Verizon gets defensive over data plan freak-out

Verizon Wireless (NYSE:VZ) is trying to calm customer panic over its Share Everything data plans, the launch of which has drawn a comparison to last summer's Netflix debacle.

Social networking sites such as Facebook and Twitter are awash in angry comments regarding Verizon's announcement that June 28 it will launch its Share Everything plans, which will include unlimited voice minutes, unlimited text, video and picture messaging and a single data allowance for up to 10 Verizon devices.

Steve Mesnick, Verizon Wireless' head of marketing, defended the new shared data plans to ComputerWorld, saying existing customers will not have to adopt the Share Everything plans, which will primarily save money for workgroups and families with multiple devices.

"We're allowing the existing customer base to have a choice ... we're not forcing anyone to more to new plans... I take exception to [comments] of people leaving Verizon," he said.

Late on June 12, hours after it announced the new plans, Verizon tweeted a message addressing the growing consumer concerns, including a link to the Droid Life website, which in turn sought to quell the consumer uprising with a post that started out, "We see in the comments that some users are freaking out a bit and are wondering if they will be forced onto one of Verizon's new Share Everything plans. The answer is no. Let me say that one more time, so that hopefully, it can be the last. You do not have to switch to Verizon's Share Everything plans."

Nonetheless, a comment to FierceBroadbandWireless on June 13 from one long-time Verizon customer, who is on a family plan for voice, reflected much of the confusion permeating the marketplace. "They're going to make us change our plans and go to these expensive new ones," he said.

An analysis of Verizon's new pricing shows that the new plans will benefit groups with multiple devices but will be costlier for individual subscribers who restrict their mobile voice, data and text use. Many of those individuals seem panicked over the prospect of paying a minimum of $80 per month, which as of June 28 will be the cost of Verizon's cheapest smartphone plan, offering 350 megabytes of data per month that cannot be shared. A smartphone customer on the lowest-priced Share Everything plan will pay $90 for unlimited voice, text and 1 GB of data, which is $20 more than Verizon's current entry-level smartphone plan, which costs $70 for 450 minutes of talk time, no texts and 2 GB of data.

Further, Verizon will provide two entry level price plans for new customers, including a plan with 700 minutes and pay-as-you-go messages and data for $40. The other plan includes unlimited talk and text plus 300 MB of data for $70. And as Mesnick noted, Verizon customers will be allowed to remain on their grandfathered price plans.

Independent industry analyst Rob Enderle told ComputerWorld that the extensive negative reaction engendered by Verizon's pricing announcement "is similar to the Netflix mistake last year that almost sunk that company." He was referencing Netflix's ill-fated effort to raise prices for physical DVD rentals and rebrand the DVD delivery service as Qwikster. Enderle predicted Verizon, like Netflix, could chase away customers with the dramatic pricing changes it is enacting through Share Anything.

However, Mesnick said the new data plans will eventually be embraced because Verizon interviewed 50,000 customers regarding their opinions and announced the changes well in advance of their implementation in order to give current and potential customers ample time to absorb and appreciate them.

He acknowledged that one change, requiring current unlimited data users to pay full price for a new smartphone when they renew their contracts in order to retain their unlimited plan, "would be perceived negatively, so we weren't surprised.".

Mesnick told ComputerWorld that a "healthy percentage" of Verizon's smartphone customers are on unlimited data plans and suggested that in addition to needing to buy a new iPhone at the full unsubsidized $649 sticker price to keep unlimited data, an unlimited user might also want to activate an older device they already own or buy an inexpensive one on eBay.

Research firm iGR has estimated that of the combined subscriber base of Verizon Wireless and AT&T Mobility (NYSE:T), 38.7 percent are on grandfathered unlimited data plans.

"The importance of this client base cannot be overstated--unlimited mobile data plan users are some of the most valuable subscribers in the industry," said Iain Gillott, president and founder of iGR. "Our research shows that these two carriers need to be very careful to offer a migration plan to replace the grandfathered unlimited plans that provides the data service, value and recognition that meets these valuable consumers' needs."

Now that Apple's (NASDAQ:AAPL) iPhone and devices based on Google's (NASDAQ:GOOG) Android OS are available from no-contract operators with unlimited plans, "AT&T and Verizon Wireless need to tread very carefully," said Gillott.

Verizon's efforts to quell consumer discomfort are not being aided by articles such as one in Forbes titled, "Verizon declares war on moderate data and text users," while CNET wrote that "Verizon's shared data plan is a raw deal."

Forbes suggested Verizon's new pricing will help it slam Skype and WhatsApp before they erode more of the operator's voice and texting revenue because customers will be forced to pay for unlimited voice and text under new plans anyway, detracting from the allure of third-party VoIP and messaging apps. Further, customers with tablets might be more likely to add 3G or LTE data rather than relying upon Wi-Fi, since a tablet data connection will cost just $10 more over the $90 base price for service.

Despite the furor, numerous analysts, articles and blogs have supported Verizon for its gutsy changes, lauding the company for introducing family-friendly shared-data plans that many consumers have desired. A Facebook protest group, launched initially in April and retitled "Stop Verizon from taking money from its loyal customers," has only attracted 63 likes at deadline.

Further, Verizon's price changes are likely to be copied by other operators, particularly AT&T, which has repeatedly signaled its interest in offering a shared-data plan and flat-rate pricing for unlimited voice service.

For more:
- see this Droid Life post
- see this Billing and OSS World article
- see this ComputerWorld article, this article and this other article
- see this Forbes article
- see this CNET article
- see this iGR release

Related articles:
Why Verizon is offering shared data plans
AT&T's Stephenson: Verizon's shared data pricing 'not a surprise'
Entner: Shared data pricing has arrived
Verizon launches 'Share Everything' family data plans
AT&T's Stephens: Purpose of shared data is to attract new devices to network

Suggested Articles

With CBRS entering the commercial phase, entities like Google are emphasizing products for the entire ecosystem, not just the SAS part.

Thomas Marzetta, originator of Massive MIMO technology, was appointed director of the research center at the NYU Tandon School of Engineering, replacing Ted…

T-Mobile executives reiterated their plan to use the proposed merger with Sprint to leapfrog competitors AT&T and Verizon in 5G.