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How To Decipher Verizon's Maddening New Pricing Plan

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Gæt en smartphone - Del 2 (Photo credit: @boetter)

Verizon released its new data and voice pricing scheme yesterday, and it will surely set the trend for all other carriers to follow.

I am quite sure that this is a follow-up to the not-so-subtle PR campaign waged by the carriers crying wolf about the impeding wireless data doomsday based upon anticipated lack of spectrum. These carriers have been setting us up for price increases for several months, claiming that a spectrum shortage and increase in usage may “force them” to jack up the rates to maintain the present quality of service because there is only so much bandwidth to go around, so if customers want to use it, they will have to pay more for it. Their stated goal, of course, is to offer quality service to their customers, and to do that may coincidently require that they receive more money for selling us electrons!

Let’s remember that these are all public companies whose primary job is to make money at your expense. Their only purpose in life is not to offer good deals to their subscribers unless it would at the same time serve their ultimate goal: profitability.

Last month I interviewed Marty Cooper, a retired Senior Vice President of Motorola and literally the inventor and father of cellular. We discussed the alleged spectrum shortage. While the demand for data is growing and will increase an estimated twenty to forty fold, it is not a crisis according to Cooper. He told me there are plenty of technological solutions and the addition of spectrum is only one component. Marty is an expert in smart antennas, which may hold some of the answers to increase the ability to send and receive data and the ability of a new generation of very-smart phones, beginning to be implemented with LTE 4G, to initiate a communications path directly to a specific cell site and antenna for more efficient usage of spectrum.

I also spent some time at PowerWave headquarters in Santa Ana, Calif. a few months ago. These are the folks that handle most of the cellular installations throughout the world that are inside of buildings, at convention centers and large events. They have sophisticated solutions to extend cell service for all of the carriers to just about any venue. The statistic that stood out was the fact that eighty percent of all cell traffic is within buildings and usually moved off the network so that it does not impact upon spectrum requirements. So we come to the potential rationale for the price increase, (if in fact that is what it is) announced by Verizon today. Is this a pure revenue-enhancement move, or do they actually need more money to build out more network capability?

I spent an hour on the phone this morning with a senior customer service representative at Verizon to inquire about pricing details. While she did not have any information about individual plans, she did have specifics about shared plans, which is primarily what this is all about. Basically, Verizon has decided that data should be treated much like voice and text in family or shared plans, with a base cost for the plan and then an amount to be paid for each data device. If you have a current family voice plan, you will pay about $50/month per smartphone for unlimited voice and another $30.00 per month for unlimited data per phone. There are lower level plans for 700, 1400, and 2000 minutes per month that are shared between all phones and somewhat cheaper.

Here is what this all comes down to: do you want to pay for what you use up to a predefined amount of data, on a per-device basis, or be forced to pay a fixed rate for data to be shared between all devices, whether you use it or not? Some devices presently have unlimited data; that would go away under the “new deal.”

Our office has three tablets and three smartphones. We currently are paying for a 2000 minute shared plan $80 and $10 per handset, in addition to $30 per unlimited Internet access per phone. We pay $30 per tablet (for two tablets) for a 2 GB allowance each, and $50 for 5 GB plan for my iPad. All of the tablets include hotspot service, but smartphones do not and charge an extra $20 per phone if you want that option.

I rarely use more than 1 GB of data on any individual smartphone per month and my most heavy usage is on my tablet because I use it as a hotspot to feed other computers, especially at venues where my colleagues and I share the connection for multiple computers.

Under the new plan, I would have unlimited voice and text for each smartphone at $40 per device, but not unlimited data as is presently the case. I would have to decide how much data I wanted to buy, in advance. The structure is 1 GB for $50, 2 GB for $60, 4 GB for $70, 6 GB for $80, 8 GB for $90, and 10 GB for $100.00. You can have up to ten devices to share your data allotment, with a $15 per 1 GB overage charge. The kicker is that you have to pay for each data device (laptop or tablet), just like you do for phones on a shared plan. Each tablet will cost you $10, a USB modem $20. There is no charge for smartphones; it is built into the $40 monthly fee. To put this in perspective, the old data plan allowed for 2 GB for $30, 5 GB for $50 and 10 GB for $80. There was a minimum of a 5 GB requirement for a USB modem for your laptop. So the data rates are initially more expensive, unlimited options are gone, and overage costs are higher. But you are also not paying as high an individual-device cost.

