Verizon Ending Unlimited Plan, Likely as New Apple iPhone Launches
Verizon Wireless plans to replace its $30 unlimited data plan with usage-based pricing toward the middle of this summer, Chief Financial Officer Fran Shammo said during a Morgan Stanley telecom conference.
After competitor AT&T's three years of exclusive rights to the Apple iPhone, Verizon began offering a CDMA-based (Code Division Multiple Access-based) version of the Apple iPhone 4 Feb. 10. (AT&T, by contrast, offers a GSM-based version.) The timing of Verizon's new pricing plan, however, is expected to coincide with the launch of a next-generation Apple iPhone-a scenario that's likely to upset Verizon's new iPhone owners, who will find themselves with an "older" model in only a matter of months. It could also upset Verizon's financials in the short term.
"There could be some [margin] lumpiness when you launch the phone," Shammo said during the March 1 conference, according to Reuters. "If there happens to be a new one that comes out, that quarter might not look so good [either]."
Shammo added that the unlimited plan was never meant to be a long-term strategy.
Former Verizon CFO John Killian, who retired from the position at the end of last year, had confirmed during Verizon's third-quarter earnings call Oct. 22, 2010, that a $30 unlimited plan would be offered, as well as a $15 plan for 150MB of data. The plan, Killian said at the time, was to attract, with the $15 offer, first-time smartphone owners, who would eventually upgrade to the $30 plan. Shammo seemed to believe the $30 plan was encouragement in itself.
"Let's step back. Why did we do the unlimited $30 plan on the iPhone?" Shammo said during the conference, according to Fast Company. "Well, the reason we did that was we didn't really want to put up a barrier to anybody who wanted to come over to experience the Verizon wireless network."
While Verizon's shares fell, following Shammo's comments, the move to usage-based plans is expected to benefit the carrier's bottom line over time.
He didn't directly address reports that Apple is working on a smaller, less-expensive version of the iPhone that will be geared, according to Needham & Co. analyst Charlie Wolf, toward "100 percent" of the mobile phone market, instead of a quarter of the market.
Bloomberg has reported that the small iPhone won't include a "home" button.
"Apple would sell it at a low price mainly because the smartphone will use a processor, display and other components similar to those used in the current model, rather than pricier, more advanced parts that will be in the next iPhone," Bloomberg reported.
A teardown of the Verizon iPhone 4 by repair site iFixit found that Apple has replaced the AT&T iPhone's Broadcom GPS chip with a Qualcomm MDM600-which supports both CDMA and GSM technologies.
"Can it be that Apple's thinking of using this chip in the iPad 2? Or maybe when the iPhone 5 is released, there will be just one phone for both Verizon and AT&T? That would be great," iFixit's M.J. said in a video on the site.
Or maybe, Apple is just preparing for its less-expensive offering. Shammo, too, hinted at the growing need for lower-priced smartphones during the conference.
"With the competition that's coming from China and some other manufacturers, it's going to push that smartphone price down, which means more and more people will be able to afford it," Shammo said, according to the Fast Company report. "We have got to give them an entry point."