Verizon's new pricing plan is a godsend for Sprint

With Verizon moving to a tiered model, Sprint is the only unlimited game in town.

commentary Verizon Wireless' move to a tiered data plan will cement Sprint Nextel's role as the go-to carrier for heavy data users.

On Thursday, new Verizon customers will have to sign up for a usage-based data plan to go along with their handset. With AT&T having already moved to a tiered model and T-Mobile USA slowing down excessive data hogs, that leaves Sprint as the only national carrier offering unlimited data with no strings attached.

It's a rare advantage for Sprint, which routinely gets outgunned by AT&T and Verizon both in marketing clout and in handset selection. Sprint, which has hinged its turnaround on more affordable, simple, flat-rate pricing plans, is expected to press its advantage. It could also become a major selling point if it also ends up carrying Apple's iPhone.

"(Sprint) is becoming a haven for heavy users," said Roger Entner, an analyst at Recon Analytics.

Verizon's switch, unlike AT&T, seemingly targets high-end users. When AT&T moved to tiered pricing, it offered a lower-end $15 plan with limited data access. Verizon offers no such option, instead introducing more expensive plans for heavy data users.

While AT&T and Verizon have moved to tiered pricing plans, T-Mobile continues to tout its unlimited plans. But if customers exceed a certain amount, the carrier will slow down the connection, a practice called throttling.

Sprint, meanwhile, already targets consumers looking for more value in their plans, competing directly against T-Mobile. A recent ad featured Chief Executive Dan Hesse talking about his company's unlimited data plans, dismissing terms such as throttling. A company spokesman wasn't immediately available to comment on its future marketing plans. Hesse and other executives have talked about the advantages of sticking to unlimited plans even as the rest of the industry moves away from them.

With carriers increasingly talking about data usage, consumers are more concerned about going over the limit. Verizon spokeswoman Brenda Raney said 95 percent of its customers currently use less than 2 gigabytes of data, which is the cap set at its cheapest data plan. With 2 gigabytes of data, a customer can stream a little more than 2 hours of music or stream 35 minutes of video each day for a month. Regardless, half of all smartphone users consider themselves excessive users, Entner said.

Again, that could play well into Sprint's strategy of offering no-worry plans.

So, what about the iPhone for Sprint?
Speculation, meanwhile, has increased on Sprint potentially getting the iPhone. Shing Yin, an analyst at Citadel Securities, said in a report that Sprint's willingness to pay the high subsidy cost and Apple's desire to expand its distribution could all play a role. Sprint would be the only carrier offering the iPhone with an unlimited data plan, a major draw for customers who spend a lot of time using their phones.

An Apple spokeswoman declined to comment on the prospect of Sprint getting the iPhone.

Sprint could stand to use another shot in the arm. While the company added 1.1 million net wireless customers in the first quarter, much of its growth continues to be on the lower end, prepaid side. The company has used its 4G network to lure new contract customers in, but that advantage is diminishing with the other carriers touting their own faster wireless networks.

While Sprint is more focused on adding customers now, there's a downside: while the company still has capacity in its network, Entner said Sprint's network could start to strain once it adds another 5 million smartphone customers.

Sprint doesn't disclose its number of smartphone users. At the end of the first quarter, it had 51 million customers, although many are prepaid customers or use basic phones.

"If everything goes well, they will be a victim of their own success by next spring," he said.

The company doesn't seem to have any intention of changing its strategy. Earlier this year, it raised the price of its plans by $10 to ensure its unlimited offering continues.

Rival carrier executives have talked about the need to move away from unlimited pricing, highlighting the dilemma for carriers as they wrestle with exploding data traffic and the need to invest more in their networks. The need to stay ahead of the network constraints is one of the reasons why AT&T wants to buy T-Mobile.

So far, Sprint doesn't appear to be facing that dilemma.

 

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