Sprint Realizing That Data Caps Turn Customers Off

from the about-time dept

Back when Sprint joined other mobile carriers in issuing a 5 GB limit on its EVDO connection, I was among those who noted that it was disappointing that the company sold me an “unlimited” service, and then changed the terms on me unilaterally. It also changed the way I used my EVDO card, making it significantly less useful and valuable for me. I don’t want to be thinking about how much data I’m using (and it was especially difficult without a detailed system of tracking how much data you were using). I remember once, while traveling, I accidentally left the EVDO connection running over night, and got worried that Sprint might cut me off. It’s just not worth it, and I’ve actually been thinking about dumping Sprint once my contract is up.

Apparently, I wasn’t alone in thinking this and Sprint has noticed. With its new WiMax network, it has stayed away from talking about any caps, and has now admitted that the reaction to the EVDO caps is part of the reason why. They’re afraid that, just as they’re trying to convince people to use the WiMax network, they’ll get scared off by caps. The problem, of course, is that these mobile broadband providers are fighting against themselves on these things. They want to convince the world that these networks are useful — and to do that, you have to show all the cool things that you can do with them. But, if they haven’t really invested enough in the networks, they can actually run into some congestion problems, and so they can’t encourage you to use them too much. Hopefully, the investment into WiMax (or, potentially moving on to LTE) will mean that such congestion problems are mostly a thing of the past, and that it’s not worth implementing caps.

That said, Sprint’s admission of how people responded to the EVDO caps should be a clear warning to ISPs that keep trying to implement broadband caps or metered broadband. Doing so imposes additional costs that you might not have considered, such as the mental transaction costs your users face in determining if it’s even worth using your network. Of course, ISPs should know this already. We already have a detailed case study in that AOL only really took off after it switched from hourly billing to an unlimited flat-rate. Why some ISPs want to go back to make their product less valuable is beyond me.

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Comments on “Sprint Realizing That Data Caps Turn Customers Off”

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PRMan (profile) says:

Re: Re:

Actually, I read that it was the number that separated “normal” users from 24-hour P2P abusers.

5 GB is actually quite a bit, unless you have Netflix HD running over it.

Even the new Sprint plans are unlimited. When I got my new Android phone, they put it on an unlimited everything plan, including text, internet and even TV.

I see a lot of people switching to Sprint lately because they are tired of being nickel-and-dimed by Verizon and AT&T.

AdamR (profile) says:

Re: Re: Re:

5GB is shrinking in value, it will even appear smaller as we move forward. Consider that smart phones are now reaching 1GHZ, and have the following, able to record 720p video, HDMI output, 8 megapixel camera, and allow video calling. Also consider that a lot apps let connect to others and play each other as well MMOPG type games. You can now stream from sling box, stream radio and God forbid you forget and leave one of those running by accident.

If your using a USB key that allows you on to a mobile network its even shrinks faster if you take into account that most software likes to check and install software on its own ie, MS updates, firewall updates, anti virus, spyware, and any other applications you run regularly.

Derek Kerton (profile) says:

Re: Re: Re: Re:

The carriers are aware of the “shrinking” value of 5GB. This point is true, but only because people’s appetite for data is ever-increasing. It is just this fact that has scared carriers into tiered pricing! “If customers use ever-more data, requiring ever-faster networks, how can we keep the prices the same?”

It finally occurred to carriers that the idea of selling “unlimited” based on the assumption that the average user only uses 200MB/mo may not be such a good one over even the short-term. Mobile data consuption is just growing so insanely fast.

By shifting from an unlimited model to a tiered model, carriers will be able to offer differentiated services to different classes of users at different prices. Gamers can pay for a low-latency package. Media junkies can pay for a package that supports some Netflix downloads. Email users can pay less for a modest package. I like this, and it seems to me to be the way a market should work.

Mike argues that ‘mental transaction costs’ are being ignored. No such thing. The wireless carriers have always been VERY aware of that cost, which is why they started with “unlimited” deals since the advent of wireless data…even if there was fine print that contradicted the marketingspeak.

