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Verizon’s new plan shakes up mobile phone pricing

Mark Davis, The Kansas City Star, Mo. –

The nation’s largest wireless phone company plans to stop counting texts and minutes on calls in favor of charging households based solely on their number of mobile devices and how much data they use.

Analysts are calling the Share Everything plan that Verizon announced Tuesday a watershed in mobile phone pricing. They expect ATandT, the second-largest wireless carrier, soon will announce similar plans.

They’re also warning that such a shift in pricing could spell trouble for smaller carriers, including Sprint Nextel Corp. based in Overland Park.

“Market share will further concentrate in the hands of the Big Two (Verizon and ATandT), accelerating the industry consolidation into a duopoly and further marginalizing Sprint and T-Mobile,” Craig Moffett, an industry analyst at Sanford C. Bernstein and Co. LLC, wrote in a note to clients.

In a statement, Sprint emphasized its pricing strategy that provides customers unlimited data as well as unlimited voice minutes and texts.

Verizon’s new plan starts June 28 and replaces nearly all of the choices that new customers currently have.

Existing customers don’t have to switch from their current plans, but some with multiple phones and devices and who use a lot of data, such as watching videos, may find cheaper prices under Share Everything.

On the other hand, consumers with lower-cost plans that limit texting and voice minutes may find the Share Everything plan costlier.

Verizon said it would charge customers $40 a month for a smartphone connection to its wireless network under the new plan. Add a traditional cellphone for $30 a month, a Wi-Fi hotspot or notebook for $20 a month or a tablet for $10 a month.

The account, with up to 10 devices, would enjoy unlimited voice minutes and texts.

Data, such as streaming videos and Internet access, would cost $50 for 1 gigabyte each month and $10 for each additional gigabyte, up to $100 for 10 gigabytes of data use each month. All of the devices on that account would share the purchased data.

Verizon customers currently have to buy separate data plans for each device.

Brenda Hill, a Verizon spokeswoman in the Kansas City area, said the separate data plans could leave family members confused if one of their cellphones used all of its data but couldn’t share in the unused and paid-for data on another cellphone.

Sprint, in an email statement, said Verizon’s shared data plan still would leave customers exposed to possible overage charges. Its own Simply Everything plan has unlimited voice, text and data.

“The concept of sharing a monthly data allowance across a family of devices significantly increases the potential of a surprise monthly bill due to data overage charges and driving greater customer dissatisfaction,” Sprint’s statement said.

Verizon said the average customer uses between 1 gigabyte and 2 gigabytes of data a month, and recommended customers purchase 2 gigabytes of data, which would cost $60. With a $40 charge for a smartphone, the most basic plan would cost $90 with 1 gigabyte of data and $100 with 2 gigabytes of data.

Sprint’s Simply Everything plan for a smartphone costs $109.99, including unlimited data.

Verizon said customers could change their data plan from month to month, or even increase it during the month. Exceeding the data plan would cost $15, rather than the $10 an additional gigabyte would cost normally.

Verizon’s pricing strategy is shifting toward data largely because that is where customers put the greatest strain on wireless networks.

Wireless industry growth also is stronger in newer mobile devices that focus on data, such as tablets, rather than in cellphones, though consumers still are switching to smartphones. The plan also may give Verizon a chance to capitalize on its faster 4G network that uses Long Term Evolution, or LTE, technology.

“The main benefit (to Verizon) is to stimulate device adoption and usage on its LTE network,” senior analyst Jennifer Fritzsche of Wells Fargo Securities wrote in a note to clients.

Wireless companies also gain little benefit from counting texts or cellphone minutes, because these use relatively little of their networks’ capacity.

Moffett said Verizon’s new pricing strategy may usher in the end of voice and text as wireless service concepts in favor of simply buying access.

He also argued that Verizon’s per-device pricing may work against smaller carriers.

For example, a household with two or three Verizon devices, or ATandT devices, and one Sprint or T-Mobile device, faces a strong incentive to move to one carrier under a shared-pricing structure.

“Sprint doesn’t stand a chance,” Moffett wrote.

Bloomberg News and The Associated Press contributed to this report.

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