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How much for mobile bandwidth?

With data increasingly overtaking voice as the primary source of traffic on mobile networks, the big 4 providers (AT&T, Verizon, Sprint, T-mobile) in the United States have increasingly moved to offering relatively inexpensive voice and text messaging packages and different pricing schemes around data handling. This has led to a confusing landscape of prices, with different bandwidth numbers being touted at different rates. But taking the marketing data and massaging it in a spreadsheet can allow us to normalize it and present it in a way that allows for true comparisons between the different players.

Different plans, different rates

Today, mobile companies offer data plans in two different fashion: either attached to a mobile device (those are the kind of plans you get with a smartphone subscription) or detached from any device, allowing you to connect multiple ones. While each company offers bundling with voice and text service, I decided to focus on the data only plans, to remove the number of variables around voice or text message pricing that could have polluted the data (AT&T calls it “Mobile Share”, Verizon named theirs “Share Everything,”for Sprint, it’s “Mobile Broadband,” and T-mobile went with “Mobile Broadband“) Here, already, we notice that the pricing offerings differ as each provider attempts to sell a different amount of bandwidth, making it difficult to do comparisons. Put simply, it looks as follows:

Bandwidth (Gb) AT&T Verizon Sprint T-mobile
.5 $20
1
2
2.5 $30
3  $34.99
4  $30  $30
4.5  $40
6  $40  $40  $49.99
6.5  $50
8  $50
8.5  $60
10  $60  $60
10.5  $70
12  $70  $79.99 Not Available
14  $80
15  $90
16  $90
18  $100
20  $110  $110
30  $185  $185
40  $260  $260
50  $335  $335

The first thing you may notice, when you look at this chart, is that there is a big “Not available” box north of 10.5Gb per month for T-mobile. I called each company and asked them what happened if one went over their allotted bandwidth. AT&T and Verizon replied they would charge $15 per extra Gigabyte; Sprint’s price for this extra bandwidth is 5 cents per Mb (or, considering that a gigabyte is 1024 megabytes, $51.20 per gigabyte). But T-mobile does not provide any offering for going over. In their plan, if you go over your allocation, they continue serving you traffic but at a substantially reduced speed, moving you from a 4G LTE network to something called EDGE, which tops out around the same type of speeds as a traditional phone-based modem used to before broadband access became ubiquitous. So in order to be fair to all players, I removed that lower quality service from the equation.

How do they compare?

To compare the different services, I decided to look at the price of 1 Gb of service from each provider at the different plan levels. I ran the numbers two ways: first, I started with an assumption that one would go and pre-pay for more bandwidth than they would use, essentially paying a premium to ensure they would not be charged overages. Let’s say you needed 5Gb of bandwidth, then you would purchase a 6Gb to ensure that you would be OK. The result is a chart that allows us to see the per Gigabyte price of monthly bandwidth across each provider (bolded prices are the ones where the company actually offers a plan):

Bandwidth (Gb) AT&T Verizon Sprint T-mobile
.5  $60  $60  $69.98  $40
1  $30  $30  $34.99  $30
2  $15  $15  $17.50  $15
2.5  $12  $12  $14  $12
3 $10  $10  $11.66  $13.33
4  $7.50  $7.50  $12.50  $10
4.5  $8.89  $8.89  $11.11  $8.89
6 $6.67  $6.67 $10  $7.50
6.5 $9.23  $7.69  $12.31  $7.69
8  $7.50  $6.25  $10  $7.50
8.5  $7.06  $7.06  $9.41  $7.06
10  $6  $6  $8  $7
10.5  $8.57  $6.67  $7.62  $6.67
12  $7.50  $5.83  $6.67  Not Available
14  $6.43  $5.71  Not Available
15  $6.00  $6
16  $6.88  $5.63
18  $6.11  $5.56
20  $5.50  $5.50
30  $6.17  $6.17
40  $6.50  $6.50
50  $6.50  $6.70

Of course, the above data does not provide a complete view in that it does not take into accounts full overages. Yet, it is interesting to note an interesting pattern: Across any given category, Verizon and AT&T are mostly aligned on the low end of the price spectrum. Another surprising result is that the value players (Sprint and T-mobile) are relatively expensive in comparison to the largest guys. On average, across all plans, a customer will pay $11.19 per Gigabyte on AT&T, $10.79 on Verizon, $16.72 on Sprint, and $13.34 on T-mobile.

Overages

But of course, the prices highlighted above only tell part of the story. In order to get a true sense of full prices, it is probably safe to assume that an individual may go over their bandwidth allocation and pay extra overage fees. While T-mobile has dropped those charges, AT&T and Verizon both charge users an extra $15 per Gb of data and Sprint charges an extra $51.20 for the same amount (Sprint actually is granular in that it charges an extra $.05 per Mb). So, assuming you are taking the overages into account, the per Gb price of mobile bandwidth looks as follows (I’ve excluded T-mobile here as they do not provide any solution that allows for full speed service once you’ve maxed out your bandwidth allocation):

