Verizon's Unlimited-Data Plan Comes With Caveats

By Ryan Knutson 

Like its rivals, Verizon Communications Inc. has brought back unlimited data plans. And like its rivals, "unlimited" comes with a few caveats.

All four U.S. carriers warn they may temporarily slow connections for the biggest data users at times of heavy network congestion. At Verizon, after an unlimited subscriber consumes 22 gigabytes in a billing cycle, the carrier "may prioritize usage behind other customers in the event of network congestion."

While the average smartphone customer uses less than 5 gigabytes a month, those who stream lots of video or use their cellphones as Wi-Fi hot spots can consume far more. Watching an hour of video a day for a month would require about 10 gigabytes, according to Verizon's online data calculator.

AT&T says it may take similar action to temporarily throttle users at 22 gigabytes. For Sprint, the magic number is 23 gigabytes and at T-Mobile it's 28 gigabytes.

That means that if a bunch of customers are connecting to the same cell tower at the same time, users who have exceeded those levels that month will get a slower connection than everyone else until the congestion passes.

A problem for smartphone owners is that it's hard to know when or where that might happen. Verizon says: "While we don't expect to do that very often, network management is a crucial tool that benefits all Verizon customers."

Another restriction on Verizon's unlimited plan: The company won't let customers pay for it with a credit card -- debit cards or checking accounts only. That change is probably saving Verizon 2% to 3% in credit-card fees, according to analysts at Evercore. Customers must also choose paperless billing and enroll in autoplay or else pay $10 more a month.

Verizon had stopped selling unlimited plans in 2011 and consistently said such plans don't make money. Several analysts who studied the impact of the unlimited plan, which costs $80 for a single phone and $180 for four phones, said it would likely be neutral to the company's average revenue per user.

That's because while the unlimited plan is priced below Verizon's bigger monthly data plans, the company might encourage users with smaller plans to pay up for data they don't consume. Last month, for example it was selling a $55 monthly plan with 5 gigabytes of data.

"By offering unlimited, Verizon is making its slate of offerings more competitive with peers; however, it is not cheap enough to have a dramatic impact on share," analysts at New Street Research wrote in a note to clients.

The unlimited offering could also help the company compete for customers with Sprint Corp. and T- Mobile US Inc., which have been pushing lower-priced unlimited plans, as well as AT&T, whose unlimited plan requires customers to sign up for its DirecTV satellite service.

Unlike its rivals, Verizon's unlimited service allows users to stream high-definition videos for no additional charge. Sprint and T-Mobile only included lower- quality video in their unlimited plans, which they rolled out last year, unless users paid extra fees.

On Monday, T-Mobile responded to Verizon's offer by saying that it too would let customers stream HD video on its unlimited plan starting Friday. It also dropped the price of two lines with unlimited data by $20 to $100 a month. Sprint's most recent promotion is 5 lines with unlimited data for $90 a month.

Verizon's unlimited-data customers can turn their smartphones into a Wi-Fi hot spot in order to connect laptops, tablets or other devices. But users will be slowed to 3G speeds after 10 gigabytes have been consumed in a month.

T-Mobile said Monday it would include a similar amount of data for hot-spot users on its unlimited plan. Sprint's plan includes 5 gigabytes of such data use, while AT&T doesn't allow it on its unlimited plan.

Write to Ryan Knutson at [e-mail]

(END) Dow Jones Newswires

February 14, 2017 05:44 ET (10:44 GMT)

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