Is Verizon's $30 iPhone Data Plan a Good Deal?

Keep in mind: It's only temporary

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Did Verizon just pull a fast one on us? On Tuesday, the country's largest wireless provider elated customers with news that it would offer an unlimited data plan for the iPhone for $30 per month. It was a nice way of one-upping rival AT&T, which recently halted its unlimited plan for all new users. But hold on: later on Tuesday Verizon representatives said the offer was merely temporary and they would adopt a tiered pricing system like AT&T in the "not too distant future." Should prospective Verizon customers be grateful or is this a classic bait-and-switch?

  • At Least They're Being Honest, writes Rik Myslewski at The Register:  "Verizon will now follow AT&T's 'hook 'em, then up 'em' strategy for data plans--although the company is to be credited with admitting up front that unlimited data is merely short-term offer to early adopters."
It’s a wise offer, because iPhone users moving to Verizon will also be losing the ability to use voice and data functionality simultaneously due to limitations of its CDMA 3G network. Verizon needs as few barriers to entry as possible for new iPhone customers, as the carrier has a lot of ground to make up for when it comes to smartphone users. Verizon announced today that only 26 percent of its mobile subscribers have smartphones, up from around 15 percent last year.
  • It's Unsustainable, says Jack Gold, an analyst at J. Gold Associates: "It is interesting that they're allowing an unlimited plan, because in the long term they're unsustainable. There's only so much bandwidth. This is part of the play by Verizon to get customers to move to the iPhone quickly, and to give AT&T customers a reason to jump ship. It's not a bad move."

While Verizon will be adding large numbers of smartphone subscribers, who are expected to spend about double what typical feature-phone customers spend, Verizon will pay a price for adding these customers. The reason is simple: these devices are heavily subsidized. In fact, Fran Shammo, Verizon's CFO, pointed out that the addition of the iPhone and the subsidy that Verizon will pay to offer the device to new customers will cut into profits over the next year. Even though average revenue per user will grow substantially, earnings per share are only expected to grow in the 4 percent to 8 percent range, he said.

  • Will Verizon Offer a Grandfather Clause?  Though this question hasn't been answered in the blogosphere, it's worth raising. Currently, AT&T allows its original unlimited data plan customers to keep their plans. New customers are out of luck. If this is the case for Verizon, it makes sense for heavy data users to sign up ASAP before the offer expires.
This article is from the archive of our partner The Wire.