Under current shared plans, Verizon has gone from charging $30/smartphone/month for unlimited data and $10 for each line, to $40/phone with no data. You must now purchase data separately at an increased cost, beginning at $50, but this is for all phones and devices.

There are some nuances which I learned this morning from Customer Service:

  • If you update your phone or plan, you will likely be switched to the new rate;
  • Presently, smartphones have unlimited data for $30/month. This feature will no longer be available in the new pricing tier and you will pay for what you use as part of your shared allotment;
  • You will have free hotspot service on all smartphones without an extra fee, but usage will be included in your overall data package;
  • Hotspot service presently has a data limit of 2 GB per month. If you go over that, you will be charged another $20 per 2 GB. In the new plan, the data usage on hotspot is built into the overall allotment;
  • You do not need “Friends and Family” if you have an unlimited voice plan;
  • This plan will not impact what you pay for international data.

So in our case we are paying $200/month for data for six devices, with a minimum of 9 GB monthly allowance, but this can vary because there is no limit on smartphones. This means that if we use 4 GB of data per month per smartphone we still pay the same rate. Under the new plan, we would be charged.

If we switch to the new structure we will only pay $120 per month for unlimited voice and text for three phones, and then would select a data plan to meet our needs. Let’s say we decided that a total of 6 GB would be sufficient. That means we would be paying a base rate of $80, plus $30 for three different data devices. Our total bill would be $230 per month, which is $120 less than our current billing. But, in my example, we are limited to 6 GB per month. However, the marginal difference in rates to go to the 10 GB allowance is only $20, so it would still be a good deal.

The analysis that every customer must consider would include the following questions:

  • Do we have access to WiFi and how much of our data usage can be over a Wifi network, rather than broadband;
  • What is our total projected and actual data usage per month;
  • How much data do we presently use on smartphones and on tablets or modems; the mix is quite critical in your analysis because smartphones have unlimited data allowances presently;
  • Are we paying for hotspot service on any smartphone now, at $20/month for 2 GB;
  • Do you need hotspot service on one or more phones, or would it be convenient if we did not have to pay for the feature;
  • How likely are we to go over the predefined data amount, and if we do, will the $15 overage per GB be higher than buying the greater amount of data usage up front;
  • Do we need unlimited voice and text for every phone, or are the current 700-1400-2000 minute plans sufficient for our needs?

Good deal or bad deal?

The new Verizon plan is a good deal if:

  • You use a lot of voice minutes or text messages per month;
  • You have more than one tablet on your plan;
  • You can accurately gauge your data usage per month, or use a minimal amount across all devices;

The plan essentially forces you to purchase the equivalent of unlimited voice and text plans, which are normally $50/month for each smartphone. The reality is that voice is becoming largely irrelevant in the equation; data usage comprises the vast majority of smartphone consumption, and Verizon has decided that their revenue potential is in the sale of data access. The plan no longer requires you to purchase a separate data package for each device but rather agglomerates all devices into one comprehensive data allowance plan. This is a good deal, assuming that the majority of your usage is not on smartphones which presently have unlimited data allowances.

It is a bad deal if:

  • You do not use a lot of voice minutes or text messages per month;
  • You use a lot of data on your smartphones per month.

If voice calls or text are not particularly relevant to your usage and you consume a lot of data, then you will pay more, but again, this is not completely true, as my example indicated. It just depends on the mix of smartphones and tablets or laptops. Under the new scenario, you will pay for usage on all devices while in the past you paid a flat monthly rate for everything you used on your smartphone. Providing free hotspot service on all devices is somewhat of a scam because while you are not paying the monthly fee for that feature to be attached to a smartphone, you are paying for the data, whereas under the old plan, you were essentially paying $20/month for 2GB. Verizon has mixed voice, text, data, smartphones, tablets and laptops so that you really cannot accurately compare current to new rate plans on an exact basis. Each plan has to be tailored to your needs.

The carriers will continue to increase the rates that they charge for data based upon a very simple premise: they have the networks and the only capability to provide broadband data, and we need it. In my estimation, this is only the first of many increases, reminiscent of the cable and satellite TV industry. Whatever they can get away with, they will charge until the public or regulators say no. The real question is whether this is a more equitable plan. It all depends on how much data you need per month, on how many devices, and what kind of devices you have. The days of unlimited data will soon be a distant memory; the good old days.