It just happens that the ‘mental transaction cost’ has become less significant than the ‘network expansion cost’. When network traffic expands at exponential rates, the ‘mental transaction cost’ drops in relevance.

Plus, the carriers are starting to get their act together with respect to proactive notification about how much data a customer is using. They have updated web portals with real-time data consumption meters, they have offered on-device meters, they have pro-active SMS and email notifications when thresholds are reached. They can still improve these features, but they’ve already come a long way. This information reduces the confusion the customer previously had, and replaces it with the ability to decide and choose: do I want to download a Netflix movie to my phone and use the last 1GB of my plan…or not, or buy up to the next tier.

Mike’s false assumption in all of this is that the bandwidth is free, and so should be priced at the marginal cost. But the marginal cost of bandwidth is a complicated calculation. It is clear from all of our experiences that there are many times of network congestion where our data slows down even with 5 bars. To offer more bandwidth at these peak times requires additional network investment, thus, more bandwidth (marginal cost) is NOT free.

With the correct assumption that MC > 0, selling an unlimited plan is a risky way for a telco to do business. And that applies whether the network is LTE, WiMAX, or 3G.

I think the opposite of Mike. I think it’s about time that mobile application developers and mobile network users started applying the ‘mental transaction costs’ of considering their usage of a constrained, limited resource. Developers should be aiming part of their creativity at how to do awesome things while just sipping bandwidth. This has the additional benefit of respecting the battery life, too. Meanwhile, consumers should consider how bandwidth-hungry an app is before downloading it. All things being equal a movie showtime app that uses 5kb is better than one that uses 100kb for the same result.

Mike, I don’t have to tell you that econ is the study of how to best allocate scarce resources. Once we all understand that wireless bandwidth IS a scarce resource, we will start to see better outcomes, where one lady’s remote heart-monitoring data is not crowded out by some dude streaming Pandora to his car stereo. OR where that dude CAN stream Pandora to his car stereo, but his data plan will account for it and he will pay a reasonable price for his larger appetite.

OTOH, the reason Sprint is offering this ‘unlimited’ plan is just more marketing. They have a terribly under-utilized WiMAX network, and their time-to-market advantage with “4G” is fading fast versus Verizon’s LTE. Sprint simply doesn’t have any capacity crunch RIGHT NOW. So they employ the kind of short-term thinking that gave us “unlimited*” in the first place.

Who knows. With adequate competition, we may see that there is always a carrier hungry enough to offer “unlimited” even if it is risky for them. Mike knows as well as I that offering a scarce resource in an unlimited model works only so long as the expected consumption of the average user is below the cost, and then if that expected consumption matches real consumption, and then if that real consumption doesn’t grow. Tough constraints.

Benjamin says:

Re: Re: Re:2 Re:

Not really. Technolagy is always gonna be able to catch up therioedically. We evolved from 1g to 2g [talk and text] to 3g [data] to so called “4g” or [much faster data to accomidate for larger data demand] Sprint was very smart to innovate and build Wi max so they COULD offer unlimited data. Its so fast that they can offer unlimited data, becaue there is little fear of overloading, theres so much bandwith. BTW Verizon LTE would barely be faster than Wi Max at their theriedical max. Therioedically, Verizon can do 100 mbps. Wimax at 88 or 92 or 96 mbps [i might be getting HSPA+ mixed in there its slowed than the rest]. Thats theriedically. 3g is obsolete. Technolagy evolved to accomodate our needs that would have been hard to imagine when 3g was at its height. Technology could evolve it to 1000 mbps. I dont see why not. And I bet it will when 4g reaches its peak in its ability to support us.
Your idea of rationing data to help other users is not a good idea. It would be limiting our ability to do everything thats possible on our phones. Limiting what our phones can do is a step backwards. If we were stuck with 3g, and there was no “4g” technology available. Do you think that we would have all the features that our smartphones have today? If anything, the fact that our phones are using more data is because now their downloading higher definition movies. or Better quality songs. Or Higher quality wallpapers. The fact that calls take more bandwith mean our call quality is improving. BUT. Just the way we can support our increasing data appetite, technology can advance to the point where we use less data, and still get the same results.
The idea of carriers rationing data would be very ignorant and stupid when its really technolagy that they should be pushing. Thats like rationing rain when our local water resoviour is depleting. Its unnessessary, and its not the way foward, its only a short term solution.
Companies invest alot of time and money onresearch to make data towers with more technologically advance so they can have larger bandwiths and more range. Where do you think Wimax and Hspa+ and LTE came from. There will be more.
I think sprint was smart enough to build wimax up because they figured out that the more bandwitch our network can allow, the more data our smartphones can use. The more features a phone has, the more data it will use. Since they can handle the extra data, they can market the phone with extra features. That could be GPS, streaming movies, radio, sending pictures, accessing internet on the go.
THE phone with extra features is … overall… BETTER. The Htc Evo was revolutionary, and only now have phones like the thunderbolt and Inspire on other networks have been able to come out, nearly a year after!
ALSO one last thing to remember, these are busniesses. They will only go above and beyond to get ahead of their competators, and when the market demands it. That means that if 4g is fast enough to support all the data increases for the next 20 years, then no company is gonna spend the money to invest in a better network. Simple as that. Am i right?

