Verizon continues the “congestion” myth with unlimited data plans

August 1, 2014
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Recently, the¬†Federal Communications Commission chairman Tom Wheeler wrote a letter to Verizon in which he stated that he was ‚Äúdeeply troubled‚ÄĚ by the fact that Verizon was planning to slow down¬†speeds of customers who had¬†unlimited data plans. Previously, Verizon only throttled 3G EVDO customers if that user was¬†in the top 5% of the heaviest users and if a local tower was suffering from congestion.

Verizon responded to this letter by releasing a statement stating:

“As we‚Äôve said, what we announced last week was a highly targeted and very limited network optimization effort, only targeting cell sites experiencing high demand. The purpose is to ensure there is capacity for everyone in those limited circumstances, and that high users don’t limit capacity for others.” - VerizonWireless

Of course, customers can avoid the slowdowns if they subscribe to one of Verizon’s shared data plans. Verizon states that the top 5% of data users were using 4.7 GB or more of data each month.

screen-shot-2014-07-25-at-1-49-20-pm 9to5Google

It seems a little odd that Verizon would be having trouble with such a small number of customers considering they love to tout the reliability of their network and the spectrum space that they have for future LTE enhancements. That is, unless Verizon is looking to make a major deal where they proceed to warn the FCC that they could soon run out of spectrum unless the deal was allowed!

Verizon’s tactics here mirror some of their most recent ones towards customers on an unlimited data plan. Verizon recently dropped the $5 monthly fee for the NFL Mobile app. Those with unlimited data plans¬†will not be included in this perk. Verizon has not given any¬†reason for this move other than Verizon simply wanting people off unlimited data plans and onto the shared data plans with a good chance of netting Verizon some overage fees.

Last year, Verizon launched their Edge handset upgrade program which allowed users to upgrade to a new device once every six months, provided they have paid off 50% of their current phone under monthly installments. But those on unlimited data plans were offered an even better deal with a limited promotion data tier called Verizon Max. This plan offered Max 6 GB of data monthly for $30 with overages between $10-$15 per GB.

more everything plan HowardForums

In 2010, Verizon followed AT&T by eliminating unlimited data plans and imposing low data caps and overage pricing on all future wireless data plans. Of course, if you moved to one of these shared plans, you had additional fees tacked onto your bill for each device that you connected to the plan and a good chance of hitting your data cap with a family that enjoyed using a video application of any kind. Since Verizon was at one point charging customers $15 per GB over their caps, how could Verizon not strike it rich with this new billing system?

Is it any wonder that just two years ago, US residents were paying seven times more than those overseas? Verizon charged $7.50 per gigabyte of LTE, which was three times the European average of $2.50 and ten times the 63 cents per gigabyte charged in Sweden.

Much like AT&T, Verizon has a long history of anti-competitive behavior being that they are one of the two wireless carriers controlling the high majority of wireless customers in the country:

  • In 2011, Verizon refused to make Google Wallet available to their customers. Why? According to Verizon,¬†Google Wallet¬†wasn’t safe for Verizon customers to use. In reality, Verizon was simply stopping Google from challenging their soon-to-be-released mobile payment platform, Isis.
  • When the original Galaxy Nexus 5 smartphone was released, it wasn’t supported at all by Verizon. AT&T, T-Mobile and Sprint found a way but not Verizon. Verizon was at the time pushing their droid handsets.
  • When the Nexus 7 was released, it was all ready to go on Verizon’s LTE network. Yet, it was blocked from activation. Verizon blamed “systems issues” while their own seven-inch tablet was shockingly on sale.

As Karl Bode puts it over at DSLReports:

“The reason for this is not complicated: the majority of the U.S. wireless sector is controlled by two companies, who, thanks to feeble competition and duopoly power (spectrum hoarding, regulatory capture, special access market dominance), have collectively jacked up the price of data to protect themselves from the looming loss of SMS and voice revenues. That’s courtesy of AT&T and Verizon’s new shared data plans, which offer unlimited voice and SMS, but impose per device fees and data overage charges of $15 per gigabyte. The latest earnings reports show shared data has consumers paying more than ever for their data.” - DSLReports

The bottom line is that Verizon wants to find additional sources of revenue from the same network. If families switch to the shared data plans, it is likely that the families¬†will have to pick higher data plans and therefore give Verizon even more money per month. Let’s not forget the overages either.

This week, the Government Accountability Office (GAO) released a preliminary report on Internet data caps based on findings from focus groups and interviews with experts. The study found that usage-based pricing has little to do with managing network congestion and more to do with plans to increase the cost of Internet access. Included in the study was AT&T being criticized for not providing access to an online data meter while socking users with overage charges.

Shocking

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