Verizon Wireless is holding onto to its unlimited data plan for smartphones just a little longer as it dukes it out with AT&T for more wireless smartphone subscribers.
Verizon on Wednesday introduced the updated Motorola Droid X, the latest version of the Google Android phone that Verizon has pitted against AT&T's iPhone. The new phone will go on sale starting July 15 for $200 with a $100 rebate.
During the press conference to introduce the new device, Executive Senior Vice President John Stratton emphasized the new device will come with a $30 unlimited data plan. While this plan is nothing new for Verizon, it comes a week after a Verizon executive said publicly the company will move toward usage-based billing on wireless data services.
The fact that Verizon is keeping this data plan is significant because AT&T, which tomorrow will begin selling the new iPhone 4, has eliminated its unlimited plan in lieu of a new two-tiered offer that caps monthly data usage. Now it looks like, Verizon is using AT&T's pricing shift as an opportunity to pick off consumers, who may be interested in the iPhone 4 but are scared off by AT&T's change in data plan.
Stratton tried to downplay the unlimited data pricing as simply business as usual.
"We have indicated that we will move to usage-based pricing eventually," he said in an interview after the press conference. "But we are still working out what that pricing will look like and what the levels should be. We haven't announced anything yet. For the meantime we are continuing to offer unlimited data plans."
He admitted that competition in the wireless market is fierce. And Verizon is always competing aggressively against all of its rivals, most notably AT&T.
"It's always crunch time for us in this industry," he said. "We are always competing aggressively. And we're always looking to raise the bar. With the Droid X we have the device to compete, and we have the network."
The Droid X launch comes on the eve of the much-anticipated iPhone 4. Apple and AT&T will begin selling the new iPhone 4, the fourth generation of iPhone, starting Thursday. Apple has said that it has taken more than 600,000 preorders for the device, and AT&T says that the latest version of the phone has gotten 10 times the response that last year's model got before it went on sale. Experts say the iPhone 4 could be the fastest selling iPhone yet.
'The iPhone effect'
This is great news for AT&T, the exclusive wireless operator for the iPhone. But it's bad news for every other wireless operator in the U.S. According to Sprint Nextel's chief financial officer, every wireless carrier in the U.S. except AT&T has--since 2007 when the iPhone first launched--seen a lag in sales at the end of June and in early July due to the "iPhone effect."
To combat this blip in sales, Verizon appears to be pulling out all the stops. Not only did Verizon launch the Droid X the day before the iPhone 4 goes on sale, but the company also announced it will keep its unlimited data plan and even alter its upgrade policy to allow any Verizon Wireless customers to upgrade to the new Droid X if their contract expires any time in 2010.
"That means that even if someone's contract expires at the end of December, they will still be able to upgrade to the Droid X immediately," Stratton said during the press conference launching the device on Wednesday.
Verizon's upgrade policy is similar to the one AT&T has put in place for its current iPhone subscribers. But unlike AT&T, Verizon is allowing any Verizon customer whose contract will end in 2010 to upgrade to the Droid. AT&T has limited this new upgrade policy only to iPhone customers.
But Verizon appears to be taking direct aim at AT&T by keeping its unlimited data plan for smartphone customers. As mentioned earlier, in late May, just before Apple unveiled the new iPhone 4, AT&T eliminated its smartphone data plans. Instead, new iPhone subscribers on AT&T will have will have a choice between two tiers of service that cap data usage at 200MB for $15 a month and 2GB for $25 a month. Existing iPhone and other smartphone customers can keep their unlimited data plans, even if they upgrade to the iPhone 4.
Last week, a Verizon executive said that Verizon Wireless would also eventually move toward usage-based billing. In an interview with Bloomberg's BusinessWeek, Verizon's CFO John Killian said, "We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate."
Until recently, unlimited data plans for smartphones were standard practice in the wireless market. All the major wireless operators offered flat-rate, unlimited pricing for smartphones. AT&T and Verizon Wireless offered identically priced plans at $30 a month.
So far AT&T is the only carrier to change its pricing plan. And when it announced the change, there was a tremendous backlash from customers who were angry the company was capping usage. AT&T said that 97 percent of its customers use less than the 2GB cap each month. But experts say that data usage on wireless networks is increasing. And it's likely that in the future, many customers will exceed AT&T's caps.
"Most people won't have to worry about their usage much under current usage levels," Schwark Satyavolu, CEO of the Web site BillShrink, said in a recent interview about AT&T's data caps. "But you have to remember that the average usage has gone up 3.5 times in the past year and a half. So if things continue on that path, then these limits could be an issue in the future."
Droid v. iPhone
For now it looks like Verizon is happy to take advantage of a small window of opportunity to lure potential new iPhone 4 customers to the Droid X with a data plan that won't restrict their usage. Of course, Verizon executives say that it's not just price that will attract customers to the Droid X.
Verizon has always touted its network in attracting wireless customers. The company has a reputation for having a much more reliable network than AT&T, for example. And traditionally, it has gotten higher marks in customer service than carriers, such as Sprint Nextel.
But until the first Motorola Droid, it was seen as lacking compelling new devices. When the first Motorola Droid launched on Verizon's network last year, Stratton admitted the company was spending more on marketing than it ever had to promote a single device.
From a hardware perspective, the Droid X has some impressive features that would likely appeal to many consumers also considering the new iPhone 4. The Droid X has a 4.3-inch touchscreen, which is about the same size as the HTC EVO 4G, another Google Android phone sold by Sprint Nextel. The screen is actually bigger than the 3.5-inch screen on the new iPhone 4.
It also includes a new faster 1 GHz processor from Texas Instruments and comes with 8GB of internal memory that can expand to 40GB with a memory card. The Droid X has an 8-megapixel camera, compared to the iPhone 4's 5 megapixel camera. It captures 720p video with high-definition playback via HDMI. The only thing that seems to be missing is the front-facing camera that is on the iPhone 4.
On the software side, the Droid X, which uses Google's Android operating system, doesn't have as many apps as the iPhone. But many of the most popular iPhone apps are also available on all Android device. Plus, the new Droid X will have the latest version of Adobe Flashplayer 10.1, something that Apple refuses to include on the iPhone.
But if consumers are interested in getting an unlimited data plan with their smartphone, they may want to act sooner rather than later. If Android usage patterns and volumes mimic those of the iPhone, then Verizon and potentially other wireless operators will also adopt tiered pricing. And for Verizon customers, the question is not if the company will move in that direction, but when.