abc gum says:

Re: Re: Re: Re:

“the period goes before the quotation marks”

– It depends upon the usage, of which you were unclear. In addition, there is a difference between punctuation and grammer. You must’ve slept through school.

“It would be nice if he would at least make some effort to come up with a semi challenging argument to refute”

– Arguments are down the hall and to the left.

“IP is designed to help lazy people”

– I assume your reference to IP was intended to be “Intellectual Property”. I’m not sure that Intellectual Property was designed at all. In fact, it is simply a term used to define several different but related items without having to name each and every one of them. This might be considered efficient by some, but I suppose you think it is being lazy.

Anonymous Coward says:

My sprint rep told me that the cap was removed because it was cheaper for people to use the wimax network over the 3G. They were encouraging use because overall, people would jump on 4G and finish their downloads much faster, so they’d theoretically be on the network less, even with an unlimited data plan.

for those that don’t know, network congestion is an exponential function. As more people jump on, more collisions happen and overhead for managing all those users starts taking up a much larger portion of the bandwidth.

I applaud sprint in their efforts. ATT and Verizon need to get a clue.

Anonymous Coward says:

Re: Re:

Perhaps a compromise between everyone having open wifi and everyone encrypting their wifi. Something like wireless routers with Internet access could have the ability to allow strangers to only connect to some service provider (ie: their ISP or cell phone provider) via an SSL connection. After connecting their devices identify the connector and they get bandwidth through that wireless router through their service provider via an SSL connection. Their ISP or cell phone provider can then compensate the ISP of the wireless router for bandwidth used from the money it makes from the cell phone owner/other ISP.

So say my neighbor has an AT&T internet connection and a wireless router. Say my cell phone provider is Sprint and they offer unlimited Internet connectivity. My neighbor has a special router that enables me to only connect to Sprint’s website (and perhaps the website of other potential providers) via an SSL connection, authenticate myself, and then have the Internet connection flow from sprint, through the SSL connection, through AT&T, through the wireless router, to my phone or computer. I pay Sprint, Sprint pays AT&T. Everyone’s happy.

(this idea is non patentable).

sinrtb (profile) says:

Re: Re: Re:

Or just do what we do on my block, leave the damned thing open. The way I think of it is like this, sure your sending a signal that your connection is open and less ethical people might sit there and watch my traffic getting bits of info from and might possibly steal my Identity (haha jokes on them!). But if they are already getting ready to steal my ID sitting in front of my house, what is stopping them from stealing everything else when they can clearly see me leaving my house.

Anonymous Coward says:

Re: Re: Re: Re:

I think the point is that I don’t want to be held liable if others use my connection for illegal activities and I want as little involvement in the matter as possible. If they have to identify themselves to the server then that weakens the case against me in such situations while enabling me to provide an Internet connection to others.

