Verizon Wireless on Tuesday introduced the Samsung Rogue, a phone that may be the first of many similar products: Reasonably priced, not quite a smartphone, but equipped for browsing and sold only with a monthly data plan.
The Rogue is equipped with a slide-out QWERTY keyboard, a "premium" Internet browser and fast EV-DO Rev. A (Evolution-Data Only) data connectivity. It doesn't have a smartphone operating system, such as Windows Mobile or Android, but Verizon expects subscribers to use it as a data device, not just a phone with some handy features. It's available now for US$99.99, after a $100 mail-in rebate, with a two-year service contract. The Rogue is the first of a new class of devices, which Verizon calls Enhanced Multimedia Phones, which will have these characteristics.
It's a safe bet consumers will browse on the Rogue, because they'll have to pay at least $9.99 per month to do so. Though aimed at a different demographic from iPhones and BlackBerrys, the Rogue will be sold like those high-end devices have been, with a mandatory monthly data plan. Previously, Verizon has let users of non-smartphones make no monthly data commitment and pay $1.99 per megabyte as they go. No existing phones will be re-classified as Enhanced Multimedia Phones, Verizon said.
Verizon's arrangement is probably a sign of things to come, according to some mobile analysts, as carriers look to maximize revenue and profits. They see the operators riding a surge of consumer interest in mobile data connectivity for browsing, social networking and downloadable applications.
"The demand for Internet browsing and applications is growing by leaps and bounds," said Yankee Group analyst Andy Castonguay. In the second quarter, data revenue made up 29.3 percent of total Verizon Wireless service revenue, up from 24 percent a year earlier. Data was 28.7 percent of rival AT&T's service revenue. However, voice plans will continue to make up a majority of mobile-operator revenue for the forseeable future, Castonguay said.
But if consumers embrace Verizon's vision, the days could be numbered for conventional mobile phones and plans. Though most handsets now have 3G capability, and features such as keyboards have been trickling down into less expensive devices, those essentially have been added features on handsets sold primarily for voice calls and text messaging. Now carriers are betting data is a key part of the mobile experience that more consumers are willing to pay for.
The required data plans for the Rogue are different from the $29.99 unlimited-data plan for smartphones, which isn't available on the new phone. Instead, for $9.99, Rogue users will get 25MB of data usage per month, and for $19.99 they will get 75MB. The plans were designed specifically for Enhanced Multimedia Phones, which consumers will want to use for data but not as heavily as smartphones, which have push e-mail and downloadable third-party applications, said Verizon spokeswoman Brenda Raney. Based on the Rogue's features and what Verizon has learned about its subscribers' data use, the carrier believes these plans will be adequate, she said.
"In the future, you're going to see more and more feature-rich phones that will come with the requirement of a data plan," Raney said. "The bulk of our phones still offer the $1.99 per-megabyte option."
Verizon has also replaced its $15 monthly VCast VPak plan, which included access to the carrier's video offerings as well as unlimited data, with the $10 VCast Video plan, which just includes unlimited video. Existing customers of VCast VPak will get to keep that plan, Raney said.
The introduction of the new plans echoes a comment earlier this year by Verizon Wireless President and CEO Lowell McAdam. Asked about third-party VoIP (voice over Internet Protocol) applications on mobile phones, McAdam suggested such applications wouldn't hurt carriers. "We have moved away from unlimited data plans," McAdam said. "The excitement of an over-the-top application like (Skype) in an unlimited environment means one thing to a customer. In an environment where you're paying for every byte, that means something totally different." McAdam said.
Other mobile operators are likely to watch how Verizon's Enhanced Multimedia Phones and mandatory data plans fare and then emulate them, said analyst Jack Gold of J. Gold Associates.
"It's like the airlines charging for drinks. ... One started, and then the others started," Gold said. "If Verizon gets away with it, everyone's going to do it."
However, another analyst called it a risky move. Users who were looking forward to the Rogue "are not going to be very pleased with these new data plan requirements, especially when other carriers impose no restrictions on similar devices to their users," said Current Analysis analyst Deepa Karthikeyan.
The service providers may be looking for more of the bonanza they've reaped with smartphones, profiting not so much on the subsidized device price but on larger monthly service bills, Castonguay said.
The way the new, low-end data plans are priced, Verizon might stand to make a good return. For example, at $9.99 per month for 25MB of data, subscribers will be paying nearly $0.40 per megabyte. Those who go over the monthly limit on that plan will pay $0.50 for every extra megabyte. Then again, the monthly outlay is smaller than for the unlimited smartphone plan.
How much a given consumer could do with 25MB data is hard to tell because there are so many different ways they could use it, analysts say. Verizon's Raney said downloading the carrier's VZ Navigator application would take 2MB and on average, viewing 100 pages on the mobile Web would be 3MB.
"A lot of these services are simply too expensive, still, for what you get," Castonguay said. U.S. carriers need to follow the lead of European operators and drop data prices, but also introduce tools for subscribers to easily see how much data they've used, he said.
Verizon's introduction of the new, limited plans just highlights a core dilemma the carriers face, analyst Gold said: How to price data plans low enough that they're attractive to consumers but not so low that subscribers swamp the network and degrade its performance, leading to complaints about both voice and data performance.