eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.
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.
Taking Advantage of Data-Addicted Smartphone Users
5. Video is becoming more popular
With mobile-connectivity speeds increasing, more and more users are turning to their mobile devices to stream video content over the Web. But with tiered data plans, consumers need to be more careful about their activities. After all, video transfers push a lot of data through the pipe, and without one of Verizon’s or AT&T’s more expensive plans, customers might quickly find that video transfers are best done over WiFi, and not mobile networks. That’s too bad.
6. Consumers will (rightfully) rebel
Verizon should be ready for the fallout of its decision. After AT&T announced its decision to bring tiered data pricing to its operation, some customers rebelled by jumping ship, publicly denouncing the move and more. And now,Verizon will likely face the same backlash. But that’s understandable. Consumers have been enjoying unlimited data for years now, and all of a sudden the rug is being pulled out from under them. It’s bad news for consumers.
7. The enterprise loses
It’s important to keep in mind the impact tiered data pricing can have on the enterprise. Companies around the globe send employees out to work, and those folks are accessing data over mobile networks. With tiered data in place, small businesses, especially, that don’t necessarily enter into long-term, enterprise-level contracts with carriers will lose out. Make no mistake, the corporate world is missing out on Verizon’s move, as well.
8. It could kill innovation
Pricing and data transfers are typically cited as an issue with tiered data pricing, but those plans also stifle innovation. Now, developers will need to think about how much data their applications are using. If it’s too much, they will need to either stop using data-intensive applications or scale back on their use in some way. With unlimited data, those constraints wouldn’t be in place, and everyone would benefit because of it.
9. It could hurt smartphone sales
Even though Verizon made a bad move by eliminating unlimited data, smartphone shipments will only rise in the coming years. However, might those shipments be higher with unlimited data plans in place? It’s certainly possible. After all, those who are using traditional mobile phones might look at the data plan pricing Verizon and AT&T offer and balk at buying a smartphone. With the economy the way it is, the lack of affordable unlimited data might force some customers to opt for flip-phones, rather than smartphones.
10. It’s not a long-term solution
Whenever carriers talk about tiered data, they say that it’s the best way to manage exorbitant data use by some customers and that most people will be unaffected by the change. Though that might be a fine short-term solution, the fact is data usage will continue to soar in the coming years. And carriers will need to find a long-term solution to address that. Ratcheting back on data use isn’t a solution,it’s a stopgap. The only good way to address data usage and in the process benefit all stakeholders is to invest as heavily as possible in infrastructure improvement and maintain unlimited data plans.