Verizon Wireless to offer free voice and texting, boost cost for data use
By Cecilia Kang,
Verizon Wireless announced Tuesday that it will provide voice and texting services free of charge while boosting its billing rate for data, a radical shift that underscores the preeminence of the Internet and the end of the phone era.
Those charges will make a family’s monthly wireless Internet bills — often hundreds of dollars — creep even higher as carriers end programs for unlimited access and roll out plans to charge based on how much data is used, analysts say. Verizon’s popular 2-gigabyte plan will double in price under the plan, which begins June 28 for new customers.
Verizon said it would allow families to share data plans, ranging from $50 for 1 gigabyte to $100 for 10 gigabytes. It will charge $40 for every smartphone connected to the plan and $10 for each tablet. The new plan is optional for Verizon’s 93 million subscribers.
“We listened to consumers who were telling us they wanted to share data and not to pay on a [per-] line basis or think about voice or messaging plans. We are responding to that desire,” Tammi Erwin, Verizon Wireless’s chief marketing officer, said in an interview.
Under the new plan, a family of four could easily spend $200 a month for three smartphones and a tablet with a shared data limit of 6 gigabytes. One user with a 2-gigabyte plan for $60 would blow through the limit by streaming 30 minutes of video and five minutes of music and visiting five Web sites each day for a month.
And as consumers are expected to connect more devices to the Internet and use applications that require more bandwidth, such as high-definition video and games, the costs for families are set to soar, analysts say.
“The whole industry sees the future in data, which is how they will differentiate themselves with new pricing and billing models,” said Roger Entner, head of the research and consulting firm Recon Analytics. “So it will drive more adoption of devices into these bigger plans.”
The rising costs worry consumer advocates, who say Internet service is being added to groceries, gas and child care as top budget items in homes.
In most U.S. homes, those wireless costs will be added to more than $100 in fees from cable providers for television and Internet.
“The problem is that there isn’t enough competition,” said Parul Desai, policy counsel at Consumers Union. “We are concerned that consumers are given fewer options and more expensive plans.”
Verizon, however, said consumers want bills that are simplified, as well as the ability to share data plans with other family members to avoid overage charges. And the firm, which is trying to buy more wireless airwaves from major cable companies to bolster its networks, said it has to manage consumption so that its networks aren’t overloaded.
But the limits today will soon feel too low, analysts say. Half of all cellphone users in the United States have smartphones. Tablet users are among the avid viewers of online streaming videos. And those applications suck up lots of bandwidth. Netflix traffic makes up 30 percent of data on major Internet networks during peak hours, according to data analytics firm Sandvine.
Comcast is experimenting with bigger data caps for Internet users. Its cap of 300 gigabytes isn’t reached by the majority of users today, but in a few years, higher-resolution videos and games will put that limit easily within reach, according to Sandvine chief executive Dave Caputo.
The new usage-based billing plans have drawn fire from big content companies such as Netflix, which complain that the higher prices might limit use of their services.
Federal regulators have blessed the new billing programs. Federal Communications Commission Chairman Julius Genachowski said last month during a cable industry trade show in Boston that he believes “usage-based pricing could be healthy and beneficial.”
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