Karma launched a Neverstop plan that promised unlimited 5 Mbps data for $50/month. On Thursday Karma cut Neverstop's maximum data speed from 5 Mbps to between 1.5 and 2.5 Mbps. The change angered many Karma Neverstop users who had just paid $150 for Karma's proprietary hotspot on the basis of Karma's promise of "no caps on the amount of data you use at 5Mbps". To its credit Karma is offering full refunds to dissatisfied customers.
Karma claims to have been surprised that many customers were using Neverstop as a replacement for DSL or cable wired broadband services. If they were truly surprised they must have been incredibly naive. For many markets wired broadband connections are slower than 5 Mbps or cost more than $50 a month. It seems natural that those overcharged and underserved by wired broadband ISPs would jump at the chance to get unlimited data at $50 a month.
I don't now how much Karma is paying Sprint for data but I suspect it's at least $2/GB, probably more. Why do I say that? The cheapest pay as you go mobile data in the US is Google Fi at 1¢/MB or $10MB. The cheapest use it or lose it Sprint network mobile broadband is Boost Mobile's $50/month for 10 GB or $5 per GB. It seems unlikely that Sprint would wholesale data to Karma for less than 40% of their lowest retail price. That means Karma's break even point is 25 GB per month or less. It doesn't take many people using 150 GB per month (AT&T's DSL cap) to make Neverstop unprofitable.
Unlimited mobile data is a myth. The throttling of Karma Neverstop represents the latest unlimited mobile broadband to be capped throttled or discontinued. Virgin Mobile capped their unlimited broadband offerings in 2013. H2O cut users off for using too much "unlimited" data and eventually discontinued their unlimited plan entirely. T-Mobile and Sprint's unlimited data phone plans have limits on hotspot use.
The simple truth is that mobile data is too expensive to serve as a replacement for wired broadband. Mobile bandwidth is constrained by the amount of the radio airwaves, or spectrum, available to mobile operators. There's only so much spectrum and because of supply and demand it's expensive. The carriers currently have an average of about 20 Mhz of spectrum in most markets and it's not enough at busy times in urban areas. The FCC has been moving government users and TV channels around to free up more spectrum for mobile use. Last year, the FCC auctioned off 20 MHz of additional nationwide 1700 Mhz spectrum for over $18 billion. AT&T and Verizon got the lion's share of it. This year a bunch of more desirable 600 Mhz spectrum is up for grabs. All the major operators and most of the regional ones will be bidding. It won't go cheap, T-Mobile alone says it's willing to spend up to $10 billion for a piece of it.
The new spectrum coming on line will increase mobile broadband capacity modestly but there is no way that today's mobile technology can substitute for wired broadband on a large scale. Wired capacity can be increased indefinitely by adding more wires or fiber optic cables. When mobile runs out of spectrum, capacity growth ends. It's likely that mobile broadband will always be more expensive per MB than wired.
Unfortunately wired broadband in the US is a disgrace. Thanks to limited competition the US has some the slowest broadband speeds and highest prices in the developed world. That's a separate problem but don't look to mobile for a solution.
Image by Joe Ravi CC BY-SA 3.0