Several tech news and blogger outlets have reported that Verizon Wireless will add a new 250 MB plan (at $20) level to its Share Everything plans as of January 21, 2014.
ANALYSIS
Big data users invariably dismiss this 250 MB level as miniscule, and it is. But there are two areas why this makes sense.
- First - Migrate the featurephone base to Smartphones and Share Everything Plans. The Share Everything plan is now the only postpaid plan vehicle to migrate customers off legacy voice-centric plans (e.g., America's Choice - remember that?). The new data-centric plan is also inexplicably linked to smartphone penetration. Since 1Q2013, an Share Everything plan slide has been every quarterly earnings presentation deck.
In 2Q 2013
In 3Q 2013
Verizon Wireless wants steeper curves on smartphone penetration and postpaid Share Everything account migration. Here are the illustrative results since 3Q 2012.
Since 4Q 2013 earnings is around the corner, it's likely to assume that smartphone penetration should cross 70% given the company's track record. We can also safely assume that once Verizon Wireless nears the 100% Share Everything plan goal, there will be another more important growth slide to take its place.
- Second - Provide a lower price point for featurephone users to convert to data. Previously, the lowest data price point was at $40 and provided 500 MB. Logically and in sales positioning, $20 and 250 MB is half. While veteran smartphone users cringe at the low data level, Verizon Wireless is betting that once a non-data user starts to use data, they will get hooked and move up subsequent next tiers. Increasing data usage is closely linked with helping increase Verizon Wireless' average revenue per account (ARPA) metric.
COMPETITIVE IMPACT?
Some may believe that this is Verizon Wireless' action against AT&T revamping its Mobile Share plans back in December 2013. When laid out, we find that the new plan is in fact less competitive to AT&T. AT&T still has the advantage for Verizon Wireless switchers at the low data levels. Given the above logic, the new $20/250 MB level will not get featurephone switchers. Those who are making the smartphone jump are likely to have explored T-Mobile or Sprint.
Still Verizon Wireless' opportunity may be in the existing range of data bucket choices with more price points and advantage in addressing the small business and high data use consumer accounts.
Looking ahead, if history repeats itself, Verizon and AT&T users will start getting a handle of monthly data consumption and adjust accordingly. Once that happens, the number of data levels should shrink and (ideally for customers) price points will decrease.
