July 5, 2011 -- Say good-bye to "all you can eat" pricing plans that let mobile device users send and receive unlimited amounts of data for one flat monthly fee. Verizon, among the last providers to offer such a plan, will start charging by use, later this month: Use a lot of data, and you'll pay more; use a little, and you'll pay less.
The company says in a statement that its new, usage-based pricing will allow customers, regardless of the kind of device they have, to select a level of payment suited to their data use. The new pricing will create more options, says the company, for users of smartphones, and will provide "updated options" for users of regular phones, tablets and notebooks.
Verizon spokesperson Debi Lewis says the philosophy behind the change is simple: "You pay for what you use." When will the change occur? "Shortly, in July," she says.
July 7 has been widely reported as the date.
Craig Moffett, a telecommunications analyst at Sanford C. Bernstein research, thinks consumption-based pricing is fundamentally fairer for the consumer. Heavy users, he says—people watching videos , playing online games or holding video conferences—send and receive data that is "orders of magnitude" greater than data sent by people who limit themselves, say, to sending email.
Without consumption-based pricing, light users wind up subsidizing heavy users. "Your Aunt Tilly," he says, "who only goes online to check the weather, is in effect subsidizing the heavy user in Silicon Valley who's running a wireless data center."
The industry's move away from flat-fee pricing started, says Moffett, with AT&T's struggle to deliver better service to users of the iPhone, which "by its very nature, its sheer usability, drove enormous data usage." AT&T was forced, he says, to do everything it could to increase capacity, including adopting a pricing plan that would "reign in the heaviest users."
Is the switch good news for consumers? "It depends," says Moffett. "If you're in the small minority of superheavy users—and that's a very vocal community: the bloggers of the world—it's bad news. It means the days of your getting a free ride are just about over, and that you'll be paying more. But for smaller users—the average consumer—it's not bad at all. Some will save."
For users of all size, he says, "It's a wake-up call that wireless resources are not unlimited. Like any other resources, they have to be tended with care. If you don't create incentives for responsible use, service quality for everyone will be degraded."
Allan Kieter, president of MyRatePlan.com, a shopping comparison site for users of cell phones and other mobile devices, views the industry's move toward use-based pricing as inevitable. "We've seen T-Mobile and AT&T move to tiered data plans in recent months. We've known all along Verizon would have to go. Ultimately they'll make more money this way."
The change, he says, means consumers will need to make sure they aren't buying more capacity than they need. His own site and those of the providers offer tools that customers can use to estimate their needs, depending on what kind of Internet services they use.