Verizon's LTE Pricing: Good Deal or Gouge?
Verizon Wireless' planned rates for LTE data usage are either too costly or a relative bargain, depending on who is offering an opinion.
The nation's largest carrier announced on Wednesday that it will start offering LTE service on Sunday in 38 cities with two new data pricing plans: $50 a month for 5GB or $80 a month for 10GB, plus $10 for each 1GB over those amounts.
For laptop use of Verizon's LTE data service, which is primarily targeted at businesspeople, the first users will need to buy new USB modems that sell for $99.99 after rebate with a two-year service agreement. Verizon said that it will also offer the modems for $249.99 without any long-term service agreement and just a monthly data charge.
The 5GB plan LTE service plan is $10 less per month than Verizon charges for 5GB on its existing 3G EV-DO network -- something that several analysts praised after the new service was announced.
But some critics said on Thursday that Verizon is potentially gouging new customers -- especially unwary ones -- with data plans that tend to lock them in and could result in costly overage costs.
New speed comes with a trap
One early tester of a Verizon LTE modem said he found he gets performance of 21Mbit/sec. with the device on the admittedly uncrowded network. At that rate, it would be possible to use up an entire 5GB monthly allotment ($50) in just 32 minutes.
Verizon is only claiming downloads will be 5Mbit/sec. to 12Mbit/sec., which could still eat up a 5GB allotment quickly if someone isn't paying close attention to his usage.
Dan Hays, a partner at management consulting firm PRTM who has followed proposed LTE rollouts in other countries, said he has noted that the average monthly usage for TeliaSonera's new LTE service, which offers speeds of up to 100Mbit/sec in Sweden, Norway and Finland, is about 15GB a month per user. At that level of consumption, a Verizon customer on the higher data plan would pay a total of $130 a month -- $80 for the initial 10GB plus $50 for the additional 5GB.
In another comparison, customers of Clearwire, which operates a WiMax network also used by Sprint Nextel, use about 7GB per month (at average speeds of 3Mbit/sec. to 6Mbit/sec. At that rate, a Verizon user with the $50/5GB plan would pay $70 a month, including overage charges. Clearwire charges $55 a month, with no limit on usage.
Verizon spokesman Jeffrey Nelson defended the company's new LTE data pricing, saying LTE data customers will get automatic text messages notifying them when they hit 50%, 75%, 90% and 100% of their monthly data allotments. "No surprises, and plenty of time to right-size your usage," Nelson said by e-mail.
He said it was surprising that there's now "a hot new conspiracy theory about duping people into using data without regard to cost" even though some observers initially praised Verizon for charging $10 less for 10MB on LTE than it currently charges for the same amount of data on its EV-DO service.
Nelson added: "I gotta tell you, there is absolutely no future for Verizon in tricking customers into paying for things they don't understand or want."
LTE smartphone pricing
The Verizon spokesman refused to say how the company will charge for LTE voice service once LTE phones are made available in 2011. Currently, voice charges are separate from data charges on smartphones, starting at $30 a month, depending on the plan.
Analysts widely agree that LTE smartphone users will likely pay for both an LTE data usage fee and a separate charge for voice service, since voice will run over Verizon's existing CDMA network until at least 2012.
Most analysts believe that the monthly LTE data pricing Verizon has planned is high enough with overage charges to discourage heavy usage, so the network will run efficiently for all users.
Verizon has bragged about the efficiency of its current network compared to that of No. 2 AT&T's network, which has been bashed repeatedly for problems supporting Apple's iPhone smartphone.
"If anybody plans to use LTE as a cable modem substitute, you will spend a lot of money," said analyst Jack Gold of J.Gold Associates. "That's not how Verizon is targeting LTE. They are purposely charging for LTE so users won't ... download BitTorrent movies, or the network would fall on its knees."
"They are encouraging light usage to encourage acceptable performance," Gold said.
Businesses will benefit
He said the LTE pricing might end up being a challenge for some individual consumers, but he added that LTE's benefits for businesses "are clear." Most business users will be fairly light users of LTE to access e-mail and download presentations, or even to access enterprise applications wirelessly, he said.
Verizon has said LTE could handle a download of a 10MB file in 10 seconds or so, instead of about 100 seconds with the current 3G network. That would be a clear advantage to many business users, Gold said.
Gold said that, to some extent, the announced pricing for LTE data won't matter to large enterprise customers, who will convince Verizon to sell them data plans that can be pooled across a large body of users, thereby lowering costs.
For the same $50, he said some companies will perhaps get 10GB or 15GB per user. "All things are negotiable," he said. "It's just an accepted premise that people want a faster network, just like with the move to 802.11n."
Ultimately, the value of LTE is that it gives Verizon a tremendous boost in network capacity for a larger number of users, Gold noted. If a user can download a large presentation in 10 seconds instead of 100 seconds, as Verizon has argued, "then that leaves them 90 seconds so they put more people on the network with that capacity," Gold said.
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is email@example.com.