No says:

Re: Re: Re:

WTF. DATA is not that important that we have to negociate deals with strangers over their home internet. Why do you need your neighbors connection? GET YOUR OWN.
thats like saying your a little baby, and your sitting next to another baby. Your momy gets you the toys when you want it [service provider] The same thing with the baby next to you. BUT you want the toy he has right now and you cant get it RIGHT now. So instead of your mother getting your own, you have your mom negociate with the other babys mom over the toy that his dad gave for the baby. The dad is the home internet provider, the moms are the service providers and the babys are you and your neighbor. EVERYONE is therioedicaly happy. But the world doesnt work that way. Point is Get Your Own. Data is not important enough if you need a system like this to get it everywhere. ITS not that internet providers lack the willingness to cooperate, its that its not a solution. Home internet providers have contracts, That state very very strictly, that you are not aloud to share the internet with anyone ourside of your household. The service they provide cannot be resold. If they find you giving your internet to your neighbors, they drop you.
BUT MOST IMPORTANT. why do you need your neighrbors home connection?!? YOU should be using your own home connection, or better yet, your carrier, because thats what they are there for. Thats why your paying 30$ a month. IF you dont have coverage where you live, WHY THE FUCK DID YOU PICK THAT CARRIER. hotels let you access their wifi for a fee. thats very understandable and does not involve or conflict carriers. their wifi is busniess wifi,and has special contracts with service providers and it is allowed to be resold. other than that. what the fuck are you thinking?

ChronoFish (profile) says:

Re: Re:

I don’t think the issue is that Sprint needs to manage their networks (they do). I think the issue is that the advertised unlimited access and then said that it’s “unlimited” with a cap (i.e. not “unlimited”). Sprint is not the only company who has done this.

I picked up mobile carrier’s brochure the other day and in it “unlimited” carried the caveat “reasonable”. What the hell is “reasonable?”

Mike’s point (from what I got out of the post) was that now that Sprint is trying to move people over to their new network, some still have a bad taste in their mouth over Sprints previous “unlimited” claims – and wonder if it will just be history repeating once the 4G network becomes saturated and once again they’ve promised more than they can offer.


Anonymous Coward says:


Thanks for posting this informative article. For those who are too busy to read the actual article, its contents are summarized and categorized here for your convenience.


Lawyers are:
[ ] Stupid [ ] Evil

Judges are:
[ ] Stupid [ ] Corrupt

Politicians are :
[ ] Stupid [ ] Incompetent [ ] Corrupt

Government is:
[ ] Stupid [ ] Corrupt [ ] Evil

Corporations are:
[X] Stupid [X] Greedy [ ] Evil [X] Lazy

Content creators/owners who do not give away their content are:
[ ] Stupid [ ] Evil [ ] Greedy [ ] Lazy

Laws and regulations are:
[ ] Unnecessary [ ] Retarding progress
[ ] Only there to serve their corporate masters

Lawsuits are:
[ ] Unnecessary [ ] A waste of time

The United States is:
[ ] A bully


[ ] Obviously ridiculous and exceptional action by random person or entity demonstrates that law/policy/etc. is OUT OF CONTROL.
[ ] Ridiculous statement by someone marginally in position of influence demonstrates absurdity of entire area of law.
[ ] Successful celebrity/politician/etc. makes a statement that is {wrong, obviously ridiculous} demonstrating that “old model” success stories are hopelessly out-of-touch
[ ] Profit directly from illegal actions of others is encouraged as long as it can be done with plausible deniability.
[ ] Seemingly conflicting statements or actions in different contexts from different people in the same organization of thousands of people proves that said organization is a dirty hypocrite.
[ ] Laws in other countries are pretty wacky

Category 3: POSITIVE STORIES (Rare)

[ ] A lawyer/politician/judge/celebrity, exceptionally, got something right
[ ] Somebody made some money by giving their stuff away for free
[ ] Story includes caveat that, while this is a good thing, it should not be construed as an indication that the status quo is anything but hopelessly broken
[ ] Story includes note that even though this is a good thing, they could have done it better in some way
[ ] Story includes caveat that this might not work for anybody else, but “it’s an interesting experiment”

Anonymous Coward says:

Re: Re:

Yes, because court cases can’t possibly set precedent and so we must always just ignore bad precedent and trust that the system will work its self out without our involvement.

