Verizon (NYSE: VZ) has built its business on charging more for its wireless service because it offers the best network.
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That's a claim that has generally been proven by third-party research including the company coming in first on the recent RootMetrics Mobile Performance in the United States report. Verizon has taken top honors with RootMetrics eight straight times on the twice-annual report, something the company has celebrated in television commercials.
A second widely accepted independent report from OpenSignal, however, has shown somewhat different results. In the February version of the company's State of Mobile Networks study, Verizon and T-Mobile (NASDAQ: TMUS) were in a virtual tie, with each scoring first place in four of the eight overall categories.
In the latest OpenSignal report, released Aug. 2, things have changed. T-Mobile has moved into the top spot, taking first place in all eight categories.
In February, Verizon began offering unlimited data plans. That, according to OpenSignal, likely caused its network performance to get worse:
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Six months after reintroducing unlimited plans, Verizon and AT&T experienced a marked decline in 4G speeds in our tests. The impact appears to have hit Verizon the most. Its average LTE download test fell 2 Mbps to 14.9 Mbps in the six months between reports.
The result, as well as the reason, is something T-Mobile CEO John Legere is likely to be very happy with. He has periodically tweeted that Verizon would see network degradation due to adding unlimited plans, and T-Mobile even recently launched a promotion, #GetOutOfTheRed, aimed at getting Verizon customers to switch.
"After desperately launching unlimited, Verizon's network choked -- while our network speeds surged," said Legere in the press release touting the new offer.
It's not just Verizon getting worse
While Verizon adding unlimited plans has clearly taxed its network, T-Mobile has also gained by improving itself. Legere's company has more 4G availability than its rival, albeit only a tiny bit more. OpenSignal testers were able to find a 4G signal on T-Mobile 90.9% of the time compared to 89.8% of the time on Verizon. In addition, T-Mobile had the fastest speeds among those tested with LTE download speeds of 17.5 Mbps and overall speeds of 16.1 Mbps.
This is a big win for T-Mobile that certainly backs up Legere's boasting. It's also a narrow one when you go beyond the national rankings and look at more local results.
"T-Mobile may have had the upper hand in our nationwide metrics, but in our city analysis, Verizon and T-Mobile were in a heated battle for dominance," wrote OpenSignal. "One of the two operators either won outright or tied for our 4G speed and availability awards in all of the 32 markets we examined."
What does this mean?
Consumers no longer need to pay more for Verizon in order to have access to a top-tier network. That's very bad news for a company that's built its business around charging more in exchange for offering what, for a long time, was a better product.
T-Mobile, led by Legere, has relentlessly attacked Verizon's business model over the years. You can argue that the only reason the company added unlimited plans as a choice was because T-Mobile made that a consumer expectation by having all its plans include unlimited data.
Now, though it will take time for consumer perception to catch up, Verizon is just another quality wireless carrier that charges more than a key rival. That should lead to more consumers being willing to change carriers.
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Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.