Verizon Wireless Data Pricing: A 5 Year Case Study

My name is Mike and I am the host of the Verizon Wireless forum on the site. Once in a while, I get the chance to write a deep dive article on a current hot topic.

Looking back to 2009 I was proud of myself that I lowered my cell phone bill by reducing a $30 monthly charge for unlimited data on AT&T to $15 per month with a 200mb bucket. Because who uses a phone to browse the web and send that much email? That was a solid move for a few years and I never had any problems. When I rarely went over data, I paid a $15 fee and still found myself ahead on long term costs.

Once the carriers realized the bread and butter was no longer voice minutes and text messaging but data, unlimited plans essentially took a half decade hiatus. In the second generation of wireless plans, data plan anxiety was the modern equivalent of range anxiety for most electric cars. Back then data was not abundant, text messages where about a quarter each outside of a plan, you could not browse the web and talk at the same time, and AT&T’s most basic data allowance was 200mb for a lowly $68.10 per month. If you went over on one aspect, the overage fees were killers.

Once AT&T lost exclusivity of the iPhone, market competition took over. Verizon gave us talk and browse at the same time, five times more data, better building signal penetration, and far more useful online account management for $14.14 more a month. A complete no brainer - I have been a Verizon Wireless customer since September of 2012.

It has almost been five years since I made the switch and the market has definitely changed. The phones are simply better, the coverage is far superior across all carriers, you do not have to wait until 8pm to make phone calls, text away, and data is dirt cheap. The crackberry with physical buttons is gone and the touch screen era is here. Competition is good, right?

Since March of 2013 (give or take) it works like this: T-Mobile acts first, everyone panics, and immediately follows in some way.

Most recently, this was exemplified by the industry's return to unlimited data. T-Mobile's improving network recently resulted in Verizon bringing back unlimited, followed begrudgingly by AT&T. Customers are rejoicing and big investors are terrified.

But why did Verizon and their “superior experience” jump into something they just condemned 5 months ago? I will present the argument that wireless is no longer the golden child and carriers have a secret plan.

A Deeper Dive Into My Own Verizon Billing Data

Let's look at my service as a case study to see how Verizon Wireless has evolved the past five years. With Verizon, you can export a CSV of your entire payment billing history. I got the urge to fire up JMP 13 Pro and have a look at how I gave Verizon $6,367.55 for 53 months of service.

I have three lines on my account. I added the second one in January of 2014 and one more in May of 2015. I have always carried a corporate discount.

Figures 1 and 2 (below) show my total bill. This is the only line that investors like to see. Sustained growth and a new phone purchase every two years (where the bill spikes). Is it worth it for the consumer to have multiple lines? Is there more value to a higher bill? Figure 3 says yes. The more amount of people on an account, the average cost for everyone is reduced and Verizon gets more money.

While Verizon is getting more money (the blue line in figure 3), the average cost per line decreases (the red line). The further apart the gap between the blue and red lines, the more of a discount exists. Thus, by adding my parents (who probably do not even use their phones) to my pool, I the customer am pulling one over on 'ole big red by getting a better value the deeper I jump in. (Let us also consciously ignore the fact that the cost of more voice or text or data never did really cost anything extra to the carriers but it cost a hell of a lot to you -- meaning Verizon is getting money for essentially nothing on their side except the cost of a slightly subsidized phone).

In the history of cellular phones, first “minutes” was the bread winner. Then it became text messaging plans and the various "mistakes" that plagued Verizon Wireless for years. Then it became the age of free voice and sms with the main focus on data plans. What happened to price of data since that started? The next figure shows the total bill (in blue) and a scaled version of the data (removed one significant zero -- mainly to fit on a graph).

At least from me, from 2013 to the start of 2016 is when Verizon made the most money on data. Figure 5 shows that data is becoming less expensive to the point where an argument could be made that Verizon simply does not care about squeezing every cent out of it. Furthermore on my current 8gb plan, I have 22 GBs to use from roll over data and other bonus. Assumedly, Verizon used the money from wireless to fund the purchase of AOL in 2015 and is still trying to negotiate buying Yahoo. The company has recently started to throw things at the wall to see what sticks by trying to push services that no one wanted or the market entirely rejected.

The Return Of Unlimited Data And How It Actually Impacts Your Bill

Let's take a look at the final frontier in wireless plans -- unlimited data. Hypothetically what happens if I switch my three lines to unlimited?

Here's my current bill, pulled from the Verizon Wireless account management page, and Verizon's latest unlimited offer, pulled from their website:

Ignoring Verizon’s funny math of making your final price far larger than advertised, I will add $54 to my current bill to simulate unlimited data and call it Figure 6. Note that my 20% discount does not apply to an unlimited plan and gives them an extra $22 per month in a last ditch effort to raise funds.

Figure 6 takes the historical data from my bill and creates a theoretical peak of wireless pricing with a slightly larger than average increase. With unlimited everything, Verizon simply cannot spit out a new plan every couple of months and get people to pay more. Will corporate plans eventually be applied to unlimited data? Of course. Eventually they will need to compete on price.

What is Verizon’s Real Plan?

• Verizon is building a personalized big data-inspired advertising/behavioral analysis empire. With all the ad networks “anonymously” combing through large email systems (read: AOL, Yahoo) and consumers having zero fear of overusing their own phones, the goal is to now market *you*. You are the product. Your location, what you buy, how you move around, and what your interests are is entirely for sale to all.

• Verizon's (and every other carrier) last ditch effort to increase funds all around is with the total repeal of net neutrality under the current regime. They are working on it right now.

• Verizon does not care that much about FiOS right now. Wireless is not yet tapped out and from a business perspective it is a large investment for a steady long term payoff. FiOS is one of the most beloved services Verizon offers to consumers but currently but it is not the most profitable.

What Did we Learn?

• Verizon wireless bills change by a few cents every month for no apparent reason.

• Verizon is moving away from the wireless data gold mine. Unlimited data is the final frontier and is now a part in the overall scheme to generate revenue more through consumer surveillance and advertising -- rather than the primary source.

• Investors only care about maximizing quarterly growth which explains the overwhelming focus on wireless and not FiOS or copper land lines. They all realize that wireless is done and the future's next big thing (media/advertising) is a gamble.

• Verizon and AT&T are market share leaders. Sprint and T-Mobile have the most influence to shake up the market by simply offering better prices and a better customer service experience. T-Mobile’s Uncarrier initiative was at first cute but is now serious. Verizon and AT&T need to figure out how to stop the bleeding as the market corrects itself now that there is finally worthy competition.

This article was contributed by the DSLReports.com community. If you'd like to receive payment for writing content like this for our front page, please drop us a line.