Verizon Decreases Price Of Voice, Pushes Data

Verizon Wireless took an important step in the evolution of mobile device service pricing. It decreased its voice prices, but increased the push for more customers to pay for data. I expect other service providers to follow. I believe this trend will continue towards a world where voice charges vanish entirely, but usage-based data charges become more common.

First, here's the news, via the Wall Street Journal:

The carrier, which is jointly owned by Verizon Communications Inc. and Vodafone Group PLC, lowered the rates for its unlimited voice plan to $70 a month from $100. It also cut its baseline voice plan, which comes with 450 minutes, to $40. Unlimited text messaging costs $20 more for each.

First, the obvious: AT&T and others will follow. That's how these things work. Verizon has begun a voice plan price war, which is sure to end with cheaper voice rates across the industry. But what about data?

At the same time, Verizon is pushing payment for data plans. Customers who buy a high-end smart phone, which can run applications and surf the Web, already have to pay $30 a month for an unlimited data plan. Now, a $10 plan for 25 megabytes will be required for those with slightly less advanced phones as well.

For some reason, most articles I've read on this don't get the news exactly right. They say that the $10 plan results in a price increase on data. But the way I read Verizon's website, and after speaking with one of its media contacts, I understand data prices staying flat or actually declining. Let me explain.

The new pricing scheme also eliminates a $19.99 plan for 75 megabytes of usage. So that makes it appear that they've increased their price by 50%. But that's false. First of all, the $9.99/25 megabyte plan was also available before. Second, the old $9.99/25 megabyte plan charged 50 cents per megabyte for data overage. That's been slashed to 20 cents per megabyte, which means that if you use 75 megabytes, then you pay $19.99 -- which is the same as before. But that old $19.99 plan also charged 30 cents per megabyte after that while the new $9.99 plan keeps it at 20 cents per megabyte even after the first 75. That means overage is cheaper.

Of course, very heavy data users are still a lot better off with an unlimited plan for $30 per month.

But it's true that Verizon did push the minimum $10 data plan onto more of its phones. So it's herding more users to pay for data along with its voice price cut.

This makes sense. We've entered a technological framework where there really isn't much distinction between voice and data -- there's only data. Applications like Google Voice allow smartphone users to make voice calls through data networks. So I would expect that voice prices will continue to decline, eventually reaching zero. Meanwhile, however, service providers will make sure that more customers are paying for data to replace those losses on voice revenue.

And I would expect those companies to eventually begin increasing the price of data for that reason as well. We're already seeing the relative cost of data increasing here -- since the price of voice declined while data's stayed approximately constant. I also find it notable that Verizon pushed an incremental plan onto more phones -- not an unlimited plan. While a cheaper alternative, it could mark a move towards getting consumers used to paying for data based on usage. There will likely always be high-priced unlimited plans for huge data hogs to enjoy, but these companies would certainly like to make more money off light users through incremental usage plans.