Verizon's new plan changes game

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: June 28, 2012 - 10:33 AM

Smartphones and computers share data plans under the new pricing scheme. But critics say some users could end up paying more.

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This Tuesday, June 12, 2012, photo shows a Verizon sign at a Verizon store in Mountain View, Calif.

Photo: Paul Sakuma, Associated Press - Ap

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Verizon Wireless is introducing a radical new cellular pricing plan Thursday that favors families with multiple wireless gadgets, but is less friendly to users with only one device.

Verizon's new Share Everything plan gives every smartphone unlimited voice minutes and text messaging, and for the first time allows Internet data plans to be shared among as many as 10 phones or other devices, such as a wireless tablet computer.

No contract extensions or fees will be charged to existing customers who want the new plans, the company said.

"We're changing the way you buy wireless," said Steve Mesnick, Verizon Wireless director of marketing, in an interview. "Since data is what really matters to customers, why charge for voice minutes and text message plans?" However, voice-only plans will still be available for non-smartphone users.

"These plans are really good for connected people and for families," said Roger Entner, an analyst with Recon Analytics in Boston. "But people who have only a single device may see a price increase."

That's because Verizon is tacking on a new monthly Internet connection fee just to hook a mobile device up to its network. That's in addition to what consumers would pay for a data package. For example, an iPad owner who already has a $30-a-month data plan would pay $40 a month under the Share Everything plan because of the $10 connection fee, Mesnick said.

Critics say the new pricing plan is difficult to understand, and some consumer advocates say many customers will end up paying more.

"Instead of moving in the direction you'd expect in a competitive market -- making things cheaper and easier for consumers -- Verizon's pricing is getting more expensive and harder for consumers," said Harold Feld, senior vice president of Public Knowledge, a Washington, D.C., consumer rights advocacy group.

Analysts said the impact of the new Verizon plan is likely to be considerable. Verizon has more than 90 million wireless customers, and about half of all cellular phone customers now have smartphones. However, they said Verizon is in some ways bowing to reality by offering unlimited voice calling at a time when cellular call volume is diminishing due to increased Internet use.

Under the new monthly connection fee, smartphone owners would pay $40 a month to connect, conventional cellphone users would pay $30, Wi-Fi hotspot devices or laptops with cellular connections would pay $20 and tablet computer users would pay $10.

To actually use the Verizon network, customers must pay fees ranging from $50 a month for one gigabyte of data to $100 a month for 10 gigabytes -- the upside for customers is that multiple devices can share the same data plan. Consumers that exceed their allotted data usage would pay overage fees.

"None of this pricing makes any economic sense," Feld said. "Verizon does it because they can."

Mesnick agreed that the new Share Everything plan might not be for everyone. While the plan benefits groups of people who share a "bucket" of data, a single customer might pay more than before.

Verizon's existing unlimited data plan customers can stick with their present plans if they like, although they won't be able to upgrade to new phones at the discounted prices consumers have come to expect, Mesnick said.

For example, to stay on an existing plan a consumer wanting to buy an iPhone would have to pay the full $650 price instead of the discounted Verizon price of $200, Mesnick said. Those who transferred to the Share Everything plan would pay $200 for the iPhone.

Forcing consumers to pay full price for a new phone might cause them to give up their old plans, "which works against both families and individuals," said Curt Prins, whose St. Paul firm PoliMobile advises political campaigns on how to reach people on mobile devices. "But, if your family is full of heavy text message users, this plan is a godsend."

Some say Verizon is taking a chance on its new pricing plan in hopes of differentiating itself from competitors.

"It's a calculated risk, because some customers might be upset," Entner said. "I think the other competitors are going to sit back and see what happens."

Steve Alexander • 612-673-4553

  • VERIZON'S NEW PRICING PLAN

    Connection fee

    $40 per month for smartphones

    $30 per month for conventional cellphones

    $20 per month for Wi-Fi hotspot devices or laptops

    $10 per month for tablets

    Data fees

    Range from $50 per month for 1 gigabyte to $100 for 10 gigabytes, shared among devices

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