Verizon recently pulled an unpopular U-turn over streaming video, introducing new restrictions to its unlimited plans that limit streaming video to 480p standard definition. Analysts pointed the finger at reports of congestion on Verizon’s network, with the working assumption being that Verzion introduced video throttling to keep its network running with no problems.
But the real answer might be something much simpler: Money.
During a recent interview with CNBC, Verizon CEO Lowell McAdam said that throttling video was one of a number of cost-cutting measures, which together will save the company $10 billion over the next four years, without impacting consumers. “You can give a different quality of video,” McAdams said. “Most people on a cellphone can’t tell the difference between 480 and 1080p. You give customers that sort of option.”
McAdams wasn’t specific about where the savings are coming from apart from throttling video, but it’s likely a combination of deferring capital expenditure that would be needed to keep Verizon’s network afloat, and saving money on back-end payments to Verizon’s own internet providers. The savings are earmarked to help Verizon with building out a 5G network, which is forecast to cost the company $18 billion.
Research from analyst Chetan Sharma estimates that AT&T and Verizon saw data consumption double, based on a 24-hour time window, after the introduction of unlimited plans. That kind of overnight increase is unsustainable, no matter how good the network. Data from OpenSignal and Ookla showed some kind of change or slowdown in Verizon’s network after the introduction of unlimited plans, although that may have been a result of customers hitting the deprioritization threshold, rather than an all-around speed decrease.
Updated 9/19/2017 to reflect that throttling video was one of a number of cost-cutting measures