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.