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Here's Why We Don't Have Unlimited Mobile Broadband

In November, Sprint mobile broadband MVNO 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

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25 comments:

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  1. Dennis....in total agreement. Good info on the sad state of wireless data

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    1. Correct, but as a consequence of the lack of wired infrastructure many of us are forced to tether these "unlimited" offerings. So, I hope they continue even if it means switching providers every few months.

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  2. Shame the FCC doesn't move to make higher strength Wi-Fi connected with wired broadband in most cities and towns a government priority especially if there's an interest in keeping the country moving toward a higher technology economy

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    1. "government priority " lol

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    2. Higher strength is exactly the problem. The larger the cell, the fewer simultaneous users can be served. A future solution is "microcells", like Bluetooth and other personal area networks, which allows a single user to interfere with approximately zero other users, allowing the same frequency channels to be used simultaneously by everyone, everywhere.

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  3. In other words, "this is why we can't have nice things."

    But it's not entirely as much of a spectrum shortage as it is a lack of investment in alternatives, most of which have been feasible (and yet ignored) for over half a decade.

    http://stopthecap.com/2015/03/09/verizon-wireless-admits-spectrum-isnt-the-holy-grail-there-is-no-wireless-spectrum-shortage/

    http://s4gru.com/index.php?/blog/1/entry-160-spectrum-shortages-why-its-happening-and-what-can-be-done/

    https://techpinions.com/spectrum-the-shortage-is-a-crisis-but-not-serious/13693

    What's more, thanks to the government privatizing (instead of simply leasing) previously pooled airwaves, these corporate fiefdoms can use their government-granted monopoly to hoard spectrum so that competitors (as well as customers!) can't make use of it.

    Artificial scarcity indeed.

    The worst thing the government ever did was sell spectrum rights instead of simply leasing portions of pooled spectrum to everyone who wants a piece of it.

    They did something vaguely similar with wired networks, which is what created the small fiefdoms (and resulting lack of competition) everyone loves to hate.

    Heck, we might as well start calling wireless providers "the cable companies of tomorrow, today."

    Anyway, the public good is never served by the government granting spectrum monopolies without any "use it or lose it" safeguards.

    Still, none of this is Karma's fault. They're just as screwed as the rest of us by the government's complete mishandling of wired telecommunications.

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    1. Oh, I forgot to mention the fellas at the freakin' FCC.

      Those good old boys also have a hand in the economic unreality of unlimited internet.

      http://www.forbes.com/sites/ciocentral/2012/03/23/the-solution-to-the-wireless-spectrum-shortage-more-wires/

      That was 4 years ago, and the FCC still can't do anything right.

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  4. Dennis,

    Every so often Karma will run a promotion giving you 2X the data for the same price. So you can get 20 GB for $99 instead of 10 GB. That comes out to $4.95/GB. So I would assume that's pretty close to Karma's cost for the data from Sprint.

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  5. Spectrum wouldn't be much of an issue if regulators made it easy to deploy small cells. If we could put an antenna on every telephone pole there would be plenty of bandwidth for a nationwide wireless networks. There is an abundance of high-band spectrum (e.g. 3ghz) that could be used for low-cost broadband if sites could be deployed easily.

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    1. "Spectrum wouldn't be much of an issue if regulators made it easy to deploy small cells"

      Or big cells. There's frivolous lawsuits all over that harass people for putting up cell towers on their own property.

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  6. "Here's why we don't have unlimited mobile broadband at artificially low prices" you mean? At&t and Verizon will gladly sell you hundreds of gigabytes for a thousand dollars a month.

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    1. We pay too much for broadband in the US, actually. Way too much. Just compare what we pay here to what is paid in other countries. It's eye-opening. The big 4 etc are gouging us.

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    2. Paging Jimmy McMillan

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    3. Of course we pay "the most". Price rarely reflects costs, and only what people are willing to pay. That few people elect for prepaid service when cost savings of 50% or more are easily achievable vs postpaid service, you realize that having that "consumer identity" in the form of having the latest flagship handset and "premium" branded service is more important than cost alone. It's a vanity, luxury, status symbol.

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    4. The latest flagship handsets DO work a lot better. But if you have someone jonesing for an iPhone 6s just because it comes in "rose gold"... for them, you are correct.

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  7. The very people who want large amounts of cheap data are not willing to pay the up front cost to build the infrastructure their use demands.

    But why should the carriers invest in serving that high use minority when the government has demonstrated they'll interfere with the carriers revovering their investment from those users?

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  8. There are ways to ease the pain. I changed the PLAYBACK settings in my Netflix from AUTO to LOW. Was able to watch 25 episodes of Breaking Bad on 5GB of data from TMO. Did the same with Youtube account playback settings, check the box - I have a low bandwidth connection, never send HD. For Hulu, it has to be done manually for each movie. Wish I could set Youtube to default to 240p. I avoid HD.

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    1. I watched a 240p video once. It was so long ago that I can't even remember the quality.

      Just to remind myself, I went and watched another.

      It was terrible. Everything was to make out the details or tell what was what.

      Never again.

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    2. Whoops, meant to say that "Everything was blurry. It was hard to make out the details or tell what was what."

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  9. Karma was foolish to think that the Neverstop plan wouldn't attract heavy users intent on using it for home broadband. Even at 2-3Mbps heavy users can, and probably will, make the plan unprofitable for Karma.

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    1. Karma thought they could detect the kind of home streaming prohibited by the tos. Hackers got around their controls.

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    2. Do you know this for sure? Hacking?

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  10. "Wired capacity can be increased indefinitely ... When mobile runs out of spectrum, capacity growth ends." -- This is NOT true. Mobile can grow capacity by adding new towers at new locations. Even with the same 20MHz sub-1GHz band, by reducing cell size and thus number of users per cell, the per user bandwidth can be increased. Not to say there are very empty high bands (3GHz, 6GHz) feasible only for small cells.

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    1. So why don't you step in and get rich doing that?

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  11. Karma have decided that their final solution is to go back to 5 mbps, but cap at 15 GB/month. You get throttled speeds after 15 GB, "suitable for email and messaging", which sounds like 128 kbps to me.

    It's still a pretty good deal for $50/month, but only marginally so.

    Party's over, folks...

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