March 26, 2023

Bits Blog: Verizon Unveils Wireless Plans That Cover Several Devices

Amy Sancetta/Associated Press

4:54 p.m. | Updated Adding commentary from a consumer-rights advocacy group and an analyst.

4:02 p.m. | Updated Removing commentary from an analyst who called this a price hike. Verizon has clarified that customers on its current tiered data plans can stay on them.

In a first for the American wireless industry, Verizon Wireless said on Tuesday that it was introducing plans that would allow customers to pay for a certain amount of wireless data and share that allotment across their family’s smartphones, tablets and laptops.

To Verizon, this is an evolution of family plans for cellphones, which offer a shared pool of calling minutes and text messages. The new plans include unlimited calls and texts, but they put limits on wireless data — at a time when mobile Internet use is cutting down on time spent talking and texting.

The shared plans could help Verizon offset the decline in revenue that the trend is causing. Verizon is not the only carrier that recognizes this: ATT, the second-biggest American carrier after Verizon, has also said that it plans to introduce shared plans this year.

Consumers may find the new plans more appealing than having to get separate data contracts for, say, an iPad and a teenager’s phone. But the idea of paying for unlimited texts and calls may not sit well with everyone.

“Verizon is finally delivering something that everybody wants — in a way that nobody wants,” said Jan Dawson, a mobile analyst at Ovum, a research firm. “There are people who want a shared data plan and minimal voice and text messages, and that just isn’t available.”

For Verizon customers, the shared plans are an option, not a replacement for their current phone plans, which involve paying a monthly fee for a certain amount of minutes, text messages and data.

Brenda Raney, a Verizon spokeswoman, said customers with these older plans would not be required to switch to a shared plan, even when they upgraded to a new device.

“The point of this is customer flexibility and value,” Ms. Raney said. “If you have a smartphone and you don’t have a tablet, but you’re at the beach one day and your friend has a tablet, you can activate it right then and there because it’s included in the data plan.”

The shared plans may have repercussions for customers who are clinging to unlimited data plans. Verizon discontinued these last year, but customers who wanted to keep them were allowed to do so. After the shared plans come into effect later this month, Verizon’s unlimited data customers who want to get a new phone at a discounted price will have to pick either a limited data plan or a shared plan. They can keep their old plans only if they buy a new smartphone at its full, unsubsidized price — often hundreds of dollars.

Customers who choose a shared data plan will pay a monthly fee for each device on their account. A smartphone would cost $40 a month, a normal cellphone $30 and a tablet $10. Then there is an additional monthly fee for the shared data pool, ranging from $50 for 1 gigabyte to $100 for 10 gigabytes. A family of three with an iPhone, a regular cellphone and an iPad that wants 10 gigabytes would pay a total of $180 a month.

When an account is close to using up its data, each device on the shared plan receives an alert asking if the customer wants to buy an extra 2 gigabytes of data for $10, Ms. Raney of Verizon said. But if they ignore this and go over the limit, they have to pay $15 for every extra gigabyte they use, she said.

Verizon previously outlined to investors how these plans would help it make more money. Francis J. Shammo, Verizon’s chief financial officer, said at a recent investors’ conference that the company believed that its faster fourth-generation LTE network would encourage people to stream video and generally be heavier users of data, eventually prompting them to buy the more expensive plans. He added that the new plans would help push the old unlimited customers off those plans.

“It is going to be more important that people will start to upgrade in their tiers as they start to really realize the benefits of the LTE network,” Mr. Shammo said. “Over the future time, as they add more devices, they are going to have to buy up into tiers.”

Michael Weinberg, senior staff lawyer at Public Knowledge, a consumer-rights advocacy group, said he was puzzled by one aspect of the new plans. He said he found it odd that customers had to pay an additional fee per device when they were already paying for the data they were using.

“I’m already cutting Verizon a check for a pool of data,” he said. “Why do I have to pay a monthly extra fee just for the pleasure of adding a device to my account?”

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An Uproar on the Web Over $2 Fee by Verizon

The $2 monthly fee, which takes effect Jan. 15, will apply to people who make one-time credit or debit card payments on the phone or online. Subscribers who write checks or have the company charge their credit or debit cards or deduct from their bank accounts each month will not have to pay the new fee.

But Verizon customers nonetheless flooded Twitter with denunciations of the company, setting up online petitions and vowing to use paper to cost the company more money than it would raise through the new fee. Others noted that the people who tended to pay at the last minute were often those who lived paycheck to paycheck.

The outsize reaction in many ways reflects the year that is now concluding. The economy has not improved much, consumers are fresh off their victory in getting Bank of America to rescind its own move to levy a small new monthly fee and airlines and other companies continue to ask customers to pay à la carte for goods and services that were once part of the standard price.

Then there was Verizon, making the announcement in the dead week between Christmas and New Year’s and calling its new charge a “convenience” fee.

“These fees are going to cover the costs of those last-minute payments,” said David Samberg, a Verizon spokesman. “We don’t want anyone to have to pay this.”

So how can customers avoid it? In addition to using a check, automated bank transfer and credit or debit card, Verizon customers can also pay at a Verizon store, by money order, or by using a bank or other company’s online bill payment service. They may also use a Verizon gift or rebate card, or make a last-minute, one-time phone or Web payment by handing over their bank account number and their bank’s routing number.

Verizon Wireless followed other Internet service providers, including Comcast, that have decided to charge fees to customers for certain phone payments. ATT, Verizon’s biggest rival, has not announced plans to impose charges for electronic payments and a company spokesman declined to speculate on whether it might do so.

Gerry Purdy, a principal analyst with MobileTrax, a market research firm, said it made sense that Verizon was charging for over-the-phone payments, because carriers typically must pay a third-party service to handle those transactions. But Internet payments do not require a third party, he said.

