July 6, 2011

Verizon To End Unlimited Data Plans On Thursday

Verizon Wireless is ending its unlimited data plan for new smartphone subscribers on July 7, replacing it with new a collection of new plans ranging in price from $30 to $80 per month.

Existing subscribers with unlimited data plans will be able to keep those plans, Verizon Wireless said.

Mobile service providers have been moving away from unlimited data plans in recent months as subscribers consume an increasing amount of data browsing the Web and downloading video, music and other content to their smartphone devices.   Indeed, demand for wireless data is expected to grow rapidly as subscribers discover more fun and data-consuming things to do on their smartphones and as new 4G features become available.

"This change sets the stage for all the promise of 4G ... [and] when much of the computing we do will be wireless," said Verizon Wireless spokeswoman Brenda Raney.

"It's preparing for the future and setting the stage where people will pay for what they use."

Under Verizon's new wireless data plans, customers who limit their data usage to 2 gigabytes (GB) per month will pay a monthly charge of $30 "“ the same amount paid by current subscribers for unlimited data use.  In comparison, AT&T charges $25 per month for 2 GB of data, and also offers a $15 plan for subscribers who use 200 megabytes of data.

Verizon said wireless subscribers who exceed the data allowance of their plan would be charged an additional $10 for every extra gigabyte of data they use. 

Wi-Fi usage does not count towards the monthly data limits, and Verizon said it plans to alert subscribers when they cross certain thresholds of their data allowance.

Power users of Verizon Wireless' data services can sign up for a $50-per-month plan, which allows for 5 GB of monthly data use, or an $80-per-month plan, which allows for 10GB of monthly data use, according to company spokeswoman Brenda Raney.

Verizon's move to tiered data plans follows a similar decision by AT&T, who has said that its lower priced data plans has helped it add millions of new subscribers that would otherwise not have paid for higher priced plans. Both Verizon and AT&T, the nation's top two wireless service providers, sell the Apple iPhone, which created a dramatic surge in demand for services such as mobile Internet and downloading of mobile applications.

However, one particular challenge with capped data plans is that few subscribers know how much a megabyte or gigabyte of data truly is, so they may not immediately know which data plan is best for them. This contrasts with conventional voice service billing, in which a minute spent talking on the phone is easy to understand.

In general, light users of wireless data services that steer clear of heavy-usage applications such as online music streaming and video may be ok with a 200MB plan.  However, an Associated Press report cited data from Nielsen Co. and Cisco Systems that found average monthly data consumption for most smartphone users exceeds 200MB.

The 2GB per month data plan should be enough to meet the needs of most subscribers.   AT&T said last year that a 2GB plan would satisfy 98 percent of their smartphone users.   Ms. Raney of Verizon said that 95% of Verizon Wireless' customers use less than two gigabytes of data per month, which is equivalent to roughly 1,000 emails or 20 hours of streaming video per month.

However, customers who routinely stream online music or videoconference for hours on end, or view Netflix movies, will easily exceed a 2GB limit.

Telecom shares were basically flat after Verizon's announcement, which was widely expected.

Shares of Verizon's stock rose 2 cents on the New York Stock Exchange on Monday, closing at $37.82.  Shares of AT&T's stock closed down 5 cents at $31.63.   Sprint shares closed down 4 cents at $5.39, also on NYSE.


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