I wish I could say that I hate to say “I told you so,” but I don’t. When Verizon began carrying the iPhone last year, it made the mistake of offering an unlimited data plan. This was a dumb move, I argued then, because it was clear Verizon would later have to scrap this approach. Unlimited plans reward data hogs at the expense of everyone else: If you’re streaming puppy videos all day and I’m just surfing the Web, why should we pay the same rate—especially if your puppy videos are clogging the network and ruining my Web searching? It’s fairer—and, for most people, cheaper—if, like in everything else in life, we pay for only what we use.
Verizon has, predictably, killed the unlimited gimmick. This week the company unveiled a new wireless plan that offers several advantages over its old pricing scheme. First, Verizon’s new plans for smartphones and tablets do away with antiquated charges on voice minutes and text messages—now voice and text, which take up very little bandwidth on Verizon’s lines, are free and unlimited. (Verizon will still offer plans for “basic phones” that charge for voice minutes.) Verizon will now sell its plans by data tier—$50 for 1 GB a month, $60 for 2 GB, and $10 for each 2 GB thereafter. (If you go over the amount allotted in your plan, the charge is $15 per gigabyte.) The best part is that you can share the data service with all the devices in your household. So if you and your spouse both have a Verizon device and you each use about 500 MB of data per month, you can pay for just the $50 tier. The same is true if you’ve got a tablet and a phone—pay for data once, use it on both devices.
There is no way to get unlimited data under the new plan, and Verizon has made it very expensive for current unlimited customers to keep their cherished service. If you’re now on a Verizon unlimited plan and you want to stick with it, the only way to do so is to pay the full retail price of any new phone you buy. That is, instead of paying the “subsidized” price of $199 for an iPhone or another top-of-the-line smartphone, you’ll have to pay $649 or something similar.
I applaud Verizon for imposing this stiff restriction on unlimited plans. But there’s one nearly fatal flaw with Verizon’s new pricing—a catch so outrageous that it creates a big opportunity for the company’s rivals to step in with something more attractive. In an act of pure greed, the firm is charging a monthly “access fee” for each device you use. The fee is $40 for a smartphone, $30 for a basic phone, and $10 for a tablet. If you and your spouse each have a smartphone and share Verizon’s 1GB plan, you’d pay $130 a month—$50 for the data and $80 for the access.
Those enormous fees are completely indefensible. Just as it doesn’t cost my Internet provider if I connect 10 computers to my wireless router instead of just one, it doesn’t cost Verizon any more money to serve data to two devices instead of one. For Verizon, the only thing that increases its costs—and, therefore, the only basis on which it should charge its customers—is the amount of data people use every month. If you spread your 2 GB plan across 5 devices rather than 1 device, you ought to pay the same. Indeed, Verizon’s plan implicitly acknowledges this fact, because the company allows you to turn your device into a “mobile hotspot” for free. In other words, if I share my iPhone’s data plan with my iPad using the phone’s hotspot switch, I pay nothing extra to Verizon. If I want to connect my iPad to Verizon directly, however, I’ve got to pay $10 per month for that right even though I’d be using exactly the same amount of data in either case.
Now that Verizon has made its dumb pricing move, it’s time for AT&T or another competitor to offer something groundbreaking—what I imagine to be the perfect wireless plan. Here’s how it would work: First, you select a data tier. That’s it.
You wouldn’t pay extra for texts, voice calls, and for additional devices. You’d pay just for the amount of data you use—the more you use, the more you pay. This plan is simple, fair, and—depending on the price of data—it could save a lot of people a lot of money. Over the long run, this plan would be a boon to any wireless carrier that rolled it out. It would bring in more customers with more devices, and—as all those people spend more time using their various mobile devices over the next few years—the network would cash in. The only problem with this plan is that it’s so transparent and customer-friendly that it’s hard to imagine there’s any wireless company forward-thinking enough to consider it. Especially not AT&T.
Still, let’s try to figure how much my fantasy wireless plan should cost. Today, different carriers offer vastly different prices for data usage. Under its new plan, Verizon charges $90 per month for its cheapest plan for one smartphone—$40 for the access fee and $50 for 1GB of data. That’s about 9 cents per megabyte of data per month. AT&T’s cheapest plan is $60 a month for 300 MB of data, which works out to about 20 cents per megabyte. But if you pay $70 a month, you can get 3 GB of data, which works out to a tiny 2 cents per megabyte. T-Mobile charges $70 per month for 200 MB—a whopping 35 cents per megabyte—but its $80 per month, 2 GB plan brings that down to 4 cents per megabyte. And finally there’s Sprint, the only one of the four major wireless companies that still offers unlimited data. Sprint’s cheapest unlimited plan is $90 a month. If you use a humongous amount of data, Sprint’s a great deal. Let’s say you use 10 GB per month on your Sprint unlimited plan (far more than Americans’ average cell data usage of around 500 MB per month). In that case, you’d be paying Sprint around 1 cent per megabyte.
If you study these prices, you notice a couple things. First, they vary widely. Second, after you meet a certain minimum price—after you get past AT&T and T-Mobile’s cheapest plans—the carriers can afford to sell data for very cheap, less than 5 cents per megabyte per month for AT&T, Sprint, and T-Mobile.
So let’s be generous and choose that as the starting price for my perfect plan. Even more generously, let’s give the carriers a couple extra cents for adding unlimited voice and texts and letting you share your data across any number of devices you like. So that’s 7 cents per megabyte, with a minimum of 1 gigabyte. That means my perfect plan will cost you $70 a month for 1 GB of data. More data would cost $10 for every 2 gigabytes (as in Verizon’s current plan), so $80 for 3 GB per month, $90 for 4 GB, and so on.
Depending on your current usage, my perfect plan might be more expensive than what you pay now. If you’ve got only a single smartphone and you don’t consume very much data, you’d pay $10 more under my plan than for AT&T’s 300 MB service. But if you’re like most Americans, your mobile data usage—and the number of devices you’re using—will likely skyrocket over the next few years. The research firm Nielsen, which has been analyzing more than 65,000 volunteers’ phone bills, says that most people’s mobile data usage doubles every year. The company also notes that the average teenager sends or receives 3,400 text messages a month. This means that for a lot of wireless customers—especially those in households with text-mad kids—my perfect plan could save money over time. As you and your family accumulate more devices—a 4G tablet, a 4G laptop—you won’t have to pay extra for each new thing. You’d pay only for the data you use. And that’s as it should be.