See, that’s how copyright reached 95+ years, because of this nonsense. and that’s a huge problem that needs to be corrected. It’s not an exceptional case, it’s a bad law that has huge negative impact.

out_of_the_blue says:

Mike again wanting "unlimited" for a fixed price. -- Or not.

This time it’s mere data, and you recognize that no system can actually handle unlimited use: “But, if they haven’t really invested enough in the networks, they can actually run into some congestion problems, and so they can’t encourage you to use them too much.” — The qualifier only matters if there’s enough profit to *make* the needed capacity increase, and it’s still likely to be a constant race.

What you’re saying — that’s an idiomatic expression meaning “an interpretation of extended implications of existing statements” — is that Sprint has simply decided to lie, because if everyone tries to use “unlimited” service, the system will collapse. — Exactly as a subway system would if too many people decide to utilize it on an “unlimited” basis.

As a business practice, I’ve no objection to advertising “unlimited” service so long as it *can* be true for a *tiny* portion of users. That benefits heavy users without extensive bookkeeping for anyone. But if at some point, as evidently occurred previously, service must be limited by practical concerns, it’s not false advertising to have stated “unlimited”.

And it’s certain that Sprint will do so *again* if this new service is popular enough. — And then what’s the point of this piece? You seem to be on both sides of this with “ISPs must avoid caps”, but then admit that network capacity *is* limited. — So I take your point to be that companies *should* lie to induce users into a limited system, skim the profits, then change to practical terms, and repeat. You can then write *another* piece railing about how an “unlimited” service actually has a limit. That seems… weird, but guess that’s tech journalism.

ChronoFish (profile) says:

Re: Mike again wanting "unlimited" for a fixed price. -- Or not.

DSL carriers used to (maybe still do) advertise a “burst speed” which, from my understanding, was the fastest the network would serve you data provided no-one else was online in your neighborhood.

“Unlimited” access can remain true if you don’t tie guaranteed speed rates. The carrier could easily throttle persistent connections that are using using a lot of data all the time. That way the network remains open to the heavy user while being “nice” (In Unix/Linux “nice” command sense) to the users who use much less bandwidth.


Anonymous Coward says:

Re: Mike again wanting "unlimited" for a fixed price. -- Or not.

“no system can actually handle unlimited use”

– Not sure what you are trying to say here. Possibly something like …

No system can handle unlimited use when it was designed for average use and design capacity has been exceeded due to over selling.

“Exactly as a subway system would if too many people decide to utilize it on an “unlimited” basis.”

– Keep digging that hole.

“I’ve no objection to advertising “unlimited” service so long as it *can* be true for a *tiny* portion of users.”

– Apparently there is a market … who knew?

Michael (profile) says:

Re: Mike again wanting "unlimited" for a fixed price. -- Or not.

“This time it’s mere data, and you recognize that no system can actually handle unlimited use: “But, if they haven’t really invested enough in the networks, they can actually run into some congestion problems, and so they can’t encourage you to use them too much.” — The qualifier only matters if there’s enough profit to *make* the needed capacity increase, and it’s still likely to be a constant race.”

Running into congestion problems and putting a fixed limit on ‘unlimited’ are very different.

Think of it like this. You own a buffet that seats 50 people. You advertise unlimited food. When the 51st person arrives, do you tell everyone else they can only have 4 pieces of chicken so customer 51 can have some?

No, you have two options. You wait for one of the other customers to leave and then allow customer 51 to enter, or you make the restaurant bigger.

Sprint is complaining about their success. They have too many customers using too much of their network at once. If they cannot manage that traffic, they need to reduce the customers, expand the network, or break the customer experience. The fact that they chose the third route does not mean the first two may not have made better business sense long-term.

nasch (profile) says:

Re: Mike again wanting "unlimited" for a fixed price. -- Or not.

