Verizon Charging You More, As Bandwidth Costs Them Less

from the caps-and-pap dept

Fri, Jan 25th 2013 6:08am — Timothy Geigner

As we just recently discussed, broadband providers appear to finally be willing to give up their pretend need for data caps due to the pretend costs of delivering service. The story they told essentially was that, without data caps, congestion would clog the interwebz tubes and that laying bigger tubes was way too costly. Perhaps noteably, this rarely resulted in actual hard caps on data, but rather provided a convenient excuse to charge more for more data service, regardless of the effect or cost of delivering that service.

Now Verizon's 4G LTE money-making machine is giving us a glimpse into exactly how profitable providing bandwidth is becoming as the cost for delivering service drops and prices to consumers go up.

Verizon (VZ) posted a pretty impressive holiday quarter (one-time charges aside) with a good outlook on Tuesday, and the company’s share price rose as a result. There were also plenty of interesting takeaways from the carrier’s earnings call, but The New York Times’ Brian X. Chen zeroed in on one item of particular interest. Verizon launched new “Share Everything” plans last summer that make smartphone data more expensive for many users. The best thing about these plans for investors — and, not coincidentally, the worst thing about the plans for subscribers — is that Verizon is now making more money off of smartphone data as costs associated with transmitted that data are falling.

It really doesn't get much simpler than that. The 4G LTE network is efficient to the point that delivering the service costs less than the 3G network, yet the price to consumers is going up. To be clear, the problem here isn't that Verizon is making money. Rather, the problem is that this comes from the same company that built a business model around low caps and high overage costs while also claiming that caps were the sign of a "competitive market." For those of you playing along at home, it's precisely because of a lack of competition that Verizon can at once have its costs drop while raising prices on its services. Were there more competition, someone new would compete on price or value of service. As it stands, Verizon can use their faster service and low caps to further the aforementioned business model.

As an added bonus, Chen noted that Verizon’s faster data networks also cause users to eat through their data allowances more quickly. This eventually prompts them to buy more expensive plans with higher data caps, which of course net Verizon even more cash.

As a Verizon customer myself, these kinds of signs that there isn't enough competition for my dollar are quite frustrating. On top of that, the model is specifically designed to provide a great service and then drop a bunch of obstacles in its path... it's maddening.

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Filed Under: broadband, charges, costs, data caps, metered broadband, pricing
Companies: verizon

36 Comments

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Anonymous Coward, 25 Jan 2013 @ 6:29am

one answer surely would be to 'name and shame' the politicians that have/are accepting bribes to stifle competition by making new carriers an almost impossible task and by allowing those that exist atm to do whatever they want. it's just like the entertainment industries really. pay money to politicians, stop competition, come out with what ever BS they want to impose restrictions. every one is happy except for those that are paying for everything, ie, the customers! but then, they dont matter, do they!
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Anonymous Coward, 25 Jan 2013 @ 6:34am

I feel like Verizon is going to lose a lot of subscribers soon. There are a -lot- of people hanging onto their unlimited plans for dear life. Verizon is going out of their way to make it so these people can't keep them without actually taking it from them flat out. So now, when you upgrade your phone, they force you to change your plan. In about a year or so when all the unlimiteds come up for contract renewal, we're going to see a lot of people abandoning ship. A majority of comments I read from people are that they hate Verizon but love their network and if they ever lost their unlimited plan they're going somewhere else.
Please forgive typos, typed from my phone.
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Matthew, 25 Jan 2013 @ 6:34am

The worst part about all of this is that there's just enough competition out there to prevent any kind of investigation into this. The Big Three (Four?) all seem to adopt new "innovations" and price points in lockstep; any arguments that such moves were all coincidental most likely fall on deaf ears by now, as I think a lot of us have independently come to the conclusion that that's utter nonsense.

