T-Mobile (NASDAQ: TMUS) CEO John Legere loves tweaking Verizon (NYSE: VZ) and does so frequently on social media. He has relentlessly used his popular Twitter account (4.46 million followers) to go after the rival carrier. His Twitter bio notes that he is focused on "scaring our competitors!" Legere recently has pushed the idea that Verizon's network has struggled under the weight of offering unlimited data.
The outspoken, sometimes outrageous CEO has shared images of his own company's analysis of third-party speed test data showing Verizon offering slower download speeds than T-Mobile's. That data also shows Legere's company on a steady upward trend while key rivals Verizon and AT&T move in the opposite direction.
Continue Reading Below
Legere tweeted this on Aug. 22 when Verizon introduced new unlimited data plans:
He also linked to a report on The Verge about Verizon's new tiered unlimited plans. There's some validity to Legere's claims since the new plans do throttle video to differing degrees depending upon which offer customers sign up for. It's hard to see that as anything other than an attempt to manage network traffic, which is not in itself a bad thing, but it does give at least a suggestion of validity to Legere's claims that "Verizon's network is crumbling from offering unlimited."
What did Verizon do?
Verizon split its consumer unlimited plans into two tiers. The first, Go Unlimited, offers one line for $75, two for $130, three for $150, and four for $160. That plan lines up pretty well with T-Mobile, which offers one line for $70, two for $100, three for $140, and four for $160. In all cases T-Mobile is actually cheaper because its plans include taxes and fees.
Verizon also offers the higher-end Beyond Unlimited. That service, which adds free calling, text, and data in Mexico and Canada as well as other perks, starts at $85 for one line, $160 for two, $180 for three, and $200 for four.
The caveat with Verizon's new plans is that they throttle data when it comes to video, but at different levels. Go Unlimited "offers DVD-quality video (SD on phones (480p) and HD on tablets (720p)), while video on Beyond Unlimited is HD for phones and tablets (720p for phones; 1080p for tablets)," according to a Verizon press release.
T-Mobile's regular unlimited plans also typically stream video at DVD-quality 480p rates. The carrier also offers its higher-end "One Plus" service with HD streaming video for an extra $10 a month per line. Both carriers offer 3G speeds for mobile hot spots on their cheaper plans. Verizon's higher-end offer includes 15GB of 4G LTE streaming while T-Mobile's includes 10GB.
What does this mean for customers?
Competitive pressure that drives down prices benefits customers. Verizon has built its business on having the best wireless network and Legere has been pushing the idea that the added traffic from offering unlimited data has helped cause that to no longer be the case.
There's statistical validity to the idea that Verizon's network has suffered as one of two widely accepted industry reports, OpenSignal's State of Mobile Networks Report, showed that T-Mobile now had the best network. The second study, from RootMetrics, however, still ranks Verizon on top, though it does show T-Mobile improving.
T-Mobile has essentially gone after Verizon for offering the same unlimited plans it offers, albeit at slightly higher prices when you factor in taxes and fees. Legere sees the new pricing tiers as dual admissions of weakness. First, Verizon is trying to lessen traffic on its network by throttling video when it previously did not do that. Second, by lowering prices, the carrier has seemingly admitted that its network alone may not be enough to win over or keep customers.
It's hard to see an upside to any of this for Verizon. The company is being forced to lower prices by a gleeful, upstart rival. The winners here are Legere, whose company has led the industry by adding more than 1 million new customers every quarter for four years, and consumers, who have seen prices fall with no end to that in sight.
Find out why T-Mobile US is one of the 10 best stocks to buy now
Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. (In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the market!*)
Tom and David just revealed their ten top stock picks for investors to buy right now. T-Mobile US is on the list -- but there are nine others you may be overlooking.
*Stock Advisor returns as of August 1, 2017
Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter and Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.