Somewhere, a bandwidth fairy just died. After a month of luring in new iPhone customers by touting its unlimited data plans, Verizon announced today that it too will move to a tiered, capped data structure sometime this summer, eliminating its $30-per-month, all-you-can-eat plan. I’d love to be optimistic, but it’s a sad fact that when mobile carriers screw with pricing, it never ends well for the rest of us.
AT&T started the fire
Sadly, Verizon is following AT&T’s lead on this one. AT&T is the worst at creating confusing pricing structures to get customers to pay more for less. After three years of “unlimited” (5GB) plans, the carrier eliminated the option last July and established a horrid tiered structure in its place. Instead of paying $30 for 5GB of “unlimited” data, the carrier began offering two plans: 200MB (.2GB) of data for $15 or 2GB of data for $25.
Aside from the obvious lack of pricing coherence, AT&T’s tiered plans are intelligently designed to screw over users by offering too little and encouraging overages. Here’s the kind of thing we can look forward to on Verizon.
- DataPlus 200MB plan: AT&T wins big time when users are tricked into choosing its 200MB plan. Those who opt for the “cheap” $15 DataPlus plan either don’t use any data at all, essentially giving AT&T $15 for free, or find that 200MB isn’t a usable amount of data. And they’re right; it’s not a fair or usable amount of data. Browsing the Web a few times and downloading a podcast can eat up your entire month’s supply of bandwidth. And if you use it up, AT&T makes bank, charging you an additional $15 for 200MB more data. In essence, instead of offering 5GB for $30, AT&T can get away with charging users $30 a month for 400MB of data. It’s a clever scam.a
- DataPro 2GB plan: This $25 plan offers just enough data to satisfy some users needs, but those who regularly use their phone will often be in danger of breaching the 2GB cap. If you go over 2GB, the carrier charges you $10 for an additional 1GB of data, meaning many regular data users will end up paying $35 a month for data.
- DataPro 4GB Tethering plan: This $45 plan is AT&T’s latest sneaky way to overcharge users. If users want the ability to tether their smartphone to a laptop, they have to dole out $20 extra for a tethering plan, which also gives them an additional 2GB of data. If you go over the limit, another $10 for 1 extra GB of data is added. Why can’t DataPro 2GB plan holders use their 2GB on a laptop via tethering? AT&T has no reason.
T-Mobile has adapted AT&T’s $15-for-200MB plan as well. These are only a few exacmples of how carriers overcharge for plans. Users are greatly overcharged for texting (which, really, is just data), talk, and almost every other service associated with mobile phones. Carriers make a living by nickel-and-diming customers.
Bait and switch
While we’re guessing that current unlimited data plans will be grandfathered in, the many millions who have recently joined Verizon to buy the iPhone 4 may be feeling a bit betrayed. The carrier strongly emphasized its unlimited data plans before and during the device’s launch, going so far as to offer iPhone-specific unlimited data plans. Now, less than a month later, Verizon has already pulled the rug out.
Verizon’s pricey plans
We don’t yet know how Verizon plans to tier its service, but if its current 4G prices are any indication, data will get more expensive moving forward (learn about 4G here). The carrier is currently charging $50 per month for 5GB of data and $80 for 10GB on its newly-launched high speed LTE 4G network. (It should be noted that no 4G phones have launched yet; this amount is for 4G mobile broadband access via USB modem only.) Unfortunately, a user can potentially eat up 5GB of data much quicker than on 3G, according to some tests. Hopefully Verizon will adjust its data allotments when 4G devices are launched.
At its press conference today, CFO, Fran Shammo said that the imminent launch of the HTC ThunderBolt will give everyone an idea of what to expect from Verizon going forward. ”We have a very big opportunity at Verizon Wireless because 67 percent of our customers are either feature phones or multimedia phones,” which have optional data plans at around $10 per month, said Shammo. “We see the potential of our customer base spending in that $30 to $50 range.”
Late last year, Shammo also indicated 4G customers may have an option between service plans that offer higher data caps at lower bandwidths, or lower data caps at high bandwidth. The carrier hasn’t mentioned these plans since, but may still be considering the idea.
