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Summary:

Verizon Wireless is forging ahead with plans to change how it prices mobile broadband data, but isn’t yet sharing the details. Unless there are any surprises, however, there are only a few options or combinations of such options that the carrier will likely offer for LTE.

wireless-antenna

Verizon Wireless is forging ahead with plans to change how it prices mobile broadband data, but isn’t yet sharing the details. Speaking at an investor conference today, company CEO Ivan Seidenberg said that consumers can expect new plans within four to six months as the company begins to offer its faster 4G service, known as LTE. Rival carrier AT&T has already eliminated unlimited data plans for new customers with tiered pricing of its own, but according to the Wall Street Journal, Seidenberg says Verizon isn’t yet sure that agrees with the way AT&T “valued the data” for such plans.

Seidenberg’s broad statements indicate that Verizon’s data pricing is likely to differ from that of AT&T. Indeed, although was the first U.S. carrier to talk about offering plans with limited bandwidth amounts, AT&T was the first to do so. In June, AT&T began offering cheaper 200 MB and 2 GB plans in lieu of unlimited data. Not being first to the punch could be advantageous for Verizon, as it studies how consumers react to AT&T’s limited plans. That research could lead to a number of different pricing models for Verizon, many of which Stacey covered last year in a GigaOM Pro study of metered mobile data (subscription required).

Verizon could follow AT&T’s lead by offering set packages of data, otherwise known as a tiered pricing model. Customers would choose a plan that best fits their needs in this scenario. AT&T says that 65 percent of its smartphone users use 200 MB or less each month on the 3G network, and 98 percent use under 2 GB, but Verizon hasn’t offered any similar research. As a result, it’s difficult to say what tiers Verizon could offer. Verizon could mix up the model a bit once it begins offering LTE service and the 5 – 12 Mbps download speeds the new technology will bring. Perhaps in lieu of a small or large amount of data, customers could purchase a set amount, and pay more or less depending on what speeds that amount is delivered at. For example, instead of the option of buying 2 GB per month for $25, customers have the option to buy 2 GB at speeds of 1 Mbps for $10 or 2 GB per month delivered at speeds of 5 Mbps for $30. Until AT&T upgrades its entire network to faster HSPA+ or LTE services, it has less opportunity for this type of service plan.

Another option could be based on congestion pricing, much like peak and off-peak utility rates. During hours when more people are using Verizon’s network, customers would be expected to pay more. Conversely, when fewer people are using the mobile broadband service, costs would decrease. Such pricing can act as an incentive for customers to use the mobile web for bandwidth intensive activities during the off-peak times, which allow Verizon to maintain high levels of service during the peak times.

Bandwidth caps are a third option and, to some degree, are already in place for current customers. Purchasing an unlimited 3G plan today isn’t actually unlimited; there’s a 5 GB data cap per month that customers can bump up against and face additional costs. T-Mobile also has a 5 GB cap, but instead of shutting off service or charging overages for additional data, the carrier retains the right to reduce data speeds after the 5 GB limit.

Verizon has plenty of pricing options to consider for its fast, new 4G network, but the one option that customers are least likely to see is the unlimited data plan that they most want.

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  1. Kevin – 2nd paragraph, 2nd sentence, after “Although…” – there seems to be a company name missing.

    Any idea what would drive pricing tiers? Is total data transfer price the problem, or demand spikes on particular towers, or something else? Depending on that, there might be some way to pay for priority against other users (even if Verizon and others would exploit this in slimy ways).

  2. I can understand Verizon is aiming for smartphone and possibly laptop users with tiered pricing, but what about homeowners who will never see cable, let alone FIOS? We do exist. We live in a shadowy land of satellite and dialup, where the light of true broadband never reaches.

    Verizon kindly extended our grandfathered Alltel (TRUE unlimited) aircard contract, but what kind of options will they give me when the tower two miles away is scheduled for completion? If it has LTE backhaul, will VZW push me to accept a ridiculously high price for small caps? I left Wildblue for that very reason.