I suppose we can take some solace in the fact that that we've got MVNO's springing up all the time to fill in the low-cost data gap, but even then their prices are almost double those of other cell phone providers in other countries. It feels like the entire cellphone provider industry is broken, which is a shame as mobile data becomes more and more useful in things like wearable electronics.
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Anonymous Coward, 25 Jan 2013 @ 6:38am

and what about Time Warner, who bought exclusive privileges to the Lakers and wants to buy them to the Dodgers and benefits from govt. established monopoly privileges. Their prices have only been going up. Why don't they ever get investigated for anti-competitive behavior? Why is it only Google, who does nothing wrong, that ever gets investigated?
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Andy, 25 Jan 2013 @ 6:39am

Re:
That pretty much describes me exactly. Thanks.
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JohnG (profile), 25 Jan 2013 @ 6:46am

Just wait... there'll be some congressman somewhere looking to make a name for him or herself that will introduce legislation to try to "fix" this.
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Inversed, 25 Jan 2013 @ 7:21am

The only solution I see here is to buy Verizon stock. As they make money, so do you.
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JWW (profile), 25 Jan 2013 @ 7:22am

I'll say it again
After enough time high prices and data caps will make the US and internet backwater as other countries blow past us with internet innovations that revolve around cheap very high speed access.
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Pixelation, 25 Jan 2013 @ 7:45am

Verizon, the new cocaine.
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yaga (profile), 25 Jan 2013 @ 7:45am

Horrible idea but..
I've often thought that the Federal Government should build out the networks and then the telcos get charged a usage fee for all wired and wireless networks. Then the govt. would be in a much better position to:
1. enforce commonality among equipment - no more CDMA or GSM every phone in the US would be one or the other and be able to be used at any provider.
2. enforce common tech upgrades - the govt would determine what the next generation networks would look like and when the upgrade would be completed.
3. determine a fair price for services - the FCC begin to manage the price of service like they do for other utilities because phone service is now at that point where a person has to have it in the modern world. The price would start at a point of a acceptable level of profit above the usage fee charged to the telcos.
4. force telcos to provide service to rural area - the govt would actually be setting up the cell sites and running the fiber so the only the the telcos would need to do is start advertising.

However I also understand that a lot of people would see this set up as the beginnings of socialism in the US or a huge security risk.
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gorehound (profile), 25 Jan 2013 @ 7:49am

We need a Revolutuon in this Nation !
A People's Revolution !
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Mike Masnick (profile), 25 Jan 2013 @ 7:56am

Re: Horrible idea but..
That version of the idea does have significant problems, but there are, potentially, more compelling solutions, in which infrastructure is more standardized -- but owned by the public, rather than the government.

See: http://www.wired.com/wired/archive/11.12/view.html?pg=5 as an example

If you have common infrastructure, owned by the people using the network, and then allow multiple services to compete on top of the network, you don't need the government to determine "fair prices" because you can get real competition that will set a reasonable market place.
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Casey, 25 Jan 2013 @ 7:57am

Verizon also has a huge fiber network, so the backhaul over a good chunk of the US costs them little to nothing.
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Anonymous Coward, 25 Jan 2013 @ 8:05am

Re: Re: Horrible idea but..
You filthy Communazi!

(Not serious, by the way. Satirizing the opposition to that idea.)
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bob, 25 Jan 2013 @ 8:24am

Re: Horrible idea but..
I imagine we wouldn't have 4g, and maybe not even 3g if the govt ran things. it would kill innovation because there would be no competing services. so, yes, all the phones would work everywhere, but the call quality would be mediocre, and there would be no high bandwidth mobile internet services.
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Anonymous Coward, 25 Jan 2013 @ 8:32am

I was never fortunate enough to have an "unlimited" plan. A friend I have has one with ATT that he is also "holding onto for dear life" but also reports to me that he gets throttled a LOT.
My wife has a iPhone4S and I have an iPhone5. We moved to the all share plan last summer as it made sense for us to share data being they thru in voice min and messages at unlimited.
The plan we chose was the least expensive (2G) and we have NEVER gone over cap yet.
At home its WiFi at work its WiFi and so its only during the short times in the car or while traveling to visit family (who have WiFi once we get there) that we actually use any of this allowance anyway.
I think with "creative" use a smaller cap level they still make their cash but its as painless as possible for me.
My only other choice would be ATT and that would require us BOTH to purchase new phones.
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Anonymous Coward, 25 Jan 2013 @ 9:33am

Maybe they misunderstood the concept of "Less is More". Much like they misunderstood the concept of basic math.
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Yakko Warner (profile), 25 Jan 2013 @ 11:12am

Same stuff, different company
Sounds like they're just taking a page out of "landline" internet providers' playbooks with regards to caps. Implement a cap, then offer more services and speed to make you hit the cap faster.
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That One Guy (profile), 25 Jan 2013 @ 1:25pm

Re:
And he'll be shot down by the large groups of other politicians who get hefty 'donations' from the telecommunications industry.

