Beware of pricier mobile Internet data plans
Prices for cell phone voice services may be dropping, but consumers are likely to be forced to pay a lot more for mobile Internet data plans in the future.
It's no secret that the price of voice services for cell phones is falling. Just last week Sprint Nextel announced it was offering a new $69.99 a month, Any Mobile, Anytime plan that allows subscribers to call any cell phone in the U.S., regardless of the carrier, in addition to such things as unlimited text messaging and data services.
Analysts are predicting a price war in the mobile market as national wireless carriers will soon be forced to offer more minutes of voice service or unlimited voice services for equal or lower prices to compete with each other.
To make up for the shortfall in revenue, these analysts also predict that wireless operators will start reconfiguring Internet data service plans to make up the difference.
"Voice revenue is declining for the carriers," said Charles Golvin, an analyst with Forrester Research. "And the vision for the future is to use data revenue to make up for the shortfall and to kick ARPU (average revenue per user) into growth mode."
Data usage is already on the rise, and wireless operators are cashing in. For the second quarter of 2009, AT&T reported a 37.2 percent increase in wireless data revenue to $3.4 billion, more than double the total for the same period two years earlier. This usage included messaging, Internet access, access to applications and related services. Verizon Wireless said that its data revenue jumped to over 52 percent to $3.9 billion during the second quarter of 2009.
While text messaging is still a big component of data revenue, which carriers also charge a premium for, Web access is also on the rise. This growth is likely being driven by the sale of more smartphones. Smartphone sales increased 27 percent in the second quarter of 2009, while total handset sales fell 6 percent, according to Gartner. But it's also due to the fact that more people want to do more things with their phones. CCS Insight concluded after a recent survey that the biggest drivers for Web use on mobile devices is accessing social networking sites like Facebook and microblogging sites such as Twitter.
It's standard practice for wireless operators to require smartphone subscribers to sign up for a hefty flat fee for a data usage plan. AT&T, Verizon Wireless, and T-Mobile USA all require customers purchasing a smartphone to also get a data plan that costs $30 a month in addition to a selected voice plan, which typically starts around $40 a month. Sprint Nextel has been bundling its unlimited data service in its new Simply Everything plans. These data services are called unlimited, but each of them has capped usage at 5GB per month. After that, subscribers are usually charged extra fees.
Meanwhile, data packages for non-smartphones have been priced much lower. In addition, wireless operators have not required customers sign up for these plans for most of the data-capable feature-phones they sell. There are a few
For example, AT&T offers a $15 a month package for unlimited e-mail and mobile Web access for customers who have feature phones. T-Mobile charges $9.99 per month for unlimited Web access and e-mail on most of its non-smartphone devices.
New tiers of data service
But as the price of voice services falls, and more feature phones offer better Web-surfing capabilities, carriers are realizing that they need to create new tiers of service in the high-growth data service segment to make money.
"The trend that is inescapable is that carriers are trying to put more pricing tiers in place to offer a wider range of services," Forrester's Golvin said. "The model of paying a flat $30-a-month rate for data service on a high usage device like the iPhone is likely going away. Carriers are trying to find ways to introduce more tiers and more premium services."
The first indication that this trend is on its way, is Verizon's announcement last week that it is changing pricing on its non-smartphone data plans. The company introduced the new Samsung Rogue, a phone that is not considered a smartphone, but comes equipped with a QWERTY keypad and is able to access 3G data services. As part of the Rogue launch, Verizon changed its data pricing for non-smartphones, and said that customers who buy the Rogue will be required to purchase a $9.99 monthly data plan that provides 25 megabytes worth of data usage per month, or a $19.99 monthly data plan that offers 75MB of data. If customers go over these caps, they will be charged 50 cents per MB if they have the 25MB plan and 30 cents per MB if they subscribe to the 75MB plan.
Previously, Verizon Wireless subscribers who wanted to use a data service with their regular cell phone, would either pay $1.99 per kilobyte of data. Or they could sign up for Verizon's VCast VPak service for $15 extra a month to get access to video clips, sports highlights, news updates, and unlimited e-mail and mobile Web usage.
Now as part of Verizon's change, Rogue customers and all new data customers looking for a data service package for Web use will have to choose between the two offered packages. And if they want VCast video service, they will have to pay an additional $9.99 per month.
What this means is that subscribers will actually be paying more money for less data, since the retired VCast VPak service included unlimited e-mail and Web usage in addition to the video and music offered through VCast. It also means that feature phone users could also pay more for data than smartphone users if they go over their limits. Remember, the smartphone data service costs $30 a month extra for up to 5GB of data usage per month. Verizon is now charging its non-smartphone Rogue customers $10 for 25MB and $20 for only 75MB.