Bandwidth (Gb) AT&T Verizon Sprint
.5 60  $60 $69.98
1 $30  $30  $34.99
2 $17.50  $17.50  $16.67
2.5  $12  $12  $14
3  $10 $10  $11.66
4  $7.50  $7.50  $21.55
4.5  $10  $10  $30.53
6  $6.67  $6.67 $8.33
6.5 $8.46  $8.46  $15.57
8  $8.75  $6.25  $19.05
8.5  $10  $7.65  $22.62
10  $6 $6  $25.48
10.5  $7.14  $7.14  $27.82
12  $7.50  $5.83  $6.67
14  $8.57  $5.71  $13.03
15  $6  $6.33 $15.57
16  $6.88  $5.63  $17.80
18  $6.11  $5.56  $21.51
20  $5.50  $5.50  $24.48
30  $6.17  $6.17  $33.39
40  $6.50  $6.50  $37.84
50  $6.70  $6.70  $40.51

Looking at the data, the net impact of overages is mostly felt by Sprint users. Because of the large number of high bandwidth plans offered by AT&T and Verizon, the chances that a user would fall within an overage range are more limited, which keeps their bandwidth prices relatively stable.

Why variable pricing?

This analysis points to an interesting fact: Each provider looks at bandwidth as something that varies in price much like an airplane seat might do. This begs the question: why? After all, delivering 1Gb of bandwidth should incur the same cost for the first and for the last byte issued. Once the investment has been made in installing and powering equipment, the cost of delivering 1Gb of wireless bandwidth should be relatively stable. And yet, the telecom industry has convinced consumers that it should not be the case.

If you were to average the lowest price each of the big 4 charges for 1Gb of data you would get $11.32. If you average how much they charge across the board, that price rises to $13.01. That price gap is fairly substantial and represents a landscape that is wholly unfair to consumers.

What if, instead of charging different prices for the same bandwidth, the largest carrier just decided to charge a flat rate and maintain that rate no matter how much bandwidth a consumer used? But how much should they charge? If you look at their current price models, it looks like AT&T and Verizon can, in the best case, deliver 1Gb of data for $5.50; Sprint and T-mobile do it for $6.67. So these could be starting points: a flat 1Gb price rate, no matter what. The first company to make that kind of offer would revolutionize the telecom world as it would bring a new level of transparency to the industry. The net result would also be lower prices for consumers, which may result in heavier use and the rise of new usage types. And that could help ignite the next wave of successful technology companies in America.

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3 Comments. Leave new

The critical issue is congestion. Once the equipment is installed and commissioned, the incremental cost of delivering bandwidth in a given location, i.e. in a specific cell, is near zero – until and unless the traffic in that specific cell approaches capacity. At that point, the cost goes up dramatically as the only long term solution is more capital investment (new, smaller cells; new radios; more spectrum; etc.).

Data Caps, i.e. GB per month, are a poor match to actual costs. Back when we had “free nights and weekend” for voice minutes, at least the pricing reflected the costs, i.e. the incremental cost during periods of light usage is zero.

The company that finds the equivalent of “free nights and weekends” for data, will score big.

It’s just another facet of the “privatization” scam. This is what happens when phones, cable, broadband, electricity, natural gas, and other services are “deregulated,” even though they cannot be subject to effective market competition. Such “industries” have one or several “competitors,” the cost of entry is typically measured in billions, prices often move upwards in mysterious unison, and there is no actual market, only daylight thievery.

Why would any phone company build more capacity, when all that does is devalue their product? Profits are highest where there’s a “shortage,” so the incentives designed into in this “market” are exactly wrong. Wrong for us, at least. We have a recent example of how this works in all the states where electricity was recently privatized. Building of new capacity slowed or stopped, prices increased (often dramatically), and in the case of California, you had Enron and the associated scandals, where the criminals involved were so catastrophically, overtly greedy in their variations on this scam that even the Bush administration had to prosecute.

Despite all this, our politics are so debased that we can’t even speak of re-regulating electricity, let alone the cable and phone companies. This is a shame, since the price gouging they engage in constitutes something akin to a tax hike, where the “taxes” go straight to the off-shore accounts of oligarchs instead of even having a chance of paying for a soldier’s weapon or a retiree’s medical care.

Conversely, properly re-regulating these industries would constitute something akin to a massive “tax cut” – my guess, something like $400-800 a year back into millions of American pockets, from cell carrier reform alone. A properly regulated mobile telecom industry would use priority or congestion pricing, since that models costs properly. The current pricing models (based on caps and overages) have been openly referred to by carrier execs as good for “price-up” – a term of art typically heard on telecom industry earnings calls as “unlimited data” was being phased out. You can guess what it means.

Any politician who created a huge windfall for a hundred million Americans, by sticking it to the universally hated cell carriers, would become massively popular. I wonder why no one in Washington has thought of it before? (Don’t worry, that last question was a joke.)

Gear Mentation
October 27, 2013 8:30 pm

The only reason I’d ever get a phone is to use the internet, including
Skype. So I would probably never use it as a traditional phone at all.
Thus, their data caps or lack thereof would be a real selling point. I
would be willing to pay $50 per month for no less than 500 GB data
transfer, and of course they have to raise that every year by a bit to
keep up with data needs. They could throttle speeds during peak hours
down to 300 kbps, then raise them after 10 PM to allow downloading. The
phone could be the internet pipe for other devices. That’s what I WANT,
if anyone could provide.

I have a feeling that providers might think these demands are excessive. However, I think they are the minimum necessary for my needs, and I don’t believe they are impossible. It would be better to serve the customer than the investor, since in the end the growth in customers would serve the investors.

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