I'd love if it were to happen, don't get me wrong, but it's important to realize that getting anything to change is going to take a massive amount of work.
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ASR (profile), 25 Jan 2013 @ 1:28pm

Re:
You hit the nail on the head.
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Anonymous Coward, 25 Jan 2013 @ 1:43pm

Re:
When your contract is up, you do not have to sign a new contract or upgrade your phone. You can just continue with the old contract on a month to month basis. If you need a new phone, check Craigslist or other 3rd party websites for them instead of signing a new contract.
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Jason (profile), 25 Jan 2013 @ 3:34pm

You guys must understand this, Bandwidth is no longer the product, we are.
Companies like Facebook, Twitter and even Google learned it long ago. Humans are a much better product than anything the industry itself can create.

Verizon knows it and this is the result. They can get away with these tiered low cap crappy "plans" because they are no longer selling you anything, they're buying you as a product to continually feed money into the corporate bank account at the lowest price to the them.

Humans are the commodity and the "service" is incidental. They're attempting to strike that perfect balance between consumer hatred and consumer apathy. There's a line at which their service becomes so shitty and abusive that they start losing customers and they know that so they pull back just before, like stretching a rubber band to it's absolute limit before it breaks.
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Ed C., 25 Jan 2013 @ 4:10pm

Re: You guys must understand this, Bandwidth is no longer the product, we are.
They're attempting to strike that perfect balance between consumer hatred and consumer apathy.

That basically sums up how everything is run in this country, even government.
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Glenn, 25 Jan 2013 @ 4:38pm

Verizon Wireless
If you're paying them [too much?] for service, then you're pretty much getting what you deserve.
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Angel (profile), 25 Jan 2013 @ 5:32pm

As soon as my tax refund comes in I'm paying my early termination fee & dropping Verizon then I'm going back to prepaid. Technically I don't have to continue paying anything and could drop at anytime since the plan is in my mom's name, but I won't dog my own mother that way. Anyway, I'm totally done with contract phones from here on out.
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Anonymous Coward, 25 Jan 2013 @ 9:00pm

Don't Like it? Change to Sprint
If you do not agree with the new data policies of Verizon (and AT&T for that matter) then you need to take advantage of what competition still exists today before it get squashed out into two identical companies completely.

I changed over from Verizon to Sprint as soon as was possible and am paying slightly less but with unlimited data intact. Sprint still offers unlimited data plans, a flat fee ($30 total per line on Everything Data Family) and it is MUCH cheaper overall than anything Verizon and AT&T have to offer, especially for plans with multiple lines.

The trade-off is buying the smallest pool of minutes vs small pool of data. Accounting for the fact that you get UNLIMITED mobile to ANY mobile carrier and nights/weekends @7pm, you won't run through the minutes at any appreciable rate. And given the usage of data will only go up and not down, having these high price points set for fixed amount of data at Verizon and AT&T is bad from a consumer perspective.

True, Sprint does not have as robust a network and it's 4G network is still largly on the drawing board (though it is being deployed in some areas) but if the implementation of these arbitrary data caps concern you, you should absolutly vote with your wallet while there are still other companies on the ballet.
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Janet (profile), 25 Jan 2013 @ 9:53pm

RE: Verizon
I didn't think I would care too much for the "Share Everything" data plan; but I have gotten used to it now. It has benefited our family. Our bill has actually went down. The only problem I have is the same thing many other people are upset about. My mother doesn't like the smartphones, along with many other older people. She is due an upgrade Feb.6th. She & a couple of her friends went to Verizon to look at phones. When they got back they said Verizon had about 3 regular flip phones & the rest of them were smartphones.

My Mom also said she didn't like any of them. But they also really steered her in the direction of all the smartphones. It's really gotten to where Verizon & all the other BIG cell phone carriers are phasing out all the (as my Mom & her friends would say ) dumb phones so EVERYONE will soon have to have a smartphone whether you like it or not. So my Mom said she is going to try a smartphone. She doesn't want an I-phone.

