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Competition just forced Verizon to offer an unlimited data plan

Verizon To Purchase AOL For 4.4 Billion Photo by Joe Raedle/Getty Images

Verizon had good news for consumers this weekend, as it announced a new plan: unlimited talk, text, and data for just $80 per month.

This is probably not a move Verizon wanted to make — since 2011, it’s been charging customers by the gigabyte. But Verizon’s hand was forced by its smaller rivals Sprint and T-Mobile, which introduced unlimited data plans last summer (albeit with some restrictions).

It’s just the latest sign that competition is working in the wireless industry. It vindicates the Obama administration’s 2011 decision to block AT&T from acquiring T-Mobile — a move strongly supported by liberals.

At the same time, conservatives and libertarians argue that the consumer-friendly evolution of the wireless market supports their case against further regulation of the wireless business.

“Competition is clearly working,” said Berin Szoka, president of the free market advocacy group TechFreedom. “And competition between the carriers checks the ability of any one of the carriers to exercise market power.”

Both sides of this debate have good points. Liberals are right that pro-competitive regulation is important for a healthy marketplace. At the same time, conservatives have a point that robust competition weakens the case for the Federal Communications Commission to micromanage how wireless providers run their networks.

The Obama administration preserved a competitive wireless market

In 2011, T-Mobile was the wireless industry’s smallest and weakest player, and advocates of the merger warned that the company couldn’t survive on its own. But after the government nixed AT&T’s takeover attempt, T-Mobile defied its doubters. It developed an “uncarrier” strategy designed to win over customers by blowing up much-hated industry practices like two-year contracts and restrictive data caps.

The strategy paid off for T-Mobile, which passed Sprint in subscribers in 2015. In the process, it dragged the rest of the mobile industry in a more consumer-friendly direction. All four wireless carriers dropped two-year contracts. And wireless plans have gotten cheaper and more generous, with fewer restrictions on what customers can do.

Phillip Berenbroick, general counsel of the left-leaning group Public Knowledge, argues that T-Mobile deserves a lot of the credit for this. “They've lowered prices across the board,” he told me. “They were the innovator in offering an unlimited plans.”

Now we may be moving to unlimited data as an industry standard. AT&T is now the only wireless carrier not to offer a standalone unlimited plan (you can get unlimited data from AT&T if it’s bundled with a DirecTV account), and it’s going to be hard for the company to hold out when all of its competitors are offering unlimited data plans.

Competition might make wireless network neutrality rules unnecessary

When Obama’s FCC passed its first round of network neutrality regulations in 2010, it included a carve-out for wireless services. At the time, wireless data plans were a relatively new service, and the agency wanted to give the industry freedom to develop without burdensome regulation. Advocates for exempting wireless providers also pointed out that competition could provide an effective check on wireless company misbehavior: A wireless provider that blocked customer access to certain websites would risk losing those customers to competitors.

The courts struck down the 2010 net neutrality rules for reasons that had little to do with the wireless carve-out. And by the time the Obama FCC passed its second round of regulations in 2015, there was a lot more grassroots enthusiasm for strong regulations. So the new regulations applied to wired and wireless networks alike.

It’s an open question whether extending these rules to wireless networks has been a good idea. Interestingly, T-Mobile — widely seen as the most innovative and customer-friendly of the four national carriers — has faced frequent criticism for programs that arguably violate network neutrality rules.

Take T-Mobile’s BingeOn program, for example, which exempted video streaming from customers’ data caps while also throttling video streams to prevent them from overwhelming T-Mobile’s network.

On its face, this seems to violate network neutrality by treating different kinds of content differently — an argument the Electronic Frontier Foundation made last year. At the same time, the benefit to consumers seems pretty obvious: Many users will be happy to accept somewhat lower-quality video in exchange for never having to worry about video streaming busting through their data limits.

Last year, the FCC started investigating BingeOn and similar policies adopted by other wireless carriers to see if they violated network neutrality. That investigation may become moot if the industry shifts toward unlimited data plans.

But Berenbroick isn’t convinced that competition among wireless providers makes other regulations unnecessary. He worries that without network neutrality protections, wireless companies could block websites they don’t like or subtly tilt the playing field in favor of their own services. He points to a recent FCC decision finding that AT&T violated network neutrality when it decided not to count the streaming service of DirecTV (which AT&T owns) against customers’ data caps.

On the other hand, this kind of thing seems much less serious than the apocalyptic rhetoric of the 2015 network neutrality debate suggested. At most, AT&T is going to be able to give its own services a small leg up against competitors. And that advantage could go away entirely if AT&T is forced to adopt unlimited plans like the other major wireless providers.