Verizon's LTE launch: What happened to innovative data pricing?

Sue MarekAfter much anticipation, Verizon Wireless (NYSE:VZ) announced that it will launch its 4G LTE service in 38 markets and 60 airports on Sunday. During a conference call with the media, Verizon Wireless Executive Vice President and CTO Tony Melone touted LTE's faster downlink (between 5 Mbps and 10 Mbps) and uplink (between 2 Mbps and 5 Mbps) speeds, and he emphasized the fact that LTE is more responsive and has one-half the latency as compared with today's 3G networks. 

And while this increase in speed and responsiveness sounds wonderful to me, I have to admit I was disappointed when Melone provided details on how Verizon will price its new 4G LTE service. Instead of rolling out some breakthrough pricing plans that will give consumers an incentive to jump on Verizon's new "lightning fast" network, the company is resorting to a familiar model. The first plan offers 5 GB of data for $50 per month. The second plan offers 10 GB of data for $80 per month. If a customer goes over (and Melone said they will be notified via text message of their data usage when they hit 50 percent, 75 percent, 90 percent and 100 percent of their allotted bucket), they will be charged an additional $10 for every extra GB they use. 

Of course, to jump on Verizon's super-fast LTE network, consumers have to fork over $99 for a USB modem (with a $50 rebate) and sign a two-year contract.

Interestingly the 5 GB LTE plan is priced $10 per month cheaper than Verizon's 5 GB 3G data plan, though the LTE service provides much faster speeds. Melone explained that the company believes a significant amount of customers will embrace LTE and 5 GB will not be enough so instead they will gravitate to the $80 per month plan. But at the same time, for those who want to try the LTE network, the $50 plan will give them the option of trying it out.

When asked about the sedate nature of the rate plans, Melone said Verizon wanted to keep its LTE debut simple and that we should expect "new service plan paradigms" in the future. "We felt a simple, straightforward approach was best," he added.

But is Verizon's conservative pricing approach the best option? Mark Lowenstein, managing director of Mobile Ecosystem, thinks it makes sense. "Verizon does not want to set a low bar for LTE. I believe they want to charge a ‘premium price' for what they see as a service with ‘premium capability,' compared to other 3G/4G services out there."

And Lowenstein noted that Verizon isn't trying to position LTE as a broadband replacement service, similar to what Clearwire (NASDAQ:CLWR) is doing with its Clear-branded service. "At $80 per month--10 GB is at the low end of typical household broadband usage--that's too expensive for most consumers, and the overage charge can get steep," Lowenstein said.

But I think the price-conscious heavy bandwidth user will realize that for $45 per month they can get unlimited mobile WiMAX service from Clearwire and not have to worry about racking up overage charges. Clearwire executives have repeatedly said Clearwire subscribers typically consume about 7 GB of data per month. If Verizon's customers make use of the carrier's network in the same way, they will see their $50 per month bill shoot up to $70 per month, making Clearwire's offering look like a bargain.

Perhaps early adopters and business users will be lured to Verizon's new 4G LTE service. But I think the real winner in the mobile broadband race will be the operator that can come up with innovative pricing packages (such as creative bundles and family broadband data plans) that will entice the mass market consumer to embrace 4G. Come on marketers--there's got to be a more creative solution than this. --Sue

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