Verizon (NYSE:VZ) swung for the fences Thursday, staking its claim on the wallets of every mobile phone-using American looking to save money. Subscribers now can prepay for unlimited voice, text messaging and web service on Verizon-supported phones — a significant shift away from previous policies that had customers buying single-feature unlimited packages on a per-day or per-month basis. The new plan gives unlimited access to all of those services on feature phones — but not smartphones — for $50 per month, an aggressive pricing strategy that will see Verizon undercutting nearly all of its competitors.
The first to suffer from Verizon’s new pricing will be small-scale telecoms whose core audience is low-income consumers. MetroPCS (NYSE:PCS), Leap Wireless (NASDAQ:LEAP) and others already are feeling the crunch while more and more consumers flock to big telecoms as their prices become cheaper. Verizon’s new unlimited plan should further impact those companies going forward, not to mention mid-level telecom competitors like Deutsche Telekom’s T-Mobile USA.
T-Mobile’s would-be acquirer AT&T (NYSE:T), the nation’s second-largest telecom and Verizon’s primary competitor, also will be damaged by Verizon’s new plan unless it rescinds changes made to its own subscription pricing during the past year. The company did away with unlimited data plans in June 2010, shifting instead to a tiered set of data plans that give users a cap on the amount of data they can transfer with their handsets. (This is the same data plan pricing Verizon currently offers and will continue to offer its monthly subscribers.) Though Verizon’s unlimited plans aren’t available for smartphones, just older feature phones, consumer perception could be a significant problem for AT&T.
Then there’s perpetual runner-up and life-support candidate Sprint Nextel (NYSE:S). Sprint, unlike AT&T, also offers unlimited plans in the same mold as Verizon’s new offering. The only problem for Sprint is that its unlimited plans run $79.99 per month. Compared to Verizon’s $50 prepaid plans and Sprint’s poorer reputation for service, consumers might turn away from Sprint’s selections.
Sprint will have the iPhone 5 in October, though, so it can’t be hurt too badly by Verizon’s new economical mobile services, right? It’s precisely that device and its core competitors that might limit the potential impact of Verizon’s new service. The only phones available with Verizon’s unlimited plans are the LG Revere, LG Cosmos, Samsung Gusto and Pantech Caper — all of which are feature phones that can access the web. None of these are smartphones like Apple‘s (NASDAQ:AAPL) iPhone or other popular phones like Google (NASDAQ:GOOG) Android powered devices like HTC’s Thunderbolt or Motorola‘s (NYSE:MMI) Droid line. While the reliability and reputation of Verizon’s service may entice thrifty consumers to shift away from Sprint, MetroPCS and others, the new unlimited service won’t dramatically change the telecom landscape without smartphones available.
Will any telecom begin offering unlimited data plans for smartphones as they used to? Possibly, but not for some time. There’s a possibility that, once Verizon and AT&T have moved the majority of their consumers to the “4G” LTE networks, their established 3G networks then can be used to provide prepaid unlimited data transfer plans to customers willing to pay premium prices for the service. That won’t be for some time yet, though. For now, Verizon has another potent tool with these plans, but not a game-changer.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
