Verizon simplifies phones, pricing as it preps LTE

Verizon Wireless (NYSE:VZ, NYSE:VOD) today made several moves to simplify its devices and services structure, introducing lower unlimited price points, streamlining device categorization and offering new options for unlimited prepaid. The new plans came as the nation's largest carrier gears up to roll out its Long-Term Evolution (LTE) networks throughout this year and looks to drive as many consumers to data as possible.

"To me, the future here is about data, and this is about data in my view," said VZW President and CEO Lowell McAdam referring to the new plans on an investors call today. "It's the smartphone portfolio teamed together with very simple data pricing. We're about adding that high-end customer really as an on-ramp to LTE."

The new monthly service plans take VZW's unlimited price point down from $99 to $69.99 for unlimited monthly calling or $89.99 for unlimited talk and text. In addition, Nationwide Family SharePlans will now have unlimited options for $199.99 monthly voice access or $149.99 per month for voice and text for plans based on two lines. In terms of data, VZW expanded its $9.99 25-megabyte-per-month package to all of its 3G multimedia phones, discontinuing its $19.99 data package option.

Those customers on the lower tier, using what VZW is now dubbing Simple Feature phones, will continue to pay $1.99 per megabyte or choose either a $9.99 or $29.99 data package. Consumer data packages for 3G smartphones, including BlackBerry, Windows Mobile and Android devices, will remain at $29.99 per month.

"Based on the usage we are seeing from the Droid and other high-end smartphones and the apps we see on the devices, we think this is an excellent value," McAdam said, adding that VZW can use the plans to upsell both its customers and its competitors' customers to unlimited data plans. "We think it'll drive penetration of data services. There won't be surprises for customers, so we'll see more satisfaction."

VZW plans to limit its SKU of devices down from 80 currently in stores to 50 and eventually even less. McAdam said this is actually good news for handset manufacturers as it will allow them to focus their resources on higher volumes of a few number of SKUs, while VZW can also concentrate its efforts across three categories of devices: 3G smartphones that will require the $30 unlimited plan, 3G multimedia phones with HTML browsing and Brew-based app that require a $10 service plan and simple feature phones capable of talk and text with no service plan required. McAdam said to expect 20 additional smartphone devices coming from VZW down the road, all based on the kinds of capabilities the Droid has today.

"These categories are important from my perspective because there has been a lot of confusion about what constitutes a smartphone," McAdam said. Verizon Chief Financial Officer John Killian added that the new plans should provide churn reduction, cost savings through simplification of the pricing portfolio and result in less confusion and pricey calls to Verizon's call center.

VZW has traditionally stayed out of unlimited prepaid pricing, maintaining that it has no interest in offering an unlimited prepaid pricing plan, but the carrier reversed its stance today. Now consumers wanting a non-contract plan can have one for $5 more per month than the comparable contract version. The Prepaid Monthly Unlimited Talk plan will cost consumers $74.99 per month, compared to the same contract price of $69.99 per month, or $94.99 for talk and text. Prepaid plans at 450 and 900 minutes will also be $5 more than the postpaid versions.

McAdam said that these changes will bring VZW into the competitive range of the other all-you-can-eat carriers. "We have found we can charge a premium for our services and we continue to believe that, but we need to be in a reasonