Verizon has taken a leadership position in addressing a market need. Shared plans for voice had become very popular, attracting some 60 percent of post-paid subscribers at AT&T and Verizon. There was clearly a need to do so for data, given the overly expensive and unwieldy process for putting additional family members and/or connected devices on a plan. From a net pricing perspective, Verizon's Share Everything will not radically alter the equation. In some scenarios you will pay a little more, and in others you will pay a little less. Noteworthy, however, is the simplicity of the new structure. There are two main decisions to make: how many devices do you want connected to the network given the incremental fixed monthly price for each; and how much data do you think will be consumed across those devices/users. The decision tree only a few short years ago was much more complex: which combination of voice/text/data/email/ancillary services, for each line.
I believe that there are three aspects to Verizon's strategy, and what it means for consumers, that have been under-explored. First, Verizon is sending a signal to consumers and that they can Skype, Navigate, FaceTime, and iMessage all they like but it's not going to translate to a cheaper voice/messaging plan or a lower overall bill. Verizon is also telling Apple, Google, and the over-the-top (OTT) world that they're happy to support all this innovation but there it doesn't translate into a free lunch. It's OK to be "The Pipe."
Second, even though Verizon is putting into place a straightforward structure to connect multiple devices per account, data services remain expensive. A household with three smartphones and a feature phone, on a 6 GB plan, will be spending $13 per GB and will have a total bill of circa $250 by the time taxes and fees are added up. That's 40 percent higher than the average household's Triple Play cable bill. As for data services, an unbundled $50 fixed broadband data plan costs $2.50 per GB (based on average household data usage of about 20 GB), and $0.20 per GB if the typical broadband "cap" of 250 GB is considered.
Verizon, and the other operators are basically saying, "connect all the devices you like but don't use them [on our network] too much". FaceTime or Netflix might work great on 4G, but current wireless pricing structures do not encourage rich media over cellular. This is the operators' way of telling consumers, developers, and regulators that it costs a lot more to deliver data over cellular than over fixed broadband. Many have used the analogy that Share Everything is the data equivalent of what we have seen with shared voice minute plans for the past 15 years. But don't expect to see the precipitous decline in data pricing that we saw with voice, unless the economics change significantly. Technology evolution will be part of this, and so will the FCC getting more spectrum into operators' hands, and soon.
Third, Verizon is carefully managing Wall Street with this plan. It was at a financial analysts' meeting that CFO Fran Shammo telegraphed the company's intention to introduce shared data. The complexity of offering a structure that is neither a significant price increase for the average consumer, nor dilutive to its revenues or margin, cannot be underestimated. Hence the conservative approach to data pricing.
Finally, a word of advice to Verizon, with respect to how overage is treated in Shared Everything. Although Verizon is providing good tools to help subscribers manage and monitor their data usage, the overage charge of $15 per GB is steep. A better approach would be to automatically bump subscribers up to the next tier plan when they incur overage. That would serve the dual purpose of preventing the consumer and PR backlash we saw with voice and text overage, plus encouraging subscribers to right-size their data plan. With multiple devices and users on a shared data plan, there is greater risk for something to go awry in a given month. Verizon should steer clear of overly penalizing subscribers in the early innings of this new structure.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.