Verizon to end unlimited data for upgraders

@CNNMoneyTech May 16, 2012: 5:13 PM ET
Verizon Wireless' unlimited data plans are heading for extinction.

Verizon Wireless' unlimited data plans are heading for extinction.

NEW YORK (CNNMoney) -- Verizon Wireless is planning this summer to begin forcing smartphone customers with unlimited data plans to switch to tiered plans when they upgrade, the company's chief financial officer told Wall Street analysts on Wednesday.

At the JP Morgan Technology, Media and Telecom conference in Boston, Verizon CFO Fran Shammo said the company will unveil a "data share" pricing model by mid-summer, which will give customers the ability to buy an allotment of data that can be used across multiple devices linked to the same account.

As that plan rolls out, Verizon (VZ, Fortune 500) will discontinue its practice of allowing customers who have legacy unlimited data plans to keep those plans when they buy a new smartphone. Verizon stopped allowing new customers to buy unlimited data plans a year ago.

"As you come through an upgrade cycle and you upgrade in the future, you will have to go onto the data share plan," Shammo said, "[We're] moving away from, if you will, the unlimited world and moving everybody into a tiered structure data share-type plan."

The CFO emphasized that the plan is "paper, not actual." A Verizon Wireless spokesman declined to comment on issue.

AT&T (T, Fortune 500) Wireless, which led the industry with the first tiered data plans, continues to allow customers with legacy unlimited plans to keep that service when they upgrade. Sprint (S, Fortune 500) remains the only national carrier that offers new customers an unlimited data plan.

The idea behind Verizon's change in strategy, Shammo said, is to increase the company's revenue at a time when the cell phone market is already saturated with customers and voice minutes are dropping, sending average revenue per smartphone user down $10 over the past two years.

As attracting new customers grows more difficult, finding new ways to increase revenue from the customers Verizon already has is becoming the company's top priority.

Though Verizon's lowest, 2 gigabyte-per-month tier currently costs $30 -- the same price as its legacy unlimited offering --- the company knows that data usage is increasing, particularly as 4G-LTE networks make possible huge HD video downloads and machine-to-machine communications.

As customers increase their data usage on their devices, the company thinks they'll move to higher and pricier tiers.

Or, in CFO-ese: "With the construct that we have dealt with around data share and where we see consumption of LTE going, when you put the combination of them together, we are fairly confident that we will see people start to uptake in the tiers, which is really where we will get the revenue accretion in the future."

That's how Shammo put it in his JP Morgan talk. Translation: You're going to suck down more data and pay Verizon more for that privilege.

Dragging existing unlimited customers away from their unlimited data plans isn't the only way Verizon is upping its take. The company recently imposed a $30 "upgrade fee" on customers, which Shammo said has been a success.

"We are really not seeing any impact from a customer base from that fee, so that was the right thing to do," he said. To top of page

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