By Ryan Knutson 

Verizon Communications Inc. will start selling unlimited data plans on Monday, the first time it has offered such a service since 2011 and a sign that intense competition is forcing the nation's largest carrier to respond.

Sprint Corp. and T-Mobile US Inc. have been chipping away at Verizon's customer growth, thanks in part to those carriers' aggressive pricing for unlimited data. Last year, AT&T Inc. started offering unlimited data plans to customers who also sign up for its DirecTV satellite service.

Verizon added 2.3 million of the most lucrative type of monthly customers in 2016 -- only about half the 4.5 million it added in 2015. The company recently cautioned that profit and sales growth this year will be flat from 2016.

The new plan is a stark change in strategy for Verizon, which has spent years trying to get customers to pay for data based on usage and recently raised prices on certain fees. Last month, Verizon's finance chief, Matthew Ellis, said on a conference call with analysts that unlimited data plans were "not something we feel the need to do."

At $80 a month for a single smartphone, Verizon's new unlimited plan is only $10 more than a current Verizon plan that includes just 4 gigabytes of monthly data. By comparison, T-Mobile is selling unlimited data for $70 for one line, including taxes and fees.

Four Verizon devices with unlimited data will cost $180 a month. Under its previous pricing, plans in that price range typically required families to share around 20 gigabytes.

Sprint and T-Mobile have been targeting Verizon's customer base with unlimited offerings, which they began advertising heavily last fall. In recent Super Bowl commercials, both carriers slammed Verizon for its expensive bills. Sprint's ad went so far as to show a father faking his own death to get out of a Verizon contract.

But Sprint and T-Mobile's unlimited plans typically come with some caveats -- such as only allowing for lower quality video streaming. Verizon says its unlimited plan allows users to stream high-definition video.

Like other unlimited plans in the industry, Verizon says it might slow data speeds for some users on congested cell towers if they have consumed more than 22 gigabytes of data in a single month. Verizon says two-thirds of customers don't use more than 5 gigabytes of data a month.

Verizon spokesman Jeffrey Nelson said the new plan wasn't a response to competition, rather it was a sign of network quality. "This is not following anybody," Mr. Nelson said. "This is offering unlimited with great confidence that our network is built for it."

The new plans will be available to both existing and new customers starting Monday. Verizon will also continue to sell plans with monthly amounts of data.

Verizon's pricing change will likely be seen by many public-interest groups as evidence against further consolidation in the wireless industry.

Since regulators blocked AT&T's planned acquisition of T-Mobile in 2011, prices have come down while carriers have spent billions of dollars investing in their networks. T-Mobile reshaped the industry starting in 2013 by doing away with two-year contracts and eventually selling unlimited data.

Regulator opposition also quashed a potential merger between Sprint and T-Mobile in 2014. Since then, Sprint has improved its network quality and started adding customers again after years of losses.

That competition has pushed carriers to offer larger and larger data allowances to compete -- culminating with the return of unlimited plans. Such plans disrupt the industry's preferred business model, which was to treat data just like voice minutes -- the more you use, the more you pay.

It is more difficult for wireless carriers to offer unlimited plans than it is for cable broadband companies because wireless customers effectively share the same airwaves when connecting to a cell tower. The more customers streaming music or video simultaneously the slower speeds are for everyone.

Verizon says it has been adding additional cell antennas throughout the country so that fewer people will connect to each tower, which reduces the traffic on each site and gives customers faster connections.

Write to Ryan Knutson at ryan.knutson@wsj.com

 

(END) Dow Jones Newswires

February 12, 2017 19:18 ET (00:18 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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