Analysis: Verizon 'Share Everything' Plans a Mixed Bag for Consumers

Starting today, Verizon will no longer sell a separate plan for each device owned by an individual or family. Rather, all new Verizon customers will buy a "Share Everything" plan--a single voice, text, and data plan that covers all of their devices.

When the company announced the new plans on June 12, Sanford Bernstein analyst Craig Moffett called it "the most profound change to pricing in the telecom industry in 20 years."

Many Verizon customers weren't exactly thrilled about the news. Verizon admits that Share Everything will drive down costs for some people and push up costs for others, especially families with multiple feature phones (dumb phones). Although all of the plans come with unlimited voice minutes and texts, they also charge you to add devices to the plan--and some devices cost more to add than others do.

Share Everything will indeed simplify the billing process for people who buy data for more than one device. And since the data is shared among devices, the data hogs in the family can use up data that other family members wouldn't normally exhaust in their own plan.

But the plans have an obvious downside, too. If one person downloads a few movies or holds some extended video calls, they max out the data usage for everybody in the family. If you examine the data limits in the various Verizon plans, you can see how this situation could easily crop up.

A Family Affair

Picture this: Young Jimmy wants to watch a movie on Mom's new iPad. Jimmy asks Dad if he may download a movie from iTunes. Dad says, "Sure, Son, after you're done with your algebra--and make sure to download it over Wi-Fi."

The next morning, Dad is riding to work on the bus. As is his custom, he breaks out his laptop to read the Wall Street Journal online. He opens the browser and clicks a bookmark, and the site opens quickly on the fast LTE service.

Then his phone dings, and he sees that a text message has come in. It's from Verizon, and it says that the monthly data allowance in his Family Data Plan has been exhausted. Overage charges will now begin to accrue. And it's only the 15th of the month. "What happened?" Dad thinks. "How can we be out of data already? I thought this plan was supposed to save me money!"

Then he remembers. He angrily punches out a text message on his phone: "Jimmy, did you download your movie over Wi-Fi, as I asked you to last night?"

In fact, Jimmy did download the movie over Wi-Fi--that is, until he tossed the tablet into his backpack and went to meet his pals for some late-night grinding at the skateboard ramp. Most of the movie ended up downloading over Verizon's LTE network, using up the remainder of the family's data allotment for the month.

Yes, Verizon sends email or text messages to users who are about to exceed their data limit, but how useful is that if a quarter of the allotment disappears in one night?

Please Use More Data

Verizon says that it is adopting the new plans because more people own multiple connected devices (Verizon won't say how many of its existing customers now own more than one such device), and because it wanted to offer a simpler plan for families who currently have a separate data plan for each relative.

But I believe that Verizon had more in mind than simplicity when it designed these plans. Look closely, and you can see that it has set up the pricing model to promote certain behaviors in its subscribers.

Wireless services (and many other kinds of services) can be priced and marketed in a manner that encourages customers to act in a certain way. For instance, a company might offer incentives on high-margin services, or raise the price on products that are scarce.

In Verizon's Share Everything plans, behaviors that promote more data usage (connecting a tablet) are rewarded, while behaviors that promote less data usage (owning feature phones) are penalized.

Under the new plans, it costs only $10 to add a tablet, a device that tends to consume a lot of data--after all, it's fun to use high-bandwidth services like high-def video and online gaming on a tablet. On top of that, the plans allow people to use their smartphones as mobile hotspots at no charge, which encourages even more data usage.

Verizon also announced that customers who currently have (grandfathered) unlimited data plans will not be able to upgrade to a new phone without paying the full, unsubsidized cost of the device.

Higher Overage Fees

Meanwhile, if you exceed your family's or group's pooled data allotment for the month, Verizon automatically charges you a $15 overage fee for an extra 1GB of data. On the older tiered plans, the overage fee is only $10 for an additional gig. Verizon spokesperson Brenda Raney says that the carrier warns customers with multiple email messages or texts as they approach their data plan limits. If they decide to buy more data before they reach that limit, they may purchase an extra 2GB of data for $15; but if they go over their limit, they are automatically charged the $15, and they get only 1GB of additional data. Asked why Verizon doesn't charge the same rate for the same amount of extra data regardless of whether you exceed your plan limit, Raney replied: "We'd rather they [customers] have a positive experience with their service, and not go over their limit."

Countering 'Over the Top' Services

Verizon appears to be using the new pricing structure to hedge against "over the top" voice and messaging services, which wireless carriers see as a growing threat to their bottom line.

Wireless carriers make most of their money selling data service, but selling voice minutes is still a major source of revenue. So is text messaging: Carriers charge U.S. consumers $20 billion a year to deliver text messages (and Verizon alone makes $7 billion of that), even though it costs them nothing to do so.

Since voice and text messaging are two large line items on monthly phone bills, some consumers have begun using Web-based voice services (such as Tango or T-Mobile Bobsled) and Web-based text services (like Apple iMessage) to replace the carriers' cellular voice and text services. This approach allows them to buy fewer minutes and texts from the wireless carrier.

You'll notice, however, that all of the Verizon Share Everything plans for smartphones and other connected devices include unlimited voice and text service; the costs of unlimited texting and calling are built into the cost of each plan. As a result, Verizon's new Share Everything plans take away a cost-saving option.