June 13, 2012 in Business

Verizon to phase out existing phone plans

Company looks to bundle all data-enabled devices
Peter Svensson Associated Press
 
New option

Existing Verizon Wireless customers have a choice to make. They can stick with their current plan or switch to one of the company’s Share Everything plans when they become available on June 28. Under the new plans, subscribers pay for two things: the pool of wireless data they use every month and the devices they add to the plan.

NEW YORK – Verizon Wireless, the nation’s largest cellphone company, is phasing out nearly all of its existing phone plans and replacing them with pricing schemes that encourage customers to connect their non-phone devices, like tablets and PCs, to the Verizon network.

The revamped plans let families and other subscribers share a monthly data allowance over as many as 10 devices – the biggest overhaul in the price of wireless service since the cellphone became a mainstream device. The idea is likely to be copied quickly, at least by AT&T Inc., which has already said it is considering introducing shared-data plans soon.

Verizon’s move “is the most profound change to pricing the telecom industry has seen in 20 years,” Sanford Bernstein analyst Craig Moffett said.

For Verizon, the approach reflects a desire to keep growing now that nearly every American already has a phone.

In the first quarter of this year, phone companies, for the first time, reported a drop in the number of phones on contract-based plans, which are the most lucrative. To keep service revenues rising, companies are betting on increased data usage, and that means getting more data-hungry devices on their networks.

Verizon’s new “Share Everything” plans, announced Tuesday, will become available June 28. They include unlimited phone calls and texts and will start at $90 per month for one smartphone and one gigabyte of data.

If used only with a smartphone, “Share Everything” prices are lower than for current plans with unlimited calling and texting, but higher than plans with limited calling and texting.

The plans will push many subscribers toward spending more by including unlimited calling and texting by default. Unlimited calling plans provide peace of mind, but not many people need them, and the average number of minutes used is declining.

From Verizon’s perspective, offering unlimited access is an efficient use of its network because calling and texting take up little capacity. Data usage, on the other hand, consumes a lot of network resources.

The savings will come to subscribers who add more devices to their plans. In such cases, the new pricing system will be cheaper compared with separate data plans for each device. Today, few consumers put tablets on data plans, probably because they dread paying an extra $30 or so per month, on top of their phone bills.

Under “Share Everything,” adding a tablet to a plan will cost $10 per month. Adding a USB data stick for a laptop will cost $20.

Verizon’s limited calling and texting plans will disappear, except for one $40-per-month plan intended for traditional cellphones. Verizon is keeping its limited-data plans for single non-phone devices, like the $30 tablet plan.

Current Verizon customers will be able to switch to the new plans or keep their old ones, with one exception: Those who have unlimited-data plans for their smartphones won’t be able to move those to new phones, unless they pay the full, unsubsidized price for those phones. (For example, an iPhone 4S that costs $200 with a two-year contract costs $650 unsubsidized, with no contract.)

Verizon stopped offering unlimited-data plans last summer. The industry as a whole is moving away from the plans, since the data capacity of their networks is limited.

Under the new plans, subscribers can stop worrying about monitoring the number of calling minutes or text messages their families use in a month, but they’ll have to keep a close eye on data consumption. Verizon will allow subscribers to adjust their data allowance from month to month, but if they go over their monthly allotment, that will cost $15 per gigabyte.

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