Verizon Caves to the Dark Side

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Verizon Wireless is buckling under the weight of Apple's (Nasdaq: AAPL  ) iconic iPhone.

Verizon (NYSE: VZ  ) CFO Fran Shammo -- speaking yesterday at the Morgan Stanley Technology, Media & Telecom Conference -- warned that the gravy days of unlimited data plans are coming to an end.

"Why did we do the unlimited $30 plan on the iPhone," Shammo asked rhetorically. "Well, the reason we did that was we didn't really want to put up a barrier to anybody who wanted to come over and experience the Verizon Wireless network."

Well, the barrier's coming back up. Verizon Wireless -- a joint venture between Verizon and Vodafone (Nasdaq: VOD  ) -- plans to revert back to offering only tiered data plans. The shift should happen "in the mid-summer timeframe" according to Shammo.

It's not a surprise, but I was hoping it would go the other way. Instead of AT&T (NYSE: T  ) pulling Verizon Wireless into tiered plans that discourage smartphone usage in the wild, I was hoping that Verizon's success and the lack of iPhone exclusivity would force AT&T to come back to its unlimited data deals for new accounts.

After all, it's not as if frustrated smartphone owners have been raving about AT&T's network since the tollbooths went up. It's not as if AT&T was losing money overall in serving up unlimited data.

I have rarely come close to tiered caps while using AT&T, but I've stuck to being grandfathered in to the unlimited plan because I love the value proposition of a good smorgasbord. I hate feeling as if the clock is ticking whenever I'm checking email or streaming Pandora on AT&T's 3G network.

It's not a coincidence that Verizon is eyeing a rate plan change during the summer. The fifth generation of Apple's iPhone will likely hit the market come June. AT&T did the same thing last year.

Once again, Apple's vision is obstructed. A world of smartphones and unlimited apps will once again be held in check when Wi-Fi hotspots aren't around.

I know it's not just Apple and Verizon shutting down the buffet line. Sprint Nextel's (NYSE: S  ) Virgin Mobile USA turned heads when it began selling Novatel Wireless' (Nasdsaq: NVTL) MiFi portable hotspots with unlimited data for $40 a month last summer. It nixed the plan a couple of months ago.

This may not seem like a big deal now, but it will be when consumer broadband providers install ticking time bombs into routers. It can happen. It's already happening on the extreme end of the data hogging.

Welcome to the dark side, Verizon. Obi Wan is oh be gone -- and he was our only hope.

Are unlimited data plans history or will they make a fashionable comeback? Share your thoughts in the comment box below.

Vodafone Group is a Motley Fool Inside Value recommendation. Apple is a Motley Fool Stock Advisor pick. The Fool has written puts on Apple. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has unlimited distaste for limited data plans. He does not own shares in any of the companies in this story, except for Vodafone. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (8) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 02, 2011, at 3:24 PM, LindsayLilHo wrote:


    1. Verizon PROMISED and stated by their CEO that smart phones would not go over $199.00 on a 2 year upgrade. New phones now up to $299.00. A VERIZON LIE!!!

    2. Verizon told new customers when they signed up that they would get the new every 2 plan as long as they were customers. NOW VERIZON TAKES THAT AWAY, AND IN THEIR OWN WORDS, TO INCREASE PROFITS. Another Verizon Lie.

    3. Verizon only offers customers one unlimited data plan, even to those that use very little data. THIS MEANS VERIZON CUSTOMERS THAT USE LITTLE DATA *** PAY *** FOR HEAVY USERS. Verizon did this in an effort to draw AT&T customers to Verizon. BUT WERE WILLING TO SCREW EXISTING VERIZON CUSTOMERS TO DO THIS.

    4. Verizon has LIED TO ITS CUSTOMERS ON A REGULAR BASIS. Promises made and broken. CUSTOMERS SERVICE LEVELS HAVE STEADILY DROPPED OVER THE PAST 10 YEARS FOR THE SAKE OF INCREASING PROFITS. I have been a customer over 10 Years and watched more and more of their Customer Service taken away to increase PROFITS.


    AT&T now beats Verizon on all levels of customer service and pricing.



  • Report this Comment On March 02, 2011, at 9:43 PM, kingstonstock wrote:

    That is why we use Sprint.

  • Report this Comment On March 03, 2011, at 9:54 AM, Acorn17 wrote:

    It was only a matter of time. Verizon, AT&T, Sprint etc. are all finally coming around to the reality that there is no need to subsidize everything. Much of the rest of the world does not and now that no one is "exclusive" with the iphone or anything else as AT&T once was, there's even less incentive to do it now.

