There aren't many surprises in the new tiers, which have always been in the roadmap for the carrier and for which leaks had revealed most of the details. Verizon spokeswoman Brenda Raney confirmed to Fierce Wireless that the three new options will include $30 for 2GB, $50 for 5GB or $80 for 10GB. Feature phone users will pay $10 for 75MB of data per month. As expected, overages will set a user back $10 per GB of data.
The plans are just for new Verizon customers; old customers will be able to keep their unlimited plans, even if they upgrade after the July 7 cutoff. Also starting Thursday, Verizon's free hot-spot service will cost current users $30 per month to continue with unlimited usage. New users will pay $30 for 2GB of monthly data to use with the hot spot.
Why this matters Sprint Corp. (NYSE: S) is the only major wireless operator in the U.S. to resist the move to tiered pricing, but it hasn't ruled out the possibility. Verizon's foray into tiers could force Sprint to do the same or -- on a positive note -- pressure its biggest competitor AT&T Inc. (NYSE: T) to expand its tiers to include more data at competitive prices.
The next frontier for all the carriers may be to explore family-style pricing that lets more than one device share a pool of data. Orange (NYSE: FTE) is leading the way on this in Europe, and Verizon and AT&T have expressed interest in the idea. (See New Data Plans Keep It in the Family .)
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Read more on how wireless data pricing has changed in the past year in the U.S.
AT&T wins on the low-end with its 2GB plan $5 less than Verizon's, but Verizon highest end plan is much cheaper - $80 for 10GB of data versus AT&T's $105 for the same. I bet most consumers will fall somewhere in between. I wonder how much tier comparison they'll do before they choose.
Personally, I strongly hope that Sprint resists the temptation to follow the "nickle and dime" approach that AT&T and now Verizon has taken with tier usage levels for data. I refuse to purchase an iPhone because of the high cost of using one with the AT&T and now Verizon data plans. For a business person or someone that travels and uses the data services and their phone to tether their laptop for internet and vpn access, AT&T's and Verizon's data plans are not cost effective. Sprint has so far resisted the move, and at present "T" Moble is advertising that they also have an unlimited data plan. I foresee a lot of business users and heavy data users migrating to Sprint and "T" Moble.
Telco operators have a need to intoduce new tiers based on cirteria's other than just data volumes. Volume based tiers may increase the churn rate.
With the advent of LTE (which is an all IP network) and DPI, operators shall have greater insight into the subscriber usage patterns. Hopefully, operators would be able to identify applications which clog the network. These applications must be deprioritized or charged a premium for use during peak hours.
This can help reduce cost burdens on majority of the users who are not responsible for congestion
In the late 1990's a service provider in Northern Europe evaluated the cost of call level billing vs blanket billing with unlimited calling. They found that the call tracking system and the billing system added so much to the cost of providing services, that for a price to the customers, it was actually lest costly to the service provider to provide unlimited calling on the available bandwidth. They found that the additional cost of equipment, computer systems, billing systems, tracking systems, support personnel, software, and maintenance on all these systems was more than they would make for the additional billing over a 10 year period. They were a very smart group of people with a very diligent group of senior executives to be able to break out of the standard service provider paradigm.
While it is politic paradigm to find ways of adding revenue by the middle management of service providers, it may be that more often it is the equipment and software providers that acutally make the money and not the service provider and their stock holders. This was true of the push to ATM switching in the late 1990's. By the time that the cost of support and maintenance was added to the cost of the ATM call switches, it was found that instead of saving money, they actually cost more per call than the old call switching systems. I suspect this is also true of the "Tier" and "QOS" billing that is being pushed in front of the service provider executive mangaement and ultimately pushed into the cost of services to the end users.
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