Verizon Charging You More, As Bandwidth Costs Them Less

from the caps-and-pap dept

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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Companies: verizon

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Comments on “Verizon Charging You More, As Bandwidth Costs Them Less”

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Anonymous Coward says:

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!

Anonymous Coward says:

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.

Matthew says:

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.

Anonymous Coward says:

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?

yaga (profile) says:

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.

Mike Masnick (profile) says:

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: 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.

Anonymous Coward says:

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.

Jason (profile) says:

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.

Anonymous Coward says:

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.

David Hoffman (profile) says:

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.

Anonymous Coward says:

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.

Janet (profile) says:

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.

David Hoffman (profile) says:

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.

Derek Kerton (profile) says:

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.”


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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