    I’m not asking for free internet. I would, however, appreciate a compromise, like 50G a month for $50. It’s far less than what people with cable connections demand. There’s an untapped customer base out here waiting for a bit of light.

  3. Congestion-pricing…? Forget it.

    That’s a serious big LOSE – how am I supposed to estimate my cost/month?

    Or are they going to have a dizzying number of rate plans like my power provider?

    Does the big VZ wireless fancy themselves a utility? I guess their customer service is about on-par with your average power or water company.

  4. Tiered data pricing will work if the carriers do a few things.

    1. Rollover or 100% and/or sharing.
    Nobody knows how much data a specific tasks uses. I browse a web site, I download an app (BB’s tell you how big the app download is from AppWorld), I check my FB, twitter, etc…there’s no way I know how many KB I just used out of my plan.
    They should allow rollover. So if you only used 50 MB of your 200 MB then you have 350 MB next month.
    Or they can sell you chunks of data like TMobile is doing with their new Walmart service. $40 for 1GB that can be shared by all devices on that plan and it’s not a monthly cost, it’s a usage cost. So you are paying $40 per GB. So if it could take you 4 months to use it all ($10 month for all devices per month is an awesome deal…compare that to $120 for a $15 per 200 MB monthly plan on ATT).

    And off tier pricing. Maybe during “peak” hours you get charged full price per KB but during off hours you get that same KB for half the cost or more.

    And there should be a way for them to put a “counter” on your phone for data that shows you what you are using and your total in real time. Overlay it on top of your app as you are downloading. Or put it on the home screen of your device.

  5. I really hope they don’t charge according to download speed and bandwidth cap. It’s hard enough to calculate my data usage now without having to visit ATT’s website everyday. Adding speed into the calculation would be nearly impossible. How much speed do I need to visit the nytimes website? What about watching a youtube video? Carriers should stick bandwidth caps and improve on data usage reporting first.

  6. Cracking the Case of HTC’s LTE Phone: Tech News « Friday, September 24, 2010

    [...] LTE phone this past week, Verizon has planned for a more widespread, agressive LTE rollout although it’s being coy with data plan pricing. The carrier previously said it would launch an LTE network this year in 25 to 30 markets that [...]

  7. Kind of funny how cell companies are migrating. Used to be, the focus was on strict minute usage. No unlimited nights and weekends, no mobile to mobile. With time, those were incorporated, and now you have true unlimited voice usage. Flip side, now they want to lock down data, after years of unlimited. Apples and Oranges obviously, because both voice and data have increased tremendously. Yet they are ok moving toward unlimited voice, but have to “limit” data usage. It’s fine to offer tiers. But for those of us that want peace of mind, and don’t want to have to constantly monitor our usage, cause it’s just one more thing to think about in life, give us the unlimited option. That is AT&T’s fail.

  8. On Phones Social is the Killer App & it Will Cost You: Tech News « Monday, September 27, 2010

    [...] already rolled out tiered pricing (with lower tiers!) and Verizon contemplates its moves. However, Verizon’s consideration of a different plan from AT&T, (its CEO Ivan Seidenberg had said he didn’t agree with how AT&T “valued the [...]

  9. Well you can see that there’s been some turning to a smartphone in Verizon lately. But not only. I’ve search a little and found a brilliant site with multiple tafiff plans, that lets you compare one to another. Here it is – http://simtariff.com/. When You do some research yourself, you’ll find a significant growth in costs from O2 to Vodafone.

  10. Verizon Wireless to Light Up 38 Cities With LTE in 2010: Tech News « Wednesday, October 6, 2010

    [...] be prepared to pay for it. McAdam did not release pricing details but reiterated that unlimited buckets of data will eventually give way to tiered data pricing. Even with the added capacity of 4G, there’s only so much to go around, [...]

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