On July 7, Verizon will become the third major mobile phone carrier to ditch its unlimited-data plan and go to tiered pricing, following AT&T and T-Mobile.
You could see it as a simple supply-and-demand issue. The use of data by smartphone users has grown 89 percent, from 230 megabytes (MB) in the first quarter of 2010 to 435 MB in the first quarter of 2011, according to a Nielsen study. Data capacity — the supply — is not growing at that rate. And growth costs money.
Tiers put the onus on consumers to either use less data or pay more for the data they use (or both).
A study by Validas, a company that analyses its customers’ bills to match them with an efficient phone plan, said that the upcharge on Verizon smartphone users was steep. Under the current plan, Verizon’s unlimited data plan is $30. Under the new tiered service, the lowest priced plan, 2GB per month, will be $30. Other tiers will be 5GB for $50 and 10GB for $80. Overage is $10 per 1 GB.
Validas said it studied 11,000 Verizon Wireless bills that had been submitted for analysis and found that 96 percent of Verizon smartphone users consumed less than the 2GB of the minimum tier each month. In fact, 36 percent used less than 75MB of data. And less than 1 percent of the Verizon Wireless users consumed more than 5GB of data.
That means that most consumers won’t have to spend any more than they did for the unlimited plan. But that might be cold comfort to people who buy the unlimited plan as a kind of insurance policy — they overpay so they never have worry about going over, even if in actuality they use nowhere near the limit.
I’m not sure Validas’s suggestion of more tiers of service so that people can be more closely matched to their actual usage is the answer either. For one, mobile contracts are confusing enough as it is, adding more tiers won’t make it any easier. “It is a fine line between giving the consumer too many options so it’s confusing, and too few so it doesn’t fit,” said Dylan Breslin-Barnhart, a Validas spokesperson.
The second reason more tiers might not make sense is that with the rapid increase of data use, Verizon may have built in reasonable room for growth — their lowest-end users might be burning up close to 2GB of data by the time their contracts run out in two years.
In the meantime, you have just a day to sign a new contract under the old unlimited plan.