Verizon Wireless steps toward tiered data pricing

After months of hints, Verizon Wireless is jumping on the tiered data pricing bandwagon, a source close to the company confirmed on Tuesday.

Starting October 28, the company will launch a new promotion that will allow customers to subscribe to a $15 a month data plan, which gives individual smartphone subscribers 150 megabytes of data for the month. The new pricing is only a promotion for the holiday season and is meant to entice traditional feature-phone customers to upgrade to smartphones, the source said. The source was unable to say whether Verizon would continue to offer the pricing after the holiday season.

Customers will be charged 10 cents for every MB that is consumed during the month over the 150MB limit. Unlike AT&T, which also moved to tiered pricing earlier this year, Verizon Wireless will still keep the $30 a month unlimited data plan it currently offers.

The technology blog Engadget first reported the news of the pricing promotion.

Verizon's move is not unexpected. The company's executives have said for months that the company would move to a tiered pricing model. At the CTIA tradeshow earlier this month in San Francisco, Lowell McAdam. Verizon COO, said Verizon would eventually move to a tiered offering on its new 4G LTE network. And he hinted that the company might also move to tiered pricing for its 3G service. But he was short on details for plans, such as timing and exact pricing. Most experts agree that wireless operators cannot afford to continue offering unlimited bandwidth to wireless data users. And McAdam likened today's unlimited data plans to a utility service.

"It's no different than the water system in a neighborhood," he said."If everyone is watering their lawns at the same time, then water pressure goes down. And when you leave your house, you don't leave your kitchen faucet running. With unlimited bandwidth, the tendency is to leave the faucet running. We want to make sure that we are focused on efficiency."

AT&T was the first major wireless operator in the U.S. to move away from a flat fee for unlimited data to one that offers tiers of service. In June, the company eliminated its $30 a month unlimited data plan, replacing it with a $25 a month option that allowed customers to consume 2GB of data per month. It also offers a $15 a month plan that offers 200MB of data per month.

AT&T said that most of its customers will actually be paying less for the data they actually use every month, since the majority of customers consume less than 2GB of data. Customers already on an unlimited plan have been allowed to keep their unlimited data plans, even when they renew their contracts.

But some consumers have complained. The main problem is that most people don't understand what a MB really means. They have a difficult time grasping how much data they actually use. And many believe they are heavy data users when, in fact, they are not. Still, the limits that carriers such as AT&T and Verizon will impose as part of the new pricing structures will likely change over time, as more consumers use more data. For now, the limits are designed to deter the heaviest users and protect the network for the majority of users.