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The No. 1 Reason Apple Should Hate Verizon

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Verizon's (NYSE: VZ  ) decision to shift to shared data -- with lofty prices to boot -- is being portrayed as a mixed blessing for Apple's (Nasdaq: AAPL  ) iconic iPhone.

When the new rates kick in on June 28, folks will be able to tie up to 10 mobile devices to a single Share Everything account. This should be good news for the 4G model of Apple's new iPad, as $10 a month is all it takes to get the tablet to slurp connectivity on the purchased bandwidth.

However, there's one aspect of the pricing plan that may eat into iPhone 5 sales when Apple rolls out its next smartphone later this year.

Anyone who's been grandfathered into the unlimited data plans that Verizon stopped selling to new customers last year will have to give that up the moment they upgrade to a new phone if they want a subsidized price.

In other words, it will be a matter of paying $199 for a new iPhone with a two-year contract on a shared data plan or paying $650 for the same phone to stay on the unlimited plan. Even if it's not hogtied to two years of Verizon service, $450 is a big upfront difference.

Some will argue that it's no big deal. AT&T (NYSE: T  ) and Verizon Wireless are already throttling folks on "unlimited" data plans in certain situations. Verizon may actually be doing folks a favor by encouraging them to check out the competition. However, AT&T will probably adopt a similar strategy sooner rather than later. Sprint Nextel (NYSE: S  ) does offer true unlimited plans, but the range and quality of its network isn't the same as market-leading Verizon.

Even if "unlimited" is a lie at Verizon and AT&T these days, there are plenty of users who are infatuated with the illusion of a bandwidth buffet. When the time comes to upgrade their phones without paying an early termination penalty, many may pass on the iPhone 5 or the shiniest new Android to avoid kissing unlimited data goodbye.

Verizon has its customers just where it wants them, captive to the memory of a plan that doesn't exist and without the obligation of subsidizing a new device for those who want to keep on living that lie.

Wireless carriers 1, smartphone manufacturers 0.

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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 (6)

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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 10:39 PM, gspet wrote:

    You've got me pegged on a couple of different points. First, I intend to keep my iPhone 4 and my unlimited plan as long as possible. Verizon is turning back the clock ten years to when I had to keep track of minutes, although now it's data instead. No thanks.

    Secondly, when I'm ready to upgrade I will absolutely look to see if the competition offers a better alternative.

  • Report this Comment On June 13, 2012, at 10:40 PM, conradsands wrote:

    Maybe consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to try to push the U.S. market into a wireless industry duopoly -- the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

    According to the report “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” two of the 25 companies with the largest total tax subsidies were AT&T at #2 ($14.5 billion) and Verizon at #3 ($12.3 billion). Also, there were 30 corporations that paid less than nothing in aggregate federal income taxes over the same period. These 30 companies, whose pretax U.S. profits totaled $160 billion over the three years, included Verizon. The report states the laws that allow this were not enacted in a vacuum, but rather were adopted in response to relentless corporate lobbying, threats and campaign support.

  • Report this Comment On June 13, 2012, at 10:41 PM, LowellUkulele wrote:

    For the post-paid customer, the fact remains that Sprint is the only U.S. carrier to offer them 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 10:42 PM, LowellUkulele wrote:

    AT&T remains the worst carrier in the United States, according to an annual customer satisfaction survey compiled by Consumer Reports. The mobile provider ranked dead last for the third year in a row.

  • Report this Comment On June 14, 2012, at 7:51 AM, jdmeck wrote:

    As I said yesterday, "Apple does not need Verizon or the sales they get from Verizon" A second point. You have to be a total idiot to use Verizon, AT&T or any other carrier to do heavy downloading when you can do it absolutely free at home. Using Facebook and send a photo or two uses very little data. Verizon will come out the loser with any customer who has a brain.

  • Report this Comment On June 14, 2012, at 7:52 AM, jdmeck wrote:

    Lowellukulele - Verizon is way overpriced and getting worse, while AT&T's service is getting better.

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