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Jan. 17, 2010

Verizon Wireless, the largest mobile phone carrier in the U.S., says that, starting Monday, it would start charging just $70 a month for an unlimited monthly calling plan. The same plan previously cost $99.99 a month.

This has the effect of bringing down the monthly cost for wireless users of the company's high-end smart phones like Motorola's Droid, which require a $30 per month unlimited data plan.

Such an unlimited data and voice plan will now cost $100, rather than $130 for Verizon's customers.

Not wanting to be left out of the game, AT&T responded late Friday afternoon by announcing some of the same price cuts.

Beginning Monday, the wireless giant will charge $70 for an unlimited calling plan that had also been $100, and offer a $100 plan with unlimited voice and data for smartphones like the iPhone, also down from $130.

Verizon customers who buy any 3G multimedia phones will now have to sign up for a $10 per month data package, which gives them 25 megabytes a month.

Such multimedia phones aren't the high-end smart phones like the Droid, Verizon said, but mobile phones such as the LG enV series, offering HTML browsing, music and other features like Qwerty keyboards and a few other features.

These latest moves in a long-running pricing competition between the nation's mobile carriers is not just leading to lower prices for some customers, but it also shows that data usage is becoming an increasingly important service for mobile carriers as they look to new sources of revenue from customers dependent on mobile access to e-mail and the Internet.

With Friday's latest price changes, Verizon and AT&T are requiring more customers to buy the data plans used to access the Web and check e-mail on high-end mobile devices.

Jefferies analyst Jonathan Schildkraut estimates this means about 3 million to 3.5 million Verizon customers who will now be forced into spending at least $10 a month on data services.

Verizon Wireless is also discontinuing a plan that cost $20 a month for 75 megabytes.

While all of this is happening, AT&T will require its subscribers that use the multimedia phones it offers to have at least a $20-per-month texting or Internet browsing plan.

An AT&T spokesperson said this pricing change reflect AT&T's strong desire to remain very competitive in the wireless market.

Verizon Wireless also introduced new prepaid calling plans, at a monthly rate $5 above what it charges for post-paid customers who sign a contract. It is asking $75 per month for prepaid unlimited calls.

This is more than what low-cost mobile operators such as MetroPCS Communications and Leap Wireless are charging, a sign Verizon is not necessarily interested in getting in a price competition in that specific segment.

Verizon Wireless is a joint venture between Verizon Communications Inc. of New York and Britain's Vodafone Group PLC in London.

AT&T's and Verizon's pricing cuts will most likely trigger similar price cuts with most of its rivals. It will be interesting to see how Sprint, MetroPCS and Boost Mobile will react to this in the coming week.

Some wireless industry analysts already think they will follow in the steps of Verizon and AT&T and offer a very similar pricing strategy.

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Source: Verizon Wireless and AT&T.