    In much of the world, the cost of the phone itself isn't subsidized at all either -- this still baffles me, why the US does it. If you want an iphone in much of Asia (where I live), you plop down $6-700 bucks or more and then pay as you go on the usage. Then a lot of the Nokia and Android phones start to look a lot better because they cost a lot less -- you pay the same for the data though.

    It seems like Apple has the most to lose (along with the customers) in this deal -- most capable phone and largley the phone of choice for the data hogs. I wonder if the day of subsidizing smartphones to the tune of 60%+ off the retail price is coming to an end sometime soon as well.

    For those who use less bandwidth and like the capabilities of a smartphone for email and more casual use, this may not be such a bad deal if they come out with a cheap tier in the plan. And anyway it seems reasonable that those who eat up the most bandwidth should pay the most towards all those capex charges as the networks have to add massive infrastructure over the next decade to handle it all. I might seriously look at investing in US telecoms with fat yields if the tiered plans become more profitable and especially if they quit subsidizing smartphones. They would have the chance to add significant cash flow growth (after the infrastructure build) for the first time in years. A great combo with already fat dividend yields.

  • Report this Comment On March 03, 2011, at 1:10 PM, Ivan0310 wrote:

    Nope, tiered pricing with caps is here to stay. It's only a matter of time before Sprint follows suit. Not because they are necessarily losing money with an unlimited offering, but because they just aren't making as much money as they could otherwise.

    Sprint's network has been notoriously plagued by poor quality issues for years, and their plan pricing is really the only thing that is attracting new customers. Being the first to '4G' data didn't really attract as many new subscribers as they might have hoped. In time, a dwindling consumer-base and falling number of new users will force Sprint to rethink their strategy and monetize their network in a different fashion.

    What we really need to worry about is the threat of the big companies like VZW and ATT deciding to not only tier the amount of data offered but the price as well. These companies are against net neutrality. The loss of such an ideal only means losses for the consumer.

  • Report this Comment On March 03, 2011, at 1:11 PM, Ivan0310 wrote:

    EDIT: What we really need to worry about is the threat of big companies like VZW and ATT deciding to not only tier the amount of data offered but the SPEED as well.

  • Report this Comment On March 03, 2011, at 1:22 PM, TheDumbMoney wrote:

    This was stupendously predictable, as was/are increasing complaints against Verizon now that its network, too, is being taxed by iPhone usage.

    Though I suspect Lindsey up top is in AT&T's p.r. department....

    Long T. I like Verizon, too, though I wish I had simply bought VOD when it was cheap a year ago.

  • Report this Comment On March 03, 2011, at 1:58 PM, earlyseller wrote:

    I hope my rant with VZ is at an end after all the misrepresentations, unauthorized changes and "Outright lies" that I've endured. First they ignored written complaints asking why my monthly bill increased so much without an increase in serc\vices; Then they tag teamed me from customer (dis)service and eventually threatened me with a penalty of $345 for early termination of a NON-existent contract. To top it all off I get an offer of FIOS TV, Internet and Phone for $79.99 at the same time we are adjusting a bill for Internet and phone only for same $79.99. Boy did I blow that smoke up you know where. SAGA continues as "management team learns to read a calendar. You really don't want that explained even though it's hilarious. In Summary, Verizon is an alleged communications company that does not know how to communicate with its employees or its customers. PS How many discount amounts appear on your bill? Straight talk is a "NO NO!" Because BS prevails if you let it. Fight them at every baud, bit and byte on your bill.

  • Report this Comment On March 09, 2011, at 4:13 PM, TheDumbMoney wrote:

    Here is the text of my last reply to my T pitch, which I posted on January 27th:

    "Here's how it's gonna go down: T is going to underperform VZ, and the market, for say the next six months. Then, the novelty of losing iPhone exclusivity will wear off, and also people are going to realize VZ is not any better, and is in some ways worse, than T. And, around then VZ will re-set (or annouce it is) all of its plans so that it has the same tiered data pricing T does. People are also going to realize that trade-ins and iPhone rebates have crimped VZ's margins, and that not having iPhone exclusivity has expanded T's margins. People will have forgetten the iPhone-generated strains on T's network, which will be largely remedied. Then T will outperform the market again. Now will it actually be six months? Or will it be three? Or twelve? That I don't know for sure, but that's how it's gonna go down generally. And then, too, VZ is going to have to start paying dividends to VOD, I think in 2012. "

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