“That’s the one that surprises me, because most people won’t charge you for paying on the Internet,” Mr. Purdy said. “When you book a plane ticket online, you don’t get charged a fee.”

Verizon may be imposing a $2 fee on one-time online payments to pressure customers to enroll in an automatic payment option, Mr. Purdy said, because it creates a higher probability that the payments will come in on time.

Mr. Samberg would not say how many people would have paid the fee this month if it existed now. A study conducted by Javelin Strategy Research, a firm that focuses on financial services and payments, found that 23 percent of adults make a last-minute payment to a biller once a month.

Those who would pay it today are people like Grace Lusich, an administrative assistant in San Jose, Calif. She no longer has a bank account after bad experiences with what she believed were unfair overdraft charges. Now, she uses a prepaid debit card from Walmart called the MoneyCard.

“A lot of people in America who are having a hard time paying their bills need a little leeway to wait for the money to come in,” she said. She said she called Verizon each month once she knew her paycheck had been direct-deposited onto her card. Then she makes the payment without ever talking to a human being.

“If you go into their store and an associate helps you, they’re not charging you for that,” she said. “But with the phone, no one is helping me. It’s all automated. And they’re going to accept personal checks, which will cost them more in the long run?”

Mr. Samberg, the Verizon spokesman, said he did not have a breakout of Verizon’s costs for processing various payments.

Those one-time payments cost Verizon money since it must pay merchant fees to card companies and others. The amount it costs Verizon to accept cards in stores could be less because of quirks in how the card companies set fees. It may also be willing to swallow the costs of accepting cards in its stores in exchange for the opportunity to sell upgrades to people who come in to pay their bills.

“They are punishing people who need to wait until the last second,” said David O’Neill, who recently lost his job at a Borders bookstore that closed. He is a former Verizon Wireless customer but took to Twitter anyway on Thursday to argue that the company’s move helps the 1 percent get richer, since it rewards Verizon shareholders.

“We hope it’s not the case that people are forced into paying this,” said Mr. Samberg. “You look at all of the options and choose the one that is best and easiest for you.”

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As Networks Speed Up, Data Hits a Wall

But there’s a catch, of course.

Cellphone plans that let people gobble up data as if they were at an all-you-can eat buffet are disappearing, just as a new crop of data-gobbling Internet services from Netflix, Spotify, Amazon, Apple and the like are hitting the market or catching on with wide audiences.

These services use far more data than simply checking e-mail or browsing the Web, so their heaviest users may find themselves running over their plan’s monthly allotment and paying extra.

The wireless carriers say their tighter limits will affect only a small percentage of customers. And they say they are simply trying to get ahead of an exploding appetite for data and avoid problems with overburdened networks.

Mark Siegel, a spokesman for ATT, said that if current trends continued, the company’s network would carry more data in the first two months of 2015 than in all of 2010. He described the pricing issue as a “balancing act,” adding: “The tiered data plans will meet the needs of the overwhelming majority of consumers. A lot of people think they’re heavy users, but they’re not.”

But analysts say that inevitably more people will find themselves in the “heavy user” category, particularly as more of them trade in their lower-end phones for smartphones and move to 4G networks.

For most people who use their phones to check e-mail, surf the Web and watch an occasional video, the move toward tiered pricing will not immediately raise their phone bills. Verizon’s monthly plan offering two gigabytes of data for $30, announced last month, costs the same as its old unlimited plan, for example. But even now it doesn’t take much for a media-hungry smartphone user to chew through two gigabytes; watching Netflix video for more than roughly 20 minutes a day will do the trick. And an extra gigabyte will cost Verizon customers an additional $10.

“Over time, as you give people faster devices with faster speeds, it’s going to be a lot easier to hit that two-gig mark,” said Philip Cusick, an analyst with JPMorgan Chase who follows the telecommunications industry.

In addition to worrying about overtaxing their networks, wireless carriers are looking for new ways to make money from mobile data and applications, rather than voice minutes.

Over the last three years, the amount of money consumers spent a month on mobile calling declined to $30 from $40, according to Recon Analytics. During the same period, the average amount spent on data nearly doubled, jumping to $13 from $7.

“We’ve fallen in love with data and the utility that we get from it,” said Roger Entner, an analyst at Recon. “The usage pattern has changed dramatically.”

ATT and Verizon have both phased out their unlimited data plans in favor of tiered plans. Verizon offers 75-megabyte plans for basic phones, as well as two-, five- and 10-gigabyte plans for smartphones, topping out at $80 a month. Those in the more expensive plans who go over their limit are charged $10 for another gigabyte, as are ATT customers who exceed the limit on that company’s two-gigabyte plan, which costs $25.

T-Mobile, which ATT is hoping to acquire, offers tiers from 200 megabytes up to 10 gigabytes. Those on the 200-megabyte plan are charged 10 cents for an extra megabyte. And if those with the upper-tier plans exceed their limits, the company slows their data connections until the next billing period.

Sprint is the last carrier to hold onto its unlimited data plan, but analysts and industry experts say it is unlikely to last.

All of the carriers let customers track their data use through their Web sites and on their phones, and they send alerts when customers are in danger of going over.

Of course, those who want to avoid paying more can simply wait until they are connected to a Wi-Fi network to, say, download high-definition videos, since this will not count against the monthly limit. But that doesn’t help someone who wants to stream movies or music on a long evening commute.

Terry Hartup, 34, who works as a technology consultant in Clearwater, Fla., said he was frustrated that his connection might be slowed if T-Mobile decided he was using too much data.

“These new services are coming out that let us do more, but the pipe is getting smaller and smaller,” he said. “And costing us more.”

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