Verizon Wireless plans to make its data-hungry customers pay a lot more, either in service fees or smartphone prices, as it tries to cut costs and boost revenue from data services.
The No. 1 U.S. mobile provider said it will eliminate unlimited data plans for all customers who upgrade their cellphone at a discounted rate, potentially driving more business to its smaller rival Sprint Nextel (>> Sprint Nextel Corporation).
Only customers who pay full price for their cellphones will be able to keep unlimited data service plans for a flat monthly fee of $30 a month.
Spokeswoman Brenda Raney explained the new policy a day after a top company told an investor conference that customers moving to Verizon's high-speed network would have to give up their unlimited data plans.
To convince customers to sign a 2-year contract, Verizon typically shoulders some of the cost of their smartphone in the form of a subsidy it pays to the handset vendor. Today customers who want to keep their unlimited data plan can still get the handset discount.
But when the company kicks off a new shared data plan this summer, any customers upgrading to a discounted handset will have to change from an unlimited plan to a shared data plan whose fees increase with data usage.
This will affect customers on both Verizon's older third generation network and those on its fastest fourth generation service, according to Raney.
Customers will be able to keep their unlimited plan as long as they stick with the same smartphone. But when that phone gets too old, the only customers who will be able to keep their unlimited plan are those who pay the full retail handset price.
This would mean a price increase of several hundreds of dollars for high end smartphones.
For example, the full price of the cheapest Apple Inc (>> Apple Inc.) iPhone 4G is $650, compared with the $200 price for customers who take the discount. The full price for the Motorola Mobility (>> Motorola Mobility Holdings Inc) Droid 4 phone is $550 versus $200 for customers who take the discount.
The shared data plans will allow customers to sign up for a single plan covering more than one gadget, including smartphones and tablet computers.
Verizon Wireless, a venture of Verizon Communications (>> Verizon Communications Inc.) Vodafone Group Plc (>> Vodafone Group plc), has declined to provide any additional details about its shared data plans.
Under today's pricing Verizon Wireless customers without unlimited plans pay $30 a month for 2 gigabytes of data, $50 for 5 gigabytes and $80 for 10 gigabytes. If they use more than their allowance they are charged at higher rate.
Smaller rival AT&T Inc (>> AT&T Inc.) said it also wants to offer a shared data plan. No. 3 U.S. mobile provider Sprint still offers unlimited data plans.
Analysts have said that wireless operators needed to introduce shared plans if they are to convince consumers to connect devices like tablets to the cellular network.
(Reporting by Sinead Carew; Editing by Richard Chang)
By Sinead Carew