News Analysis: Verizon made a big mistake when it announced that it will end unlimited data plans and offer tiered data pricing similar to what AT&T has been offering for months. It's bad news for everyone, including Verizon.
Verizon
Wireless said that it will start offering a new data pricing structure that
eliminates unlimited data and requires users to buy into one of its tiered data
options. The company is selling 2GB of data for $30, 5GB for $50 and 10GB for
$80. AT&T shifted from unlimited data plans to tiered plans just over a
year ago.
By
eliminating unlimited data for its mobile customers, Verizon is putting itself
in a difficult position. The fact is, a tiered data plan isn't good for anyone,
including customers, smartphone makers and carriers. Prior to its decision,
Verizon held the high ground on data plans. Now, the company is down at the
bottom of the heap with AT&T.
Verizon
committed a major blunder by bringing tiered data to its business, and over
time, it will realize why.
Read
on to find out why tiered data pricing is bad for all stakeholders and could
eventually come back to haunt Verizon Wireless:
1. More smartphones mean more data use
If
there is anything that can be guaranteed in the coming years in the mobile market,
it's growth in the adoption of smartphones. In fact, according to Gartner, 468
million smartphones will ship this year and 630 million will be sent to store
shelves in 2012. Considering smartphones are becoming more capable, and
consumers are using them to surf the Web, stream digital media and more, data
use will only go up. Tiered data penalizes consumers and enterprise users for
doing exactly what they should with their smartphones. And that's unfortunate.
2. It could have been an advantage for Verizon
Verizon's
decision to offer tiered data is shocking when one considers the competitive
landscape it finds itself in. AT&T, Verizon's biggest competitor, currently
offers tiered data. By sticking with unlimited data, Verizon could have used
that offer as its trump card to steal customers away from AT&T. Instead,
it followed its closest competitor, and now, they're both annoying people
around the globe.
3. Why isn't Verizon thinking about
AT&T's merger?
Verizon's
decision to eliminate unlimited data becomes all the more head-scratch-worthy
when one considers that AT&T is working on the regulatory approval of its
merger with T-Mobile USA. If regulators approve the deal, the companies will
form the biggest carrier in the United States by a wide margin. Verizon will be
wishing that it had more advantages to take on that mega-telecom. With
unlimited data, it could have been far more capable to compete with a combined
AT&T and T-Mobile. But with tiered pricing, it looks like the small
copycat.
4. It's expensive
One
of the biggest issues with tiered data pricing, which could come back to haunt
Verizon and other carriers, is its cost. As noted, Verizon is charging $30 for
2GB of monthly data and $50 for 5GB of data. Its $80-per-month option for 10GB
is an exorbitant fee. Consumers who are already paying boatloads of cash on
mobile plans won't be happy to see the dramatic rise in costs, especially
considering Verizon was offering unlimited data for just $30 per month.
Although carriers typically deny it, tiered data ends up costing customers more
money in the long run.
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