Whether customers will like Verizon Wireless' new rate structure… (Amy Sancetta, Associated…)
Verizon Wireless customers no longer have to worry about how long they talk on their mobile phones or how many text messages they send and receive -- instead, they'll have to watch how much data they're using.
Verizon became the first major wireless company to scuttle the industry's decade-old business model in which customers pay by the number of minutes they spend talking on their cellphones each month.
For The Record
Los Angeles Times Sunday, June 17, 2012 Home Edition Main News Part A Page 4 News Desk 2 inches; 75 words Type of Material: Correction
Verizon plans: An article in the June 13 Business section about Verizon's new cellular plans misstated what smartphone subscribers would pay if they use more data than their monthly allotment. Under the plans that take effect June 28, that cost will be $15 per additional gigabyte, not $45. Verizon customers who buy data plans for simpler, basic phones will pay $15 for each 300 megabytes above their monthly allotment, or closer to $45 per gigabyte.
Under new plans unveiled Tuesday, they will pay based on the amount of data they expect to use for email, Web surfing and video, while paying a fixed monthly fee for unlimited phone time and text messaging.
Customers will also be able to use the data plan among a number of devices, including mobile phones, tablets and laptops, and to share their data plans with family.
Analysts widely expect the other large carriers -- AT&T Inc., Sprint Nextel Corp. and T-Mobile USA -- to follow Verizon's lead eventually.
But whether customers will like the new structure remains to be seen. The less-expensive plan providing 1 gigabyte of data and unlimited voice and texting costs $90 a month. Under Verizon's current pricing, a comparable plan would be at least $10 cheaper.
Consumer groups saw the price changes as a way for the wireless industry to boost revenue unfairly without providing better services.
"The main goal of these new plans is to get consumers sharing more of their money with Verizon," said Matt Wood, a policy director at media advocacy group Free Press.
"Just when people have started using fewer voice minutes and text messages, Verizon's response is to make them buy unlimited voice and texts. You may want less, but they make you buy more," he said.
The change reflects an evolution in the way consumers are using more versatile smartphones from makers such as Apple Inc. and Google Inc. Because devices such as the iPhone are mini-computers that can send email and text messages, as well as play games, read news and join Skype-like video chats, conventional phone calls have become less central to the way consumers communicate.
The declining use of voice minutes has been a thorn in the side of wireless carriers, which have long built their businesses around revenue they make from voice plans. Certain free calling and texting applications, such as Microsoft Corp.'s Skype and Apple's iMessage, have begun to replace pay services that had been the mainstay of industry profits.
Since the iPhone debuted in 2007, the number of minutes used each month by U.S. cellphone customers has dropped nearly 20%.
Making consumers pay for the increasingly large amount of data they're consuming is the way carriers are looking to fill that gap.
The new payment structure is "a business decision to capture how people are spending most of their time with the device," said Chris Larsen, a telecommunications analyst at Piper Jaffray & Co.
The new plans enable families to pay for buckets of monthly data that they can share across all of their phones, tablets and other cellular devices.
Each device comes with a fixed monthly fee -- $40 for each smartphone and $10 for every tablet -- that includes unlimited texting and phone calls. On top of that, families and individuals pay for a monthly data allocation, starting at $50 for 1 gigabyte and moving up to $100 for 10 gigabytes.
One gigabyte of data is enough to each day send and receive about 100 emails, visit a few dozen Web pages and watch about five minutes of high-quality Internet video.
The plans are called "Share Everything" because the monthly data can be shared among all members of a family, up to a total of 10 devices.
For Verizon customers now paying more for unlimited minutes and text messages, the new plans may lower bills in the short term. But consumers paying for limited services could see monthly costs go up under the new plans, which take effect June 28.
A Verizon subscriber paying $90 for 450 monthly minutes, unlimited text messages and 2 gigabytes of data would shell out $100 under the new system. And customers face stiff penalties if they overshoot their monthly data allocations -- more than $45 for each additional gigabyte.
Customers who aren't interested in a smartphone can have a basic feature phone with 700 minutes of talk time for $40 a month, but text messaging costs extra.
In order to keep their unlimited data plans, current Verizon customers would have to pay full retail price for any future smartphone they buy through the carrier. In the case of the iPhone, that could amount to more than $600 -- about $400 than what consumers would pay to Verizon now if they purchased the phone along with a monthly plan.