Verizon, in a Reversal, Brings Back Unlimited Data Plans
February 12 2017 - 7:33PM
Dow Jones News
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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