Verizon Wireless spokeswoman Brenda Raney confirmed the change in pricing. She also confirmed that Rogue customers will be required to sign up for one of the two plans. But she emphasized that today the new data plan requirement only applies to Rogue customers, and not to customers using other phones. She also said that the new pricing model would not affect customers already subscribing to the Vcast VPak plan.
But she did say that the data plan requirement along with the new pricing scheme will apply to other new phones that Verizon Wireless introduces in the future. But she declined to provide details as to what types of phones would require data plans.
"We will identify the (phones) that require a data plan," she said in an e-mail. "And we are not making anyone with a similar phone today purchase a plan. Regarding the requirement of a data plan with the Rogue, you have to have a data plan if you get that phone."
Verizon's justification for requiring the new data service plan with the sale of these phones is that it doesn't want customers to be upset if they rack up a big bill from data charges because they didn't realize they were using wireless data service.
What's your data usage?
Golvin admits that the usage cap on the lowest tier of service seems low. He postulates that subscribers of the 25MB plan will be able to check e-mail and access some Web pages each day without going over their limit. But he said that anyone uploading pictures or downloading big e-mail files will likely chew through that bandwidth quickly.
Meanwhile, he thinks the 75MB plan is likely to satisfy the daily needs of subscribers who frequently check e-mail and social-networking sites and use mobile search tools. But heavy users uploading pictures or video will have to be careful.
"The problem is that people know what a minute of voice is like," he said. "But they have no idea how much data they are using. Unless there is a clock that is running or fuel gauge that shows that you are down to half a tank in the first week of the month, users will have no idea they are going over their limit."
But consumer advocates believe that Verizon and other carriers are simply trying to lock subscribers into lengthy data contracts and are over-charging them for services that they may or may not use. For example, there are some smartphone users who say they'd rather forgo the $30-a-month data plan and only use the data services on their phones when they are in a Wi-Fi hot spot.
"This practice highlights once again the complete lack of transparency and the lack of logic that consumers face when they sign up for wireless data plans," Joel Kelsey, a policy analyst for Consumers Union, the nonprofit publisher of Consumer Reports. "Anything that herds consumers into plans or into phones that offers them a lack of choice has been problem for a long time in the wireless market."
Meanwhile, the wireless industry contends that it is trying to offer consumers more choices. But the reality is that even though consumers may soon see lower voice pricing, it's very unlikely their monthly bills will decrease at all. And it's quite likely they will continue to rise.
"Anything that leads to higher bills for consumers is bad in the eye of the consumer," Golvin said. "So I am sure this will largely be perceived as a negative by consumers. But with more tiers of service, there could be more choices. And maybe cost-conscious consumers could find a right-sized plan at the right price for them."
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
I think we need a robust wireless network but not one that takes advantage of consumers. The wireless industry says our data plans our unlimited then they put a 5 gig cap on the amount of data you can use. Plus they cherry pick what services you can use on their network.
I challenge the wireless industry to prove me wrong. Give consumers true unlimited data usage and allow programs like Skype to be used over your data network (without restriction) and not just over Wifi
Their 'unlimited' does not define a cap. They also have other pre-paid options. And there are other carriers available in the pre-paid market that offer similar deals on Sprint's network.
AT&T caps you if you go over the limit. It doesn't matter how you use the data- if you use it up, you get cut off. That's just the way it is these days with 'unlimited' plans. :/
The only saving grace is if the entire cell phone industry starts charging more for rate plans- and that's pretty likely to happen.
Verizon, however, is a Baby Bell. They invented nickel-and-diming for telecom. They will charge you to keep your number unlisted, to dial directory assistance, to change a plan or feature. Liekwise, they will create as many plan steps as their CRM software can handle, so that you can choose 25Mb, 50Mb, 75Mb, 100Mb, 250Mb, 1Gb, 2Gb, and 5Gb sizes -- currently they don't, but just take a breath, you'll see it.
You need the back of an envelope, a pencil, and grammar school arithmetic to figure out if buying a phone on your own is equal in cost to riding a carrier for two years. Usually it's not, but unless you look at all carriers, you're not doing your homework.
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They don't have quite the signal coverage of Verizon, but I like them and unless I feel they're starting to screw me over (as it sounds some of the carriers are getting ready to do), I'll stick with them, probably for a long time.
1) Lower prices, but a reduction in services
2) Same services, but a higher price presented in a way that the consumer thinks they are getting more. The candy bar effect
And 3) The consumer gets screwed.
The candy bar effect is the candy company offers a 8oz bar for $0.50 then lowers price to $0.35 and lowers the size to 5oz. but puts a big sticker on the bar that say's "New lower Price". Then after a while they increase the size from 5 to 7oz, but raise the price to $0.75. This time with a big sticker that says new bigger size. In the long run you are actually paying more for a smaller candy bar.
