To throttle data or not to throttle: Sprint straddles the fence

Mike DanoThe data explosion finally appears to have caught up with Sprint Nextel (NYSE:S). The carrier today announced it will increase the cost of unlimited data by $10 per month for smartphone users. The news comes on the heels of Virgin Mobile USA's announcement that it will begin throttling the data speeds of its mobile broadband customers.

It appears that Sprint is doing everything it can to avoid metered, usage-based charging schemes.

Sprint currently charges its 3G mobile broadband customers (those who access the Internet via a laptop routed through a USB stick or MiFi device) an overage fee of 5 cents per MB after they pass their initial 5 GB monthly data allotment. Other Tier 1 carriers levy similar charges--for example, Verizon Wireless (NYSE:VZ) charges $10 per GB for subscribers who use more than their 4G LTE data allotment.

However, some carriers have turned to speed suppression as a method for curbing subscribers' data hunger--thereby saving subscribers the hassle of counting MBs. Clearwire (NASDAQ:CLWR), T-Mobile USA, Leap Wireless (NASDAQ:LEAP)--and now Virgin--all have eschewed overage charges in favor of throttling the data speeds of subscribers who reach specific thresholds.

(It's worth noting that Clearwire doesn't prescribe a specific data allotment. "The term ‘unlimited' means that we will not place a limit on how much data you upload or download during a month or other particular period, however, it does not mean that we will not take steps to reduce your data rate during periods of congestion or take other actions described in this Acceptable Use Policy when your usage is negatively impacting other subscribers to our service," the company said in its terms of service. Sprint resells Clearwire's WiMAX service under the Sprint 4G brand.)

Virgin's move toward throttling indicates Sprint has the capability to go either way: Virgin offers 3G service via Sprint's network, and if Virgin can offer throttling services, then Sprint probably could too. Such throttling would fit in with Sprint's marketing push for unlimited wireless services, as highlighted by its "Simply Everything" plans. However, it appears that, for the time being, Sprint has elected to cash in on the revenues it likely derives from the overage fees it imposes on subscribers who venture across its 5 GB data threshold.

But don't worry, data-hungry Sprint subscribers: "You can check your usage online anytime. Sign into www.sprint.com/mysprint and click on see all usage," according to the Sprint website.

As Recon Analytics' Roger Entner pointed out today, carriers that hoped to spark the mobile data market with unlimited data plans are now furiously backpedaling in the wake of an explosion in data usage. It looks like Sprint is trying to separate itself from the pack by avoiding charging on a per-megabyte basis and instead leverage other tricks, such as raising the price of its unlimited smartphone data service or, in the case of Virgin, throttling users' data speeds.

It's unclear which paradigm users will ultimately favor: the per-MB price, throttling or some other scheme. I expect we'll see plenty more pricing schemes in the months and years ahead. --Mike

Suggested Articles

DT will now hold approximately 43% of the New T-Mobile shares as opposed to the 42% it previously would have held.

Intelsat and SES part ways as Intelsat tells FCC that the C-Band Alliance will not be relevant anymore.

Dish Chairman Ergen said the towers that T-Mobile will decommission as part of the deal “are a big part of things that we're going to need."