Verizon Wireless will introduce a tiered pricing plan for data within the next four to six months, CEO Ivan Seidenberg told investors during the Goldman Sachs Communacopia Conference on Thursday. He also noted Verizon will not reach a deal to handle the Apple iPhone anytime soon.
The move comes on the heels of AT&T’s introduction of pricing based on usage. Data-heavy mobile applications and increased social networking via phones are prompting the adjustments.
“We do think we have to monetize the investments we make, and you will see us do that over the next four to six months,” said Seidenberg.
Good for the Operator, Bad for the Consumer?
On the face of it, tiered pricing looks like an opportunity for the industry to ratchet up prices, but it may mean lower prices for some low-data users.
“In the case of AT&T, tiered pricing lowered your pricing if you were willing to take a low data point,” Allen Nogee, principal analyst for wireless technology at In-Stat, told the E-Commerce Times. “This is aimed at the people who use an enormous amount of data — the 3 percent who use 40 percent of the data.”
The move to tiered pricing can be awkward in a world where operators want to encourage data usage.
“This is a touchy decision for the operators,” said Nogee. “They didn’t want to do it too soon in the evolution of usage. Users would be turned off. But when people get used to using a lot of data, it’s hard for them to clamp down.”
How Much Data Am I Using?
Tiered pricing may also be difficult for consumers to grasp if it’s based on data used and not minutes.
“People track their minutes,” said Chris Hazelton, research director for mobile and wireless of 451 Group. “Minutes are easy to understand — but what’s a megabyte? People don’t want to manage their use. They want unlimited time.”
Developers May Have to Change Their Data Tune
The switch to tiered pricing will likely affect the development of new applications.
“This will not only impact operators and users, it will also affect application developers,” Hazelton told the E-Commerce Times. “If the application is a bandwidth hog, there will be concerns from subscribers.”
This is a particularly big concern since there has been a massive shift to large data usage.
“A lot of the trends in the industry are going to the use of more and more data,” said Hazelton. “Cloud computing services are targeting devices. Users will need lots of data, and now they’re getting pushed with data pricing.”
iPhone Connection Delayed
During the conference call, Seidenberg noted Verizon won’t be offering the iPhone any time soon.
“It certainly seems like Verizon wants the iPhone, but it would mean a new iPhone that doesn’t currently exist. It would have to be designed,” said Nogee of In-Stat.
There have been some signs that such a phone may be in the works, although it’s far from clear where it would be marketed or which carrier would get the honor, should it come to light.
Chances are, a Verizon iPhone wouldn’t show up until Verizon’s 4G LTE service spreads, suggested Nogee.
“If Apple were going to design a new phone just for Verizon, wouldn’t they want to do it with LTE so it wouldn’t be just another me-too phone?” he asked. “An LTE iPhone would make more sense than a 3G iPhone with Verizon technology.”
The timing of a Verizon iPhone might also depend on when the contract between Apple and AT&T ends, added Nogee.
Another question about the iPhone is whether Verizon would want the product without having it include Verizon-specific branding.
“Verizon may not be willing to have iPhone on its network without services that are branded as Verizon — they get that on Android,” 451 Group’s Hazelton pointed out.
“How about an LTE 4G iPhone only on Verizon?” he mused. “Verizon would break all the rules to get that.”