Verizon Is Crashing Apple's Party

Sharing isn't caring.

This morning, Verizon (NYSE: VZ  ) officially unveiled its Verizon Wireless plan for tethering as many wireless devices as possible into a single account, but it's not as great as it sounds.

Verizon's Share Everything plan may have seemed promising when Verizon was talking it up earlier this year, but it begins to fall apart when consumers begin working the math. Connecting up to 10 devices divvying up data that starts at $50 for a single gigabyte with pricing tiers all the way up to $100 for 10 gigs? Doesn't sound too bad at first.

However, Verizon is also tacking on monthly cover charges for every device diving into the bandwidth. Every smartphone on the plan costs $40, and old-school feature phones will set a customer back $30 apiece. Unlimited minutes and texting are included, but carriers know that data is where the tollbooths need to be installed these days.

If you want a tablet added to the plan, it'll be an extra $10 a month, while mobile hotspots, USB modems, netbooks, and notebooks will cost $20 each to be part of the monthly Share Everything plan.

Apple's not going to like this
Verizon is offering an online calculator to figure out whether the new plan makes sense for customers. Share Everything will make sense for some accounts, though customers on family plans will probably want to stick with that offering.

The ominous warning here -- and why Apple (Nasdaq: AAPL  ) needs to start worrying -- comes toward the end of the Q&A:

"If keeping unlimited is important to you, you can choose to upgrade and pay full retail price for the phone."

In other words, those who have been grandfathered into unlimited data plans will have a rude awakening the next time they want to upgrade their phones. If unlimited data matters to them, they'll have to forgo the luxury of subsidized smartphones.

We're talking about hundreds of dollars upfront. Virgin Mobile will start offering unsubsidized iPhones in two weeks on prepaid access plans. The iPhone 4S at $650 is $450 more than the same device through one of the major carriers offering subsidized smartphones in exchange for two-year commitments.

Carriers pay much lower subsidies for Android devices, so anyone prizing the freedom of unlimited data on Verizon is going to be in for sticker shock when it's time to trade up.

Share and share alike
The spirit of sharing gobs of data was supposed to awaken the appetite for mobile-ready devices. Apple would be selling more of its pricier 4G iPads. The forgotten niche of mobile netbooks would be brought back to life. Customers who had been shocked over the size of their smartphone wireless bills to the point that they'd be reluctant to add portable connectivity would be encouraged to share data.

Well, reality never quite works out that way. Verizon -- and AT&T (NYSE: T  ) , which has also talked up sharing data plans -- are in this business to make more money. If Share Everything plans would result in smaller bills for average customers, it never would've seen the light of day.

However, it just goes to show how out of touch Verizon is at this point. As smartphones penetrate deeper into the mainstream, connectivity is going to have to get cheaper.

There's a monster opportunity here waiting for Sprint Nextel (Nasdaq: S  ) . It's the only one of the big three carriers still offering unlimited data on subsidized devices for new customers. It's also the company behind Virgin Mobile's gutsy iPhone push at retail pricing.

The problem with Sprint is that it's not profitable like Verizon and AT&T. Analysts don't see Sprint turning the corner for another two to three years, and who knows what the marketplace will look like at that point.

Maybe it's time to start clanging pans together and start up the old rumor that will Apple roll out its own wireless network to offer manageable access. Verizon is obviously only out for itself at this point -- and the same thing should go for Apple.

You say you want a revolution
The next trillion-dollar revolution will be in mobile, but it won't necessarily go through Verizon. A free report identifies the big winner, but it won't be around forever, so check it out now.

The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (6) | Recommend This Article (11)

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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 June 13, 2012, at 3:49 AM, dynazor wrote:

    "If keeping unlimited is important to you, you can choose to upgrade and pay full retail price for the

    phone."

    Or, you can sign on with another carrier that will undoubtedly give you one helluva smokin' hot deal on a new iPhone with unlimited data and 1000 free anytime minutes, just to gobble up the newly available market share ripe for the pickin', thanks to Verizon's gluttony and stupidity.

  • Report this Comment On June 13, 2012, at 7:21 AM, Haise wrote:

    Sure, and see how happy they are when they find out how well an iPhone works when sharing an inferior network with a bunch of other cheapskates. Verizon is after the consumer who values network quality over cost. That's clearly where the profits are.

    Hence, I fail to see how Verizon is out of touch, or the related point that connectivity must get cheaper.

    Streaming data (especially video) and growing use of cloud services requires an expensive network. Verizon can't make a profit on unlimited data plans. Apparently neither can Sprint, but they're stuck without bargaining power.

  • Report this Comment On June 13, 2012, at 7:47 AM, jdmeck wrote:

    Apple did without Verizon for many years and can do it again. And since Apple stock is so cheap, they could take less profit from each phone and the stock would still be cheap. Apple has a lot of room to play. Can't say that about any other phone maker.

  • Report this Comment On June 13, 2012, at 8:59 AM, LowellUkulele wrote:

    The fact remains that Sprint is the only U.S. carrier to offer new and existing customers the iPhone experience with unlimited data plans starting at $79.99 per month. Plus, Verizon now charges its customers $30 to upgrade to a new phone when they renew. AT&T charges $36. But Sprint only charges $18. An investment writer recently summed it up best: “Sprint offers the best value proposition for a new smartphone user. I got my first smartphone on Sprint because a new AT&T or Verizon data plan is outrageous. My Sprint plan includes 450 afternoon mobile-to-landline minutes, unlimited other minutes, and unlimited texting and data for $79.99. Unlimited AT&T or Verizon plans would approach $150, and to get a comparably-priced package, I'd have to settle on limited data or texting plans, which I'd have to constantly try to not blow through. Why get a smartphone if you can't have fun using it?” Sprint also placed first in the industry in customer satisfaction, according to results from the 2011 and 2012 American Customer Satisfaction Index.

  • Report this Comment On June 13, 2012, at 9:49 AM, BMFPitt wrote:

    I would absolutely love a non-subsidized plan, except for the part where they're still charging subsidized plan prices. As it is, this doesn't offer any incentive for me to switch from my current family plan.

    @LowellUkulele

    In no way is Sprint's plan comparable to Verizon's. You're certainly paying a premium for the better network, but there's a reason that people are willing to pay it.

  • Report this Comment On June 13, 2012, at 6:03 PM, jameskm03 wrote:

    Why should a phone bill be any different than an electric, water or gas bill? That is the point Verizon is pushing and I actually like it. Cable and phone companies have been running on this other model that people have gotten used too. Charge me a fair price for what I use not $59.99 (or whatever exactly it is) for the 700 minutes/month that I pay for now instead of me paying that and using 150 min/month! For my wife and myself we fork up $180/month to Verizon for two smartphones w/ unlimited data plans.

    I'm looking at my account right now 19 out of 31 days in and we've used 293 of our 700 minutes and not even 0.3GB of data. If people would actually look at their usage they would see this makes a lot of sense.

    Of course most of the people complaining here are the data abusers who slow down everything for the rest of us. Is it not fair that you should pay more? If you leave your lights on in your house all day should you not pay the electric company more?

    I'm kind of surprised all internet offers haven't gone this way already. All the cable companies are stupid if they don't charge you this way. I have a lot of friends that are like myself and only have an internet connection bundled with Netflix+Hulu.

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