Verizon Hints At Scrapping Unlimited Data Plans

BusinessWeek reports that Verizon may be preparing to follow AT&T's example by eliminating unlimited data plans later this year. Quoting: "'We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,' John Killian, chief financial officer of Verizon Communications Inc., the wireless unit’s parent, said in an interview at Bloomberg’s headquarters in New York today. The company anticipates 'explosions in data traffic' over wireless networks as new phones on 4G networks incorporate data-heavy applications, such as video downloads, he said. Verizon is working to keep its network running smoothly as more of its customers switch to smartphones that connect to the Internet. ... 'The more bandwidth that you make available, the faster it will be consumed,' said Craig Moffett, analyst at Sanford C. Bernstein & Co. in New York. 'From Verizon’s perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that data is always going to be uncapped.'"

Comments

Why not raise the price instead?

[YA_Python_dev]

Why eliminate them completely, why simply not raise the price until it's profitable if some consumer want them?

Re:Why not raise the price instead?

[drinkypoo]

Why eliminate them completely, why simply not raise the price until it's profitable if some consumer want them?

That's what they're doing. It's called "charging by the minute" (or megabyte).

The simple truth is that if you sell an unlimited connection, some users will cost you far more than other users. Further, if you kicked all those users off your service tomorrow, you wouldn't lose that much money. And if you charged people the actual cost of unlimited service and then spent it on providing it, which includes actually building out new capacity, then you wouldn't be able to give your execs gigantic bonuses they don't deserve.

Re:Why not raise the price instead?

[tsm_sf]

That's what they're doing. It's called "charging by the minute" (or megabyte).

It's spelled "charging by the minute" but it's pronounced "collusion".

Re:Why not raise the price instead?

[WrongSizeGlass]

Why cater to the customers needs in the first place? Just screw them as much as you can.

If you're a hooker those two are one and the same. I'm just sayin'

Re:Why not raise the price instead?

[drinkypoo]

Who are you to decide what someone else deserves? Unless you are a voting shareholder you have no valid opinion on the matter.

I'm entitled to my opinion, and so are you.

Re:Why not raise the price instead?

[ChairmanMeow]

The ISP could charge a flat rate for everyone, and the power users who go over 250 GB can be charged 10c for each additional gigabyte.

Are you kidding? This is Verizon we're talking about. I'm currently have a phone with them (a cheap phone) and was recently looking into their data plans. Their non-"unlimited" plan is $10/month, and beyond a limit of 25 MB (not GB, MB) the price is $1/MB (again, not GB, MB). Somehow I think any new non-unlimited plan of theirs would be a lot more expensive than what you're thinking of.

Re:Why not raise the price instead?

[_KiTA_]

Why eliminate them completely, why simply not raise the price until it's profitable if some consumer want them?

Because they know in 5, 10 years their network will easily be able to handle any data usage -- presuming they can stop buying their execs yachts and cocaine -- even while the advent of stuff like streaming HD Netflix Movies will send data usage through the roof. By getting us weaned off unlimited data NOW, they will make much more money LATER when everyone is hitting a paltry 2 gig cap.

Whenever you have a pay-per-minute system, you eventually see it shift to a pay-per-month system, and the price drops. We've seen it in ISPs, MMORPGs, Long Distance, and Cellphones. In each case, the companies remain profitable, but no where near as much if they were able to keep the pay-per-minute scheme going. But market forces force the companies to give customers a pay-per-month system over X number of years, which seems to be where consumers are happy enough.

Data plans on cellphones are evolving to that point. The next step would be the price dropping like a rock, which is the "part 2" of the market forces mess above. The cellphone companies are (probably illegally, but it's the US, so whatever) conspiring to price fix their market by simply dropping the rates en mass so that customers can't just flee AT&T for Verizon or Sprint or whoever has a sane plan, since they're all dropping the plans.

But this isn't about money. At least, not short turn.

It's about forcibly preventing that evolution so they can ride the wave further on out. Their networks are woefully insufficient, data usage is going up at a rate only Raymond Kurzweil expected, and it's only the start of the exponential growth (helloooo iPad HD Netflix App)... But all of these pale in comparison to the hope that they can stop the evolution of their market. ... Because if they can get people used to the idea of $25/2GB data plans that sound ok now, but in 5 years would get you maybe a movie or 4 streamed before the obscene data charges kick in... $25 is going to look like chump change. Remember that these are the assholes who thought ahead far enough to make the web buttons, which load just enough on your data plans to cost you a few cents, stupidly easy to press. They make millions from it.

If they can get the average user -- or the average for their network -- to spend more than $6 a month in overage fees, this whole mess becomes hugely profitable for them. IF they can get it to $7, $10, or even $15, it's even better.

Re:Why not raise the price instead?

