Verizon Charging You More, As Bandwidth Costs Them Less
from the caps-and-pap dept
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.