Capped America

Failed presidential candidate John Edwards once spoke of “two Americas.” While Edwards was making an economic pitch, his message, with a little temporal updating, could just as easily apply to the market for data.

In one America—that of residential broadband—most users enjoyed unlimited data and zero restrictions. In another America, mobile broadband users faced tight restrictions on the amount of data they can consume before getting slapped with additional costs. And those mobile subscribers found that some services were exempted from data caps, while others weren’t.

But, as a wise man once observed, the times, they are a’changing.

The U.S. mobile market is moving toward ever-more generous data packages. T-Mobile kicked things off with an “unlimited” plan in 2016, followed quickly by Sprint. AT&T waded in with an “unlimited” plan as well, albeit one reserved only for DirecTV and UVerse customers. Then, in February of this year, Verizon jumped into the fray with its own “unlimited” data plan.

Verizon’s entry was notable not simply because it signified the presence of “unlimited” data plans from all four of the nation’s major mobile carriers, but also because it immediately sparked responses from T-Mobile and Sprint. Both carriers responded to Verizon’s entry by altering the terms of their “unlimited” plans to make them more generous—by, among other things, removing the 480p cap on streaming video and increasing the amount of hot-spot data a customer could consume.

Of course, there’s some rather glaring fine print in these mobile “unlimited” plans. Namely, they all limit the amount of 4G data a customer is entitled to in a given month. T-Mobile begins to slow a user once they’ve consumed 28GB of 4G data—a slowdown which occurs during periods of network congestion. Verizon and AT&T can impose slowdowns once you’ve consumed 22GB, while Sprint put the clamps on around 23GB.

Still, the trajectory of the mobile market is clear: carriers are offering more data with fewer restrictions. Now, compare that with what’s been happening in fixed broadband. There, previously generous unlimited plans are now being scaled back with consumers facing broadband caps from a variety of major MSOs. In late January, Cox, the nation’s third largest cable company, expanded the number of markets where consumers face a 1TB data cap. Late last year, Comcast slapped data caps on users in over a dozen states. AT&T and CenturyLink have also imposed broadband caps.

While fixed broadband caps are naturally much larger than mobile caps (typically 1TB), the trend line is running the opposite of the mobile market: consumers are getting less data.

What gives?

Interestingly, the answer appears to cut across ideological camps.

Opponents of net neutrality can point to a mobile operator’s ability to manage their network (for instance, by limiting gaming bit-rates and data tethering) as the key enabler for facilitating a more generous data offering. Absent the ability to discriminate between kinds of data, it would be more difficult for mobile carriers to open the unlimited flood gates. On the other hand, proponents of greater competition (who also tend to be pro net neutrality) can highlight just how beneficial it is for consumers to have multiple companies scrambling for their business. It’s impossible to look at the rapid-fire announcements from Verizon, T-Mobile and Sprint and not conclude that fierce competition is working its magic for the benefit of consumers. Nothing similar can ever happen in the market for residential broadband.

For now, these trend lines appear firmly fixed but there are several potential developments that could reverse these dynamics. First would be consolidation among mobile carriers, which would remove the competitive one upmanship that has driven the current crop of unlimited offerings. The second, longer-term development is 5G, which may be fast enough to prompt broadband cord-cutting among residential data subscribers. 5G networks could pose a competitive threat to cable providers, forcing them to compete for what has otherwise been a largely captive audience.