But if at some point, as evidently occurred previously, service must be limited by practical concerns, it’s not false advertising to have stated “unlimited”.

If service must be charged for, it’s not false advertising to have stated “free”.

If a product is highly toxic under certain circumstances, it’s not false advertising to have stated “safe”.

If it’s necessary to add some fat to the product, it’s not false advertising to have stated “fat free”.

if everyone tries to use “unlimited” service, the system will collapse.

There’s a difference between unlimited usage and infinite usage. Unlimited means I can use it as much as I want. That usage will always be finite. Infinite usage would be downloading an infinite amount of data all the time. Clearly all customers can use unlimited service and it works fine. My ISP has unlimited internet access, as do most others. No caps, no throttling. All the customers have this deal, and the network works just fine almost 100% of the time.

So I take your point to be that companies *should* lie to induce users into a limited system, skim the profits, then change to practical terms, and repeat.

That’s a really bizzarre interpretation. I took it as providers should invest in their networks so they can offer unlimited access, which is what customers really want. Almost the opposite of what you said.

Benjamin says:

Re: Mike again wanting "unlimited" for a fixed price. -- Or not.

You cant use an unlimited amount of data on any smartphone. So you dont need an unlimited network. If your phone needs 5 mbps, you get a network that offers that. Technically, you can use an Evo can use an unlimited amount of data, but its limit is itself.
Its like going into an ALL YOU CAN EAT BUFFET. of course there isnt an unlimited amount of food there. But you cant eat an unlimited amount of food. Get it?
But as long as the All you can eat buffet has enough food to get you stuffed, its served it purpose. From a users standpoint, you cant be anything but pleased. Thats all the buffet was striving to do. Thats all carriers are trying to do.

ShellMG says:

Babysitting internet usage is a full-time job. I had more than my fill of experience in that field when we had Wildblue. Since we’re rural cable of fios will NEVER reach us so our options are few, and these damn caps make internet service more of a headache than anything else.

If you’re a single user with an aircard, it probably works fine. But what if you’ve got two teenagers who are home for the summer? You can ship them off to the library only so often, and I’m sure Wendy’s is getting sick of them ordering budget burgers and camping out on their wifi all day. Monitoring usage among four people is IMPOSSIBLE and 5G caps just don’t work. You start to play games with yourself, like trying to shut off ads before they load, asking “do I really need to look at that site? Do I really need to download that music file or read that article?” It leads to a pattern of constant self-rationing that will make you crazy. And for $60 a month? That’s a payment on a root canal.

I’m the holder of a precious Alltel grandfathered contract with VZW. NO overcharges. NO throttles. NO pain and suffering, gnashing of teeth when the bill comes. WiMAX just came through my area and I’ll suffer slower speeds before I deal with a cap again.

jsf (profile) says:

I don’t have a problem with there being caps on data plans. What I don’t like is that they lie about plans being unlimited that do have caps, the fact that they change a plan sold as unlimited to capped and that they charge ridiculous prices for smaller cap levels.

If they want to cap things then cap them and admit it up front. If they want to charge by the byte then do that but don’t make me pay 8 times more per byte because I only want to have a small plan.

hxa7241 says:

Why caps seem to make some sense

I think ISPs are driven toward caps, and are not just doing it for no reason.

It all follows from network capacity being a limited resource. (Which I expect is a very safe assumption in most cases.)

If everything is ‘unlimited’ for everyone, most people will be paying more than they should. Then those lighter-users can look around, see another ISP that *is* selling capped services, and find they can get a cheaper deal there.

Some kind of segmentation of price seems sensible, given the circumstances. But maybe another way of doing it would be better.

Caps are off-putting, but it seems for mostly psychological reasons. Perhaps if they remove any penalties and change to more of a ‘finding your personal usage level’ idea . . .

(. . . at least, until the network is practically infinite.)

(and until then, they certainly need to stop saying ‘unlimited’. I don’t understand how retail law wouldn’t classify that as blatant lying.)

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