Verizon iPhone data plan: Unlimited or pay as you go? Which will the carrier choose?

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Jan. 20 2011 5:25 PM

The Limits of Unlimited Data

Why Verizon's unlimited iPhone plan won't last.

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Automobile traffic engineers have lately experimented with addressing this problem via "congestion pricing"—charging people for driving when the roads are clogged. That's a relatively new innovation on the road, but the concept isn't novel: Nearly every utility we consume—electricity, natural gas, water—imposes some kind of cap or usage charge. Even home broadband service is sold in tiers: People who don't use the Internet very much pay for low-speed service, while those of us who want to spend most of our time downloading high-definition movies pay more for much faster pipes. (The only successful service that I can think of that doesn't include either caps or usage fees is Netflix's streaming movie plan. That seems to work because there's a built-in cap: You can watch only so many second-tier movies a month before you give up. But as Netflix continues to sign bigger titles and its streaming costs rise, I bet it will begin to tier its streaming plans.)

Whenever I call for carriers to ditch unlimited plans, I get an earful from readers who think I'm asking for higher prices and/or excusing companies for their terrible service. I understand these concerns. Phone companies aren't known for their transparency; we all fear that adding variability to the bill will add complexity, too, and that we'll be opening ourselves up to all kinds of hidden fees. The main worry is "bill shock"—opening your statement at the end of the month to discover that you've racked up some enormous sum, just because you had no idea you were over your limit.

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If you're worried about a world without unlimited plans, consider that it's been more than six months since AT&T imposed an iPhone usage cap, and so far the service is working really well. AT&T alerts you by text and e-mail when you're nearing your monthly cap, and surpassing the cap doesn't result in onerous fees. If you go over your 200 MB plan, AT&T charges you $15 for 200 more megabytes, and if you blow by the 2 GB plan, you're charged $10 for 1 GB more. Those are reasonable rates; indeed, because the prices feel so fair, I wonder if many people even notice that their plans are limited in any way. The caps are there, but in practice, AT&T's iPhone plan feels unlimited.

It's true that these fixed plans aren't "future-proof." As networks get faster and cell phones and apps get better, we'll all use the mobile Internet a lot more often; even if 200 MB is enough for you today, it will be too small next year. But service providers change their plans all the time as usage patterns and technologies change. In particular, as we move to 4G networks, I suspect that AT&T will ditch monthly caps and instead offer a range of speed tiers—a slow plan, middle plan, and fast plan. (Verizon says it plans to offer data caps on its 4G network, but its pricing is also bound to change as those 4G phones become more popular.)

I'd welcome that change. But whether carriers limit your plan by speed or by monthly bandwidth, the important thing is that they're limiting something, because offering unlimited use for a flat rate is madness: It's expensive, it's unfair to most of us, and it ruins the network.

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Farhad Manjoo is a technology columnist for the New York Times and the author of True Enough.

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