The Internet rumor mill suggests that Sprint will be getting the iPhone 5 on the 7th of October.
The carrier expansion is an inevitable evolutionary step, but the far more interesting speculation is that Sprint will be extending its unlimited voice-data plan to the iPhone 5 as well. This will create a unique value proposition, or perception, depending upon your view. How badly do we want an all-you-can-eat voice and data plan?
There is a time when rumors turn the corner to become seriously credible, which is the case here. According to those rumors, Sprint will be getting the iPhone 5 more than four years after the launch of the original iPhone with AT&T and more than three years of exclusivity for AT&T. In order to attract attention, Sprint is apparently planning to offer its $99.99 "simply everything" all-you-can-eat data plan for the iPhone 5. This is occurring at a time when we are accustomed to tiered data plans that are sold with borderline deceptive marketing pitches. For example, a 200 MB plan that is priced at half the price of a previous flat fee plan is touted as being in the best interest of the iPhone user and will cost less in the end. (Let's be honest. The purpose of the tiered plan is that we frequently exceed it and pay more, all the while feeling guilty about being a burden on a carrier's network capacity.)
Just like AT&T and Verizon before[l1] it ended their plans, Sprint is expected to be using an unlimited plan as a teaser that may be phased out as soon as the initial enthusiasm wears off and everyday business sets in. I am wondering how much do we care about unlimited plans, and does Sprint have a chance to compete with AT&T and Verizon simply by offering an unlimited data and voice plan.
Perception: All-you-can eat deals are a good deal
There is a fantastic Japanese sushi place in our area that offers a $21.95 all-you-can-eat buffet that includes three dozen different types of sushi as well as oysters, crab, octopus, frog legs and at least a dozen dishes I am pretty sure I will never touch. I go there because of the sushi and can't help having a strange feeling of having overspent every single time I leave the place. Unlimited deals are always associated with the perception of a good deal and your personal conviction that such deals will save you money. I tend to believe that the sushi buffet place saves me money, but I am not convinced since I am not eating the potentially "expensive" food that would give me the unquestioned perception of a good deal. I return at least once a month anyway, as I like the food and know what I will be spending every time I go there. I don't particularly enjoy financial surprises.
I don't think that a wireless unlimited plan is very different from the unlimited food scenario. An unlimited data plan does not guarantee to save you money and, depending on your needs, there may be limited deals that are cheaper, but you know the amount that you will spend every month. There is a certain freedom of choice that comes with a flat fee deal. You don't care how much data you consume, and that peace of mind may be worth a few extra bucks every month. I am using a crippled T-Mobile 5 GB data plan right now and just checked for the sake of this article what my data usage is – about 800 MB per month. I probably could get a better deal somewhere else, but I believe that there is value in having the choice to use as much data as you want without having to fear that your carrier will surprise you just because you got stuck watching YouTube videos and you forgot that you weren't on Wi-Fi.
The Unique Case of the iPhone 5
Unlimited data plans and the iPhone have a very special relationship. I remember complaining about the original iPhone and AT&T's moody network connection back in 2007. In my review, I concluded that the iPhone and its capabilities were at least two years ahead of AT&T's network. The description of "unlimited" originally was a very euphemistic word as the connection was the limiting factor. Even if you were downloading data continuously, you still would have been in the single-digit GB range per month. If you ended up at public events that had people tweeting and perhaps even blogging from their phones, the connection was frequently unavailable and you did not use data anyway.
An interesting fact about the iPhone is that in 2005, Intel envisioned it to be the reference model of a "mobile Internet device." It was a device that we could carry with us at all times and stay connected to the Internet.
There is no other product that exemplifies mobile Internet usage as much as the iPhone. The iPhone's software platform lives and breathes by being connected to data. Yet the phone's innovative power seems to be constrained by tiered data plans. For example, Facetime should be working over cellular networks but does not. Verizon recently advertised a 4G Android phone as being great for streaming Netflix movies via its cellular connection. Try that via a tiered plan and you may be spending your retirement fund at 200-500 MB per movie.
Common sense would dictate that a mobile Internet device needs an unlimited data plan to function according to its purpose. There may be a portion of unreasonable excessive use by some users, but since when is a data volume of 10 GB per month for $80 (at Verizon) a reasonable offer? There has to be some middle ground. The iPhone (and Android phones as well) is clearly moving toward much more data-intensive services, and I don't believe that the current price level of tiered data plans can be sustained in a market with healthy competition.
The Sprint deal: $100
One would think that Sprint should have a significant competitive advantage with an unlimited voice data plan for $100 per month, as far as perception is concerned. For example, with AT&T it costs $105 for 450 voice minutes along with 4 GB of data and text messaging. Verizon charges $110 for 450 voice minutes, 5 GB of data and 5,000 text messages per month. T-Mobile’s rate is $110 for 500 voice minutes, 10 GB of data and text messaging. However, if you consume fewer than 450 voice minutes and less than 2 GB of data per month, you only spend $85 with AT&T, $90 with Verizon, and $70 with T-Mobile. Sprint, along with the iPhone 5, may also be offering its unlimited data/limited voice plans, which include, for example 450 minutes of calling and unlimited data for $70 per month.
The bottom line is that you should know how much voice/data you actually use, especially if you are on a budget. Nielsen says that iPhone users consume, on average, 492 MB of data while Android users consume 582 MB of data. If you aren't downloading videos, this data volume is very realistic for an average user, but remember that innovation in this space will cause the average data usage to go up over time. If you are using 500 MB today, you may actually be using 1 GB a year from now. Be aware of that and choose your data plan wisely.
Can Sprint afford an Unlimited Plan?
Of course, unlimited data would be the best solution. Use whatever data you want without worrying about it. Whether this plan can be successful for Sprint will largely depend on the iPhone 5 itself. What new types of data services will be available? Will Sprint allow Facetime over cellular?
This may also cause Sprint to attract heavy data users who place a significant load on its network, so it may have to think about tiered plans in the future as well. Offering only the unlimited plan may actually put Sprint at a marketing disadvantage, and there could be the perception that the Sprint iPhone 5 is the most expensive option out there. Sprint may want to think about tiered data plans right away and attack its rivals head on. Underbidding AT&T by $5 per plan and keeping an unlimited plan may be the best value option available for consumers. That should get things moving.
I strongly believe that current data limits are too low and the cost is too high – high enough to suggest that we will be seeing yet another digital divide scenario. The longer Sprint can offer an unlimited data plan and the better the deal appears to be for the consumer, the better for all wireless subscribers.
And yes, we should care.