Watch for some telco come out with a "New" data plan, with near 3G speeds for only $5.00 a month. However, buried in the fine print on the back of page 3 of your 5 page contract it will say there is a 1GB cap.
What a mess. I wish I could say that was soemthing unique to Sprint, but it's pretty par for the course of the cell phone industry these days.
Look at ATTs new A-List. They don't offer it on the 450 minute plan...Why? Because they don't really want people to benefit from it. If they have unlimited calling to 5 people then most people don't need 900 minutes a month. People are going to sign up for it and end up with thousands of rollover minutes that they are paying for and never will use. Then it makes it harder for them to leave. Rollover minutes are a waste and people don't realize that they are only using it as a trap to keep you on the hook.
Thats called unlocking your phone. Which is 100% legal.
I bought an iPhone off ebay. It's unlocked and I use it only with a voice prepay. T-mobile has a card for $100, that has 1000 minutes, and active for a year.
With my light voice minute usage, along with using the data on wi-fi only, I have a low budget cell phone service.
Using a device over wi-fi...has zero to do with the cellphone companies, they can treat it like lost revenue, if they wish, but thats merely their own fantasy.
It's my wi-fi, its my device...I can use one to access the other, period.
It may take a dozen calls and/or transfers. You may have to stop short of throwing a tantrum that would make a toddler proud, but they have to give you the codes and step by step instructions.
Due to a lack of competition in my location, I pay $30 per month for a 7 Mbps DSL connection. While it would be nice to have the capability to tether my laptop to a cell phone for use as a modem, I won't do so until the price is closer to what my DSL service costs. Unfortunately, it seems this may never take place in the US. Despite all the "Broadband Initiatives" the federal government has been touting for over a decade, the US continues to lag on a global scale.
I don't understand how these wireless operators can advertise an "unlimited" data plan that actually has a cap and hence is truly limited. Nor can I understand why the FCC allows these companies to effectively operate as duopolies or monopolies and oversell their available bandwidth.
It's just plain wrong!
We pay an average of $685 a year ($53 a month) for typical midrange service vs. $135 per year ($11 a month) in 3 scandanavian countries or 5x the amount. Heck, even Japan and the UK pay less than $285 a year for the same amount of service -- half what we are forced to pay.
That we have GSM and CDMA though does make things more expensive than they need to be.
What a bunch of crap! Not that I'm defending the phone companies, they're less than customer-friendly, but you are forced to do absolutely nothing. If you're to damned lazy to shop around for a pre-paid phone or to get a cheap call-only phone then stop the freakin' whining.
True. I'm one of the last that got a smart phone and locked out data usage since I don't need it, but I do need the Smart. When I do get mobile web it better be cheap and unlimited since it's more of a hassle to surf on a phone and it's slower to boot.
plan, they better make shure it works when and where I want to use
it. My experience thus far is their 3G network is extremy iffy in my
neighborhood. I would be very upset to sign up for a tethering plan
just to find out latter that it is usless at my house. This would seem
to me to be an excellent reason to cancel the contract. Why would
anyone want to pay for a service you can't use.
I am not a big data hog in the firts place. I would only be tethering
for an hour or two each month. Don't need or want MMS but I would
like to do some browsing from time to time on a monitor that I can
acctally read without a magnifying glass. I guess if they discover I
have used a magnifying glass to view data on my iPhone, they will
try to charge me a monthly fee for that as well.
I feel that a one time activation fee of $20 or less would be fair.
I don't care if they are the only phone company left on the face of
the earth. They will get $0 from me if they can't come up with something
acceptable for me.
When I signed up for their data plan they said it was unlimeted. I should
be able to stay on the net 24/7/365 if I want. Since when did unlimeted
have limits? No wonder they have pending law suits. I, like most Americans,
don't feel that being lied to is a positive thing. Espcially when the lie
is intetionally designed to misslead and make me part with my money.
I kinda blame this all on the iphone if no one bought it they wouldn't think of making people add a data plan on all phones now. But since the phone trumps the service they are betting ppl will take the hit in there pocket to look cool with there phone.
Unlocked phone here I come
I wish there were lower rate plans- I'd gladly pay a per minute fee for voice if it meant dropping my AT&T barebones iPhone bill down from $89/mo to around $50-60.
- by Poshie232 September 15, 2009 5:25 AM PDT
- I need a cell phone to do what cell phones were meant to do and that's make calls or even send texts but I work in front of a computer all day so I don't even need a smartphone because my computer is smarter. I do like to check my e-mails on the cell from time to time but that doesn't require a lot of data. That is why I have a Straight Talk phone with unlimited Talk, text and 30mb of data for $45/month. I don't pay any extras like roaming, it's all included and Straight Talk runs on Verizon's network which is nationwide so it really fills my needs.
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