The Data Plan Dilemma Gets Uglier: Verizon To Drop Unlimited Plans Ahead of iPhone 5 Release

Data transfer is the lifeblood of smartphone usage — and the thing that sends mobile phone bills (and tempers) through the roof. New news of Verizon canceling its unlimited data plan ahead of the iPhone 5 release joins a recent report that AT&T is overcharging for data usage on the iPhone and iPad 2 review. When will the data gouging stop?

As the summer heats up, people might have more to stress about than the rising price of gasoline — a pair of news stories have surfaced this week concerning data plans on America's top mobile carries — AT&T and Verizon — and how iPhone users are systematically getting as gouged at the "data pump" as they are the gas pump.

The iPhone 5 News Blog posted an article earlier in the week about a class-action lawsuit filed against AT&T for purportedly overcharging all 20 million of their  iPhone and iPad users for "phantom" data transfers when the devices are not even in use, leading to bills that are anywhere from 7% to 300% higher than what they should be. Clearly, stories like this raise the level of concern on the part of prospective iPhone 5 customers, who fear that new features such as a cloud storage, NFC, and the 4G network (likely to debut in the iPhone 6), will only exacerbate data transfer usage. In our previous article, we postulated that the next shoe to drop on this developing story would focus on Verizon.

Well, the second shoe has dropped.

Tech media outlet ZDNET is reporting that, according to Verizon CEO Fran Shammo, their "unlimited data plans would be replaced by tiered service plans aimed at heavy users. Verizon's tiered data plans would likely mimic AT&T's own, which offer 250MB of data for $15 per month and 2GB for $25." This news comes ahead of the eventual release of the iPhone5 (or "iPhone 4s" as some have suggested it will be called), as well as several new Android phones that will have 4G LTE functionality. While consensus still remains that the next iPhone will now be a 4G smartphone, there are other possible features, such as cloud storage and NFC, which could lead to exponentially more data usage from iPhone users. It would seem that, in light of these possible new features, Verizon is positioning itself to gouge iPhone 5g users as they are potentially forced to swap data at much higher rates.

Data Plans: Moving In the Wrong Direction

Over the years, telecom-related plans have always moved from incremental billing to flat rate billing. Think about it: early Internet access on services like AOL were billed hourly, but eventually were forced to move to a flat rate billing model. The same has been true with long distance phone calls, with most land line voice plans replacing minute-by-minute billing with a flat rate.

Data plans, however, seem to be moving in the opposite direction.

With this news of Verizon abandoning unlimited data plans, smartphone users will be forced to scrutinize their own mobile Internet usage (particularly in our weak economy), much in the same way that mobile phone users have struggled to keep track of their "minutes" of phone usage. But as more and more mobile plans include either unlimited or high-level voice usage allowances, it is clear that carriers like Verizon and AT&T are looking for new ways to raise revenues, and hitting smartphone users up for data usage is clearly the new cash cow.

What the larger companies like Verizon and AT&T are failing to recognize is that they are giving price-leading mobile networks like Sprint the opportunity to undercut them on data plan pricing in the future. In the past, when Internet providers like AOL switched from hourly billing to flat rate pricing, it was a viable and necessary move, since more and more people were getting "online" every month; there were enough newcomers to the Internet experience to allow AOL to make more money with flat rate pricing, since it would attract more new customers.

But with an already established smartphone customer in place worldwide, carriers like Verizon would seemingly have more to lose by nixing their flat rate data plan, ostensibly losing that edge over their fiercest competitor, AT&T, and encouraging their own iPhone users to conserve and script on their data usage. And what if Sprint gets the iPhone 5? In spite of the fact that Sprint uses the slower CDMA technology, wouldn't the iPhone 5 paired with Sprint's Simply Everything plan look attractive compared to Verizon and AT&T nickel and diming iPhone 5 users on data?

Data plans are getting increasingly ugly for iPhone users, and it looks like the trend toward data gouging is only going to increase as the iPhone 5 looms closer.

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