New decade, new price war: Verizon Wireless slashes voice prices, looks to make up difference on data

Continuing a price war that it started in early 2008, Verizon Wireless this morning ratcheted up the pressure on its competitors by rolling out new rate plans that are more than 30% cheaper than previous offerings from the nation’s largest operator.
The new plans slash the price of its unlimited calling plans from $100 per month to $70 per month, and its unlimited calling and messaging plan from $120 per month to $90 per month beginning Jan. 18.
The carrier made even more drastic cuts for its family plans, with unlimited calling for two lines dropping from $200 per month to $120 per month and the addition of unlimited messaging and calling for two lines dropping from $230 per month to $150 per month.
While voice and messaging pricing has been discounted and simplified, Verizon Wireless looks to be making up some of the difference on its data packages.
The carrier said that customers selecting its “3G multimedia phones” non-smartphones like the LG Chocolate Touch, LG enV3, LG VX8360, Motorola Entice W766, Nokia 7705 Twist and Samsung Alias 2 will be required to purchase a data package starting at $10 per month for 25 megabytes of data transmission. The requirement began late last year with customers purchasing the LG enV Touch and Samsung Rogue. The required data package for smartphones, including Research In Motion Ltd.’s BlackBerry, Microsoft Corp. Windows Mobile-powered and Google Inc. Android-powered devices will remain at $30 per month.
In addition to being offered to new customers signing up on Jan. 18, Verizon Wireless said current customers will be able to switch to the new plans without a penalty or extending their current contract.
“The market is going towards unlimited and they have an upsell opportunity to their lower monthly minute bucket customers,” said William Ho, research director of wireless services at Current Analysis. “Given their statement of less than 1 million unlimited calling customers at $100, the upside of upward migration sounds logical.”
Verizon Wireless was the first nationwide operator to offer unlimited calling at the $100 price point in early 2008, a move quickly followed by its competitors.
Verizon Wireless noted the changes were made possible in part by the increased scale it achieved following its acquisition of Alltel Communications L.L.C., which provided the carrier with around 10 million new customers and control over Alltel’s geographically extensive network. Verizon Wireless also said it was taking advantage of the growing demand for smartphones; the new plans will require customers to sign up for data plans, which could make up for the drop in voice revenues, and its plans to build up its customer base ahead of its ongoing LTE buildout, which is expected to cover 100 million potential customers by the end of the year.
In addition to increased pressure on its competitors, the new rate plans provide Verizon Wireless’ management with “talking points” for the release of the company’s fourth-quarter and full-year 2009 financial results scheduled for Jan. 26.
The new plans undercut AT&T Mobility’s current pricing on unlimited calling plans that run $100 per month for a single line of voice-only service and $120 for a single line of unlimited voice and messaging. AT&T Mobility also charges $200 per month for two lines of unlimited calling on a family plan and $230 for the same two lines with unlimited messaging. (This could all change over the weekend as AT&T Mobility has a history of quickly following rate plan changes instituted by Verizon Wireless.)
Verizon Wireless’ new plans put the carrier more in line with Sprint Nextel Corp., which continues to offer unlimited calling, messaging, data and navigation services for all phones and most smartphones at $100 per month. The equivalent Verizon Wireless offering for a single line would run from $110 to $120 per month depending on device.
T-Mobile USA Inc. continues to be the low-cost leader with its recently launched Even More plans charging $60 per month for unlimited calling, $70 per month with the addition of unlimited messaging and between $80 and $100 per month with an unlimited data package depending on device. Analysts don’t think T-Mobile’s offerings are a huge threat for Verizon Wireless.
“(The new plans are) very aggressive and closes the value gap against T-Mo on voice-only pricing on Even More plans,” Ho said. “They don’t have to beat T-Mo but come really close to pick off switchers.”
Prepaid changes
Verizon Wireless did not limit its pricing changes to postpaid, as the carrier said it will begin offering customers no-contract plans priced at a $5 premium on their contract offerings. That means prepaid unlimited voice plans will run $75 per month. Customers who add unlimited messaging will be charged at $95 month. The carrier said the same $5 premium will apply to voice-bucket plans of 450 and 900 minutes per month.
The prepaid move brings Verizon Wireless closer to the now-standard $50 per month for unlimited voice calling without a contract, but is still $30 more per month than network partner Tracfone Wireless Inc.’s Straight Talk plan, which uses Verizon Wireless’ network. AT&T Mobility also continues to undercut Verizon Wireless’ prepaid pricing, having launched a $60 per month, unlimited calling plan late last year, though the offering is confusingly an add-on to its Simple Rate Plan.
The plans could also apply further pressure on carriers like MetroPCS Communications Inc. and Leap Wireless International Inc., which offer a number of no-contract, unlimited calling plans that range between $30 and $60 per month depending on additional services offered. MetroPCS and Sprint Nextel’s Boost Mobile division updated their no-contract offerings earlier this week.
Current Analysis’ Ho noted the new postpaid plans could lure some customers looking at the less expensive offerings from regional carriers, but who are attracted to the Verizon Wireless brand.
As for when its competitors might respond, Ho thinks it could be a short wait.
“Clearly AT&T will follow as it cannot leave the value gap and let VZW have this huge differentiation,” Ho said. “It’s a matter of time when AT&T matches; the question is how fast. In ’08, they did it in a matter of hours.”
Tick tock. Tick tock.