So, what now?
Well, now we get to wait. Like all carriers, Verizon is concocting the best way to make the most money from mandatory data subscriptions. Our only hope that the carrier’s marketing department decides that being honest, upfront, and flexible about data is the way to go. Verizon could still take a step forward and offer plans that let families pool data plans together or use services like tethering without an extra fee. These tiered plans could make data more affordable for many users and end up being a very positive change for Verizon. Sadly, it’s just not very likely.
Well put, if misleading.
For starters, you have completely ignored a very critical component – overage charges. Verizon's former plans (as well as ATT) billed overages at a whopping $.002 per Kilobyte (translation: $2097 per GB over the allotment). That's like giving customers 450 minutes each month but bill overages per microsecond.
The new plans are $10 per additional GB – a vast improvement over the previous scheme.
Also the terms and conditions were changed. Under the old unlimited plans customers had to agree not to use the service for data-intensive services like streaming movies or acting as a server. The reason is of course to maintain quality controls. Now, to accomodate the explosive growth in data use, Verizon now allows unrestricted use just as long as you pay for it.
Great article, I just ask for more balance.
Depending on where you live Verizon has the best signal, At&t comes in second and the others is only in Main city areas !!
Please see my response below. Asking carriers to create a fair and consistent pricing system for data and other services is not unreasonable. No one is asking Verizon to go out of business.
How does the author define something as “overcharge” versus none "overcharge?” For example, with every product, there is always the starting/baseline cost of providing a service, the cost involved providing that service such an employee who has to handle that transaction, another employee who has to enter the data, another employee who has to created a billing system to handle a new customer, and so on. The cost exists regardless whether a customer gets 200MB or 100GB plan. If the baseline cost with 2xxMB is at $15, I think that $25 for 2GB isn’t all that bad where the marginal 1.8GB costs only $10 extra. Besides, they can charge whatever they want to charge. And nobody is forced to pay for these things. There are other carriers who do this for less – Cricket, Virgin Mobile, MetroPCS, and many others.
There is no Bait and Switch here. Verizon let’s the user keep their original plan. Verizon doesn’t force any users who had the unlimited plan to switch to a different plan during their contract. This is completely false.
Verizon’s Pricey Plan
The author talks nothing about how much it cost carriers to get the 4G. Verizon spent $9 billion in 2008 to build out 4G LTE network. Verizon approximately has 94 million customers. AT&T said that it has about 10 million customers who are in a data plan, either has a smart phone or use some data plans. Let’s suppose that these are iPhone users. If their entire iPhone customers to subscribed to 4G-plan, the cost per user would be about $900. If the baseline cost of providing such service whether the service is 3G or 4G is at $15, and AT&T decides to charge $10 extra for the 4G access, AT&T has to bill 90 monthly cycle @ $10 for the AT&T to pay for the 4G spectrum. By the time they are through with paying for the spectrum cost, there might be a 5G network. The pricing is a lot more sophisticated than what the author leads the readers to believe
Why doesn’t the author do his own research before he hopes “that the carrier’s marketing department decides that being honest, upfront, and flexible about data is the way to go.” Customers in other countries pay a lot more for these services.
Author also doesn’t know there is a cost in providing tethering service. It doesn’t seem as obvious but creating bandwidth for the tethering, creating a tethering software, and tech support cost money. They can’t just give things away. “Verizon could still take a step forward and offer plans that let families pool data plans together or use services like tethering without an extra fee. These tiered plans could make data more affordable for many users and end up being a very positive change for Verizon. Sadly, it’s just not very likely.” How would giving away free service be a positive change for Verizon? If anything, it would be a negative change.
I didn’t include citations but I would be happy to provide them if anyone wants them.
Thanks for your comment. This article is not about what is financially best for Verizon. Obviously, it would be best for them if they charged much more than they do for everything. It is costing billions to establish 4G services. No one can deny that. But part of it is also the cost of business. Verizon and all carriers need to come up with ways to keep mobile Internet affordable and usable as they transition. Spending almost $100 per device solely to connect to a data network is an extremely pricey prospect. Especially considering that a base talk plan is still $40 and most texting plans (and texts are data, really) run at least $10.
