of pocket” bytes for unsubsidized uses of their choosing. We call it “FreeBand” and it is being considered by several European carriers currently (slowly) and entails end-users having different apps on their devices that are associated with different billing capabilities (e.g., “red” apps use your own bytes, “green” apps come with free bytes, “yellow” apps are somewhere in between). And the apps can change colors throughout the day depending on what the app creator (the subsidizing party) agrees with the carrier as part of the “pre-bundling” agreement — so a carrier traffic management element as well. If anyone wants to learn more, just drop us a line at Box Top Solution — its what we have been doing the past two years. Thanks!

    • Kevin Fitchard

      Hi Thomas, thanks for replying. Actually we just wrote on an interesting case of Orange doing just that, providing unlimited access to Facebook while capping data for other apps. Do you think operators can really pull that off in the U.S. without there being huge cries about data discrimination and the violation of net neutrality?

      • Hi Kevin,

        There are no regulatory issues / net neutrality issues with our FreeBand technology since we don’t interfere with quality of service (speed) or reduce customer choice. In fact, we have spent a fair bit of face time with the FCC and the CA PUC and they really like FreeBand since it is “accretive” to end users (it’s an additional choice end-users don’t have currently, and they don’t give up anything by availing themselves to it). We just give people apps that don’t impact their monthly bill (they can still use their existing apps/browser/tariff — if they want to). As for the Orange story, it is surely a step in the right direction, but a bit different since it is done in network (not via a swarm of third-party apps), so not scalable. With an “in-network” solution they can do it for a few big content players but not the small guys. With our “app-centric” approach to provisioning bandwidth ANYONE (big or small) can pre-bundle bandwidth into an app they create (just like anyone, big or small can buy Google AdWords). With the apps doing the billing work on the phones, there is no limit on the complexity (business/access rules) that can be put into the market. Further, the math behind a “complexity at the edge” is very compelling since it is very low cost to deploy (apps are cheap) and easy to maintain and update whenever the app providers wants to change the nature of the free bandwidth offer (evenings, weekends, free for certain downloads, etc.). You can’t do that in the network — you’ll knock over the BSS/OSS framework almost immediately. So we think pretty exciting stuff — good for carriers (selling bandwidth to content providers for use by end users, better for content creators (they go straight to the end user via the app — no middlemen), and best for end users (free byte delivery).