Verizon Offers High-Use Data Plans, Inadvertently Points Out Enormous Rip-Off

Six weeks ago, Verizon launched its new "Share Everything" data plans, declaring that everyone would henceforth use these plans or be banned from upgrading their phones at a discount, and unveiled a suite of options that range from $50 for 1GB to $100 for 10GB (not counting per-device fees). Unlimited talk and text is now baked into the per-device base fee, which means that users with minimal data needs could actually benefit from a swap.

Now, the company has admitted that its usage plans stretch higher, though these plans are usually offered on customer support lines or in the event of overages. Verizon will sell you 12GB of data for $110, 14GB for $120, 16GB for $130, 18GB for $140, and 20GB of data per month for $150. If that sounds like a staggering amount of data, keep in mind that the plan is for a shared group of devices -- you can chew up considerably more data if you use devices in parallel or have multiple family members all viewing HD content.

Verizon's publicized Share Everything plans

Which is, of course, the point. On Verizon's highest baseline plan, they charge $10 per GB and call it a bargain. The 20GB plan cuts this to $7.50. The company still trots out the "most customers don't use more than 2GB" statement," but it really ought to retire that one. On unlimited data plans with "soft" caps or a 2GB limit, it was a way of reassuring people that they wouldn't go over. Now, it highlights the fact that Verizon charges $30-$50 per GB for the 1-2GB plans that apparently address almost everyone's needs.

Cellular towers and capacity rollouts are expensive, no one denies that -- but the pricing on these plans has to make Comcast, AT&T's U-Verse division, and Verizon FiOS weep with envy at the per GB profit margin. Ask yourself -- if you can buy a router that throws wireless across your entire home for $60, why is it that connecting to a cellular network should cost you nearly $60 a gigabyte, regardless of whether you live in downtown San Francisco or Billings, Montana?

The towers?

How about one of these instead?

That's a femtocell. Verizon calls their version a Wireless Network Extender. It's a miniaturized cell tower that connects to your existing broadband service and uses that connection to backhaul your voice or data traffic to Verizon, AT&T, or whoever your provider is. One of the benefits listed by both Verizon and AT&T is that you don't need an extra data plan for it. The minutes you use will come off your normal plan, just like always.

Pause and think about that for a minute. You have just paid Verizon $250 for a small cell tower. It connects to the Internet via a router and ADSL/cable modem, both of which you also paid for. It uses your bandwidth -- and if you have service with Comcast, that's a finite good or service. You've paid for every single product that carries the signal from your phone to the point where it vanishes into the wall, but you end up billed double for data.

There's nothing inherently wrong with femtocells. They're extremely useful, particularly in areas where cellular coverage is spotty. The problem is with the ridiculous notion that cellular traffic deserves to be priced at a rate 100-1000x higher than what you pay Comcast (with a one-time payment of $60-$100 thrown in for the router). The idea that paying exorbitant rates somehow subsidizes future growth has been proven false. AT&T made a huge point of telling the DOJ how it had no plans to build out 4G past ~80% of the country if it wasn't allowed to buy T-Mobile. Verizon stopped building out FiOS two years ago. Furthermore, none of the data plans being sold today come with promised updates or price freezes when the successor to 4G eventually materializes. $100-$200 a month doesn't even buy you a guarantee of service -- all we get is a "best effort" promise.

Cost per GB for iPad data, circa 2010.

There's a reason why the prepaid industry shed subscribers for the first time ever last quarter, and a lot of it has to do with ridiculously high data prices that don't actually reflect the real cost of access. Prepaid cell plans are gaining traction in the US, and if you compare US mobile per GB pricing to prices in other nations where prepaid phones are popular, the cost/GB is much lower.

Speaking of traveling, look at what world travelers pay per MB, based on country of origin. This data set is from 2011 and was compiled by OECD, the US is the red line.

What do femtocells and Verizon shared data plans have in common? They're all examples of how the cost of data has been distorted and turned into a ridiculous cash pipe. It's not surprising -- witness 10-20 cent charges per text message when texts are carried over an unused part of the phone line and literally cost the carriers nothing -- but it's something customers need to be aware of.

Back when cell phone were $30-$50, replacing a land line made sense. With data costs skyrocketing, a landline, good WiFi, and an emergency phone is beginning to look like a much better deal.