[dgatwood]

Which is nice, in theory. In practice, there are only two cell providers in the U.S.: AT&T and Verizon, and they're both doing this. If you live in a major city, you could use Sprint/Nextel or T-Mobile, but neither of them has the infrastructure to be a viable competitor to AT&T, much less Verizon.

And this is why I keep saying that widespread telecom infrastructure can feasibly be operated only by government-founded nonprofit orgs. As soon as you have for-profit companies providing the infrastructure for critical services, you end up with a market with insufficient competition to prevent abuse. If you want ubiquitous free-market competition in telecom services, you have to take the infrastructure out of the picture.

And lest you say that cell phones aren't critical services or that you can live without a cell phone, I would point out that most homeless people I've seen in California have cell phones. It's so essential to modern society that people choose a cell phone over a roof. And although cellular data is not in the same category right now, it's only a matter of time until it is (and cellular data can't exist without cellular voice anyway, making that a moot point).

The only alternative is extreme government regulation, and although this can help fix the worst of the monopoly/duopoly problems and increase coverage areas, it rarely results in any significant amount of true competition. We need a nationalized cellular tower service that leases nationwide tower services at a low cost, and we need it twenty years ago.

Unlimited already means 5G

[wesw02]

Verizon's current unlimited plans aren't actually unlimited, they translate to 5G per month, if you exceed it you'll be fined. IMHO that's already a class action waiting to happen. This just sucks though, cell phone carriers charge more for internet and you are getting less of it.

Re:Unlimited already means 5G

[rolfwind]

They should really stop advertising "unlimited" in America. If there was an ounce of consumer protection in the government, they should hammer such terms as what it is, fraud.

Re:Unlimited already means 5G

[ScytheBlade1]

It isn't a 5GB cap. You're free to transfer as much as you please.

Anything over 5GB gets rate limited to 56k speeds, though.

They're giving you unlimited data, and past 5GB, you still have unlimited data. It just isn't fast, and nothing in their terms of use prohibits this. You can't really drop a class-action lawsuit against them doing that either.

You're not fined for going over 5GB, just throttled.

Re:Unlimited already means 5G

[ScytheBlade1]

Sorry to reply to myself, but I thought I linked this.

http://www.intomobile.com/2007/11/03/verizon-wireless-when-we-say-unlimited-data-we-mean-5gb-worth-of-unlimited-data.html

While that article is just as good at trolling a subject line as the OP is, the part we care about is this:

And, should you exceed the 5GB/month limit on your “unlimited” plan, Verizon will “reduce throughput speeds of any application that would otherwise exceed such speed to a maximum of approximately 200Kbps” – with actual speeds “subject to change.

It remains functionally unlimited, and the same type of cap pre-5GB applies: connection speed. Just a different speed.

No surprise

[name_already_taken]

This isn't really surprising.

Verizon has always seen their customers purely as a source of profit, and has done everything they can to maximize the fees they can charge customers - going as far as disabling bluetooth file exchange on their phones so customers have to send things like pictures via the Verizon network so they incur data charges.

Eliminating unlimited data plans is a logical step in maximizing profits.

SMS != data

[name_already_taken]

What they need to do is uncouple phone from the network -- to the point that the subsidized phone contract is seperate from the phone plan (allowing a customer to switch from month to month) and to stop distinguishing between different types of data -- like texts vs emails and the like. It's all just data.

Verizon's network has been CDMA, which I'm not terribly familiar with (I closed my Verizon account back in 2002 and haven't looked back), but at least for GSM, text and data are not the same thing. I don't know how it works in CDMA, so it could be different for Verizon, but over GSM, SMS messages are squeezed into unused space in control packets that the phones and towers exchange normally even if there's no call happening. So on GSM networks, SMS isn't data and incurs no cost at all to the operator. SMS should be completely free on GSM providers.

Data, on the other hand, takes up packets/bandwidth that would otherwise be available for voice service, so there is a cost.

The Lowest Common Denominator

[Enrique1218]

The only competition these guys do is seeing who can give their customers less. Forcing data plan, hiking early termination fees above the value of the phone, charging for text messaging, ring tones, and now limiting data plans. There is little difference between any of the wireless service providers in terms of what they provide. The cell phone lock in and multiyear contracts allow this to happen and stifle innovation. By getting a $600 smartphone for $200 with a multiyear contract, we lock ourselves to vendor and can't leave them when they cut service. Instead of developing the technology to meet the customer demand, they would rather trained their customers not to expect too much

Two comments

[c0d3g33k]

First: Contrast the behavior of big companies like Verizon who consistenly reduce their level of service with that of companies like Linode, who consistently increase the level of service offered to their customers for no additional charge: http://blog.linode.com/2010/06/16/linode-turns-7-big-ram-increase. THAT is how you ensure customer loyalty. Sometimes squeezing every last penny out of customers isn't the best way to do business.