It's a bit of a bait and switch. Why didn't Verizon announce this change a few weeks ago? It was solely for marketing reasons to boost the launch numbers of the iPhone 4.
I use the term overcharge mostly in regard to the inconsistent pricing strategies of carriers. If AT&T charges $30 for 5GB (which was a sometimes unenforced limit) of data and then changes their plan to $25 for 2GB, this means they have doubled the price of 1GB of data from about $6 to $12.50. And how can it not be considered overcharging when a carrier charges $15 for 200MB of data? We just established that AT&T's 2GB data plan charges about $12.50 per GB. Why not offer 1GB of data for $15? AT&T creates a very low limit so that subscribers will encounter overages. Inconsistency, lack of flexibility, and nontransparency in pricing are the problem.
The iPad 2 is expensive, but it has not changed price. I have written about the prices of other tablets and them as overly expensive. The iPad is probably the most affordable tablet on the market, especially for its size.
Apparently Verizon has enough money to pay people to sign up for new accounts on Digital Trends, do research and defend them from rascally posts by twenty-something writers on the internet.
Why doesn't the Verizon do his own research before he hopes "the sad truth about these pricing structures will not actually be written about."
There are other sub carriers with the mobile telecom space but as you can see, not every player in this market space is doing well. In fact, Verizon is sort of at the middle. Last year, after generating $106 billion of revenue, sum of total human activities within VZ, they only managed to collect 2.39% of net income. That’s not very good. So, on what basis does the author say that Verizon is trying to screw with horrid plans with tricked out pricing while employing sneaky pricing plan concoction to overcharge its customer to make the author sad. :-(
So, the author stereotypes/casts all the mobile players into one lump to describe their activities as “horrid” that will “screw” their customers.
What “coherence” pricing would the author suggest given their financial goals? Does the author prefer that Verizon make less than 2.39% net income this year?
I really love how the author, Jeffrey Van Camp writes this article with using very apocalyptic words like – "disturbing", "screw", "horrid", "tricked", "sneaky", "overcharge", "concocting", and many "sadly."
I read the author's recent article regarding the Apple’s iPad2. There isn't a single line that describes the product's pricing as "disturbing", "horrid", or number of other words he used in this article. Most people will agree that Apple’s pricing in general is “horrid.”
Why is the pricing trend disturbing? What trend does the author suggests then? Does the author know about the operating costs of VZ or any of these carriers?
VZ’s Operating Margin is around 5%. With 82,000 employees
AT&T Operating Margin is around 13%
T-Mobile’s Operating Margin is around 2%
Sprint’s Operating Margin is around -10%
"After three years of “unlimited” (5GB) plans, "
I have their unlimited plan and let me tell you that there is NO limit! My average 3G data usage for the past 6 months is well over 10 GB's per month with NO extra fees! Before bad mouthing the network, get your facts straight. When AT&T said unlimited, they meant it.
To my knowledge, Verizon was the one with the "unlimited (5GB)" plans, not AT&T!!
CHECK YOUR FACTS!!!
Wrong. Verizon's unlimited plan is completely unlimited. The only 5GB limit is for tethering.
I am so tired of Verizon & At&t ripping people off! Does Sprint, Metro PCS, or TMobile offer better plans for unlimited data, or are their service and area plans not as good?
I'm tired of technology being reported on by cranky old men. "In my day, you could get unlimited data for 30 dollars." In your day, there weren't millions of people carrying the entire internet in their pocket. Pay what it costs or don't patronize their service.
The only reason I have unlimited service is because I'm grandfathered in, but the fact of the matter is that 2 GB is more than enough for anyone who isn't watching Netflix in the middle of a park, and I could easily save some money if I downgraded to the 2GB plan. So no, that's not "less for more." It's "same for less" for the vast majority who just need enough data for email and the occasional wikipedia search.
I'm 26.
Well, Jeffrey, check your facts before writing an article like this. See my comment below regarding AT&T's supposed unlimited plan.
EXACTLY!! Well put!!