So I have a question for anyone that wants to answer. She doesn't want a big phone. They showed her the Droid Razr Mini. Or Razr M. Does anyone know if this is a good phone or can anyone think of another smartphone that would be ok for her 1st smartphone as in ease of use. Thanks to anyone that doesn't mind answering.
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David Hoffman (profile), 26 Jan 2013 @ 5:29am

Re: Time Warner
When Comcast was allowed to purchase NBC you saw an investigation in which anti-competitive issues were rejected as a basis to block the merger. If the federal government allowed that anti-competitive merger, then the ones you are discussing have little chance of being stopped.
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David Hoffman (profile), 26 Jan 2013 @ 5:45am

Re: Don't Like it? Change to Sprint
Sprint not only does not have a robust network, they have a very limited coverage one. Same with T-Mobile. If both of those companies had built geographic coverage similar to AT&T and Verizon, you would have more real competition. A lot of people I know would love to use T-Mobile instead of AT&T or Verizon, but their network's geographic coverage is too small. If T-Mobile builds out significant network geographic coverage, then you can watch both AT&T and Verizon have large percentages of customers switch to T-Mobile.
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David Hoffman (profile), 26 Jan 2013 @ 6:09am

Re: RE: Verizon
The M is highly rated on the Verizon website. A coworker uses one of the Verizon Motorola Droids and likes it a lot. Battery life is slightly better than average. The big thing is to set aside a large block of time for her to learn about the phone and experiment with it a lot using the functions and applications she needs and truly wants to use. Do this several times and she will be as comfortable using the M as she was using the old flip clam-shell or solid bar phones. It takes about 3 months to really get comfortable using or not using all the features, getting a feel for how long a battery charge will last the way she uses the phone, finding a phone case and accessories that work for her, and other stuff.
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Anonymous Coward, 26 Jan 2013 @ 8:43am

Re: Don't Like it? Change to Sprint
The problem is the fragility of Sprint's network. I live in Chicago, and one person who calls me, on Sprint, drops a lot when we are on the phone. When AT&T is more reliable, they have a problem.
I use VOIP for all my calls via CSip, so minutes are irrelevant. I use 5 minutes per month according to Verizon, yet I talk for hours and hours.
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Derek Kerton (profile), 26 Jan 2013 @ 3:20pm

Don't Really Agree
"Were there more competition, someone new would compete on price or value of service. As it stands, Verizon can use their faster service and low caps to further the aforementioned business model."

Tim,

As much as I'd love MORE competition, we have enough right now to refute your premise: someone DOES "compete on price or value of service". Lots of someones.

Sprint offers unlimited all-in plans with a nationwide network of EV-DO and is currently upgrading to LTE. T-Mo offers plans with no subsidy and $50 for unlimited use. Republic Wireless, an upstart MVNO, is coming out with Wi-Fi-heavy phones that roam onto Sprint with $20/mo unlimited plans. Then there are various other MVNO options.

Now, some comments have already addressed their belief that Sprint or T-Mo don't offer as good network coverage or LTE speeds as Verizon. Well, OK. But don't go buying the Lexus, and complain to me that it isn't as cheap as the Hyundai. Any Verizon customer can switch out their carrier to cheaper options without limits, and take their phone number with them.

The fact is, putting in an LTE network is not cheap. Verizon did it first in the country (and very early for the globe), and has an advantage as a result of that gutsy early investment. There are rewards for moving the infrastructure forward with smart investments. We call those "profits". Right now, they can reap some, but eventually there will be more LTE from other carriers and prices will fall.

Don't bitch about VZW's pricing. If you honestly think it's a bad deal, go to a cheaper provider. They're out there.
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Janet, 26 Jan 2013 @ 6:18pm

Re: Re: RE: Verizon
Thanks alot for responding to my question. She likes the fact the battery is slightly better than average. Thanks again.
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wiredworx (profile), 13 Feb 2013 @ 12:54am

best pr submission service
Thats exceptional
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george, 15 Feb 2013 @ 11:05am

Could someone dream up a petition on Change.org to get 100,000 signatures and get the government from charging us for using data caps? It probably be harder now, thanks to those idiots in Texas and Alabama who want to secede from the union. The number of signatures required to review a petition went up by 90% thanks to their stupid idiocy
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Jim L, 18 Dec 2013 @ 8:24pm

WiFi
WiFi will be a great equalizer
I've been very happy with Republic Wireless for over a year and now that they have a great phone I could never see going back.
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