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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.