Second: When I purchased my smartphone, I didn't like being forced to purchase the "unlimited" plan for $30/month. Since the phone has WiFi and I'm usually near a WiFi access point, I was willing to rely on that to save some money. Instead I had to drop a second phone from the plan so my monthly bill didn't increase too much. If their new data plans include limitied but reasonable data allowances for a lower cost, I'm actually ok with that. The real problem is that it seems many (most?) current smartphones don't easily allow 3G to be disabled until needed. Or deprioritized with respect to WiFi - eg. Use WiFi preferentially when in range, only fall back to 3G if necessary and only for the apps configured to do so. (Note I say *easily* - I know data can be turned off but it's a PITA. The normal state is "data always on".) Given that these devices are constantly accessing the network, if simply having the phone on with data enabled puts people in danger of incurring overage charges when using the standard plans, they (Verizon) did it wrong. The new plans should take "normal" use into account, be less expensive than current plans, and provide reasonable options for heavy data users. Then this move might actually be a good one, benefiting everyone.

Of course they will

[nurb432]

Everyone else is doing it, so why wouldn't they? Just like the bad old days ( for those that remember it ).

I still think this was the intent all along. Make it 'free' long enough for people to start relying on having data available, introducing even more bandwidth hog services, then after it will be hard for most to back off, start charging "per use" again. They are no better then drug dealers, except they get away with it.

Phone companies wet dream

[hpa]

The monopoly telephone companies have always been obsessed with getting users to pay by the usage unit, even when flat pricing made them more money. It does seem to reflect their thinking more than profit maximization; one possibility is that they have a vastly exaggerated notion of the inadequacies of their own plant, or alternatively they are suffering from lottery-style thinking -- the executives have happy dreams about the poor sucker who left their phone connected and got a $10,000 bill.

In the USA, at least, flat-rate long distance did not become common until it got to be way too easy to bypass the monopolists.

This is a load of crap

[bl8n8r]

I find it hard to believe that millions of people having one or more computers capable of downloading movies, ISO images, Youtube, music streaming, gaming and emailing 50MB attachments in their homes can pay a flat rate for internet access with unlimited bandwith but the same people trying to view some pics or webpages on their mobile phones are causing "explosions in data traffic". Smells to me like someone is fishing for something to pin cost increases on. Frickin crooks.

Re:Honest question

[Comen]

I work for a big ISP, and bandwidth is not a issue on the backbone, we do more bandwidth in VOD video to the home than internet service will come close to for a long time.
The amount of bandwidth in the last mile has always been the real issue, but for home internet service that problem is getting much better and I would says both cable and dsl services have been able to provide over 100mb services to a house for awhile now, but there is a cost of upgrading equipment, and you will need more equipment (dslams,cmts) since you will be able to put a smaller amount of customers on a device. But these are just money issues, not technical ones, and these companies make lots of money, they are VERY profitable.
This goes for Verison also, it is very cheap for these companies to use several fiber rings around a city to get fairly cheap bandwidth, more bandwidth than they could ever use for cell phone back haul (10 gigabit ethernet between towers) but I would have to assume the bottleneck is the tower to the phone. I do not know much about this equipment works really, I am not sure if this equipment is limited by the amount of connections on the tower or the bandwidth of each connection, but I would assume that this is a issue that can be solved by spending money on more or better equipment.
I have a hard time listening to these companies whine about bandwidth, when they are making a killing, you can not even get attention in a Verison store where I live the demand is so high you get a number like you are at the DMV. The number one highest growing market is cell phone service, these companies know these very well. So having to upgrade equipment should not be a issue, it should be what they do, what they provide us, its a good problem to have!

Now about the unlimited plan thing, for most customers that buy a unlimited plan, it is not about having lots of bandwidth, its about insurance, or piece of mind!
This allows them to let someone play with the phone with out counting pennies, or that little johnny did not get a hold of my phone and run up a big bill by mistake, it lets you play with the phone with out counting minutes, but I guarantee for every 1 person that uses allot of bandwidth, you get 20 that do not use much bandwidth at all but want the unlimited option to make them feel protected from 1 bill that they are not ready for.

Re:Why is that "collusion"?

[kaizokuace]

When one company sells something that customers want and then another competing company matches their price/product/etc to access those customers, that is competition.

When one company decides to force a product to become worse but cost the same and then another one follows suit. That's something else.

It may or may not actually involve collusion but it sure doesn't do anything good for the customers.

Re:Insensitive clods.

[cbiltcliffe]

Funny, the first thing I thought of when I saw that quote:

'From Verizon's perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that data is always going to be uncapped.'"

was this:

"From Verizon's perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that they might actually get something in return for all the money they give us."

There. Fixed that for you.