Verizon Communications Inc. said it would start limiting video quality for all customers across its network, months after the No. 1 U.S. carrier by subscribers launched unlimited data plans.
The video throttling technique, which is also employed by rival carriers, came alongside new data plans that effectively raise the price of Verizon's current unlimited data offer. The company said it would limit video qualities for both users of its unlimited plans as well as customers with monthly amounts of data.
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Verizon said starting Wednesday it will sell an unlimited data plan that doesn't stream videos in high definition, starting at $75 a month for one line, alongside an unlimited plan with HD quality video, starting at $85 a month for one line. (Both prices include discounts for enrolling in automatic payments and paperless billing.)
The tiered unlimited plans illustrate how wireless carriers have struggled to make money off increased data usage. For years, carriers primarily sold capped plans that charged per gigabyte of usage. But consumers, struggling to understand what constitutes a "gigabyte," flocked to unlimited data offers.
When Verizon brought back an unlimited data option in February, the company offered unlimited data, including HD quality video, for $80 a month for one device. Both T-Mobile US Inc. and Sprint Corp. had been targeting Verizon's customer base with unlimited offerings, but both only allowed for lower quality video streaming.
For Verizon customers on unlimited data plans without the HD video option, which costs $75, the content will be streamed at 480p DVD resolution on phones and 720p on tablets. The company said it would limit video quality for all existing customers as well as those with the HD video unlimited plans to 720p for phones and 1080p for tablets.
"We're doing this to ensure all customers have a great experience on our network since there is no significant difference in quality on a smartphone or tablet when video is shown at higher resolution," the company said on its website.
While the reduced quality will significantly reduce the load on Verizon's network, it is unlikely most customers will notice the lower video quality. Typical smartphone screens aren't large enough to show a major difference. Video throttling won't occur on Wi-Fi connections.
Verizon says its network is performing well. Rather than spend billions to acquire rights to additional airwaves, in recent years it has installed more cellular antennas closer to the ground with a smaller footprint, so that fewer customers connect to each one, lowering congestion.
Most unlimited plans come with a soft-cap that reduce speeds on congested cell sites after using about 22 gigabytes or more data during a billing cycle. But customers with the lower-cost unlimited Verizon plan will be "de-prioritized" at all times, meaning customers could face reduced speeds at any time. Verizon says those reductions vary widely but shouldn't be noticeable.
Walt Piecyk, an analyst at BTIG research, said the latest changes raised questions about Verizon's network. "Is Verizon's price increase a sign of dwindling network capacity or a path to revenue growth?" he wrote in a research report.
T-Mobile has also raised prices slightly recently. Taken together, the moves might signal the wireless industry isn't as competitive as people think, Mr. Piecyk said.
Recent analysis from independent network companies have offered mixed results on Verizon's network. A report from OpenSignal found Verizon's network speeds have slowed slightly following the launch of unlimited. Another firm, RootMetrics, still rated Verizon's network the fastest and most reliable.
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(END) Dow Jones Newswires
August 22, 2017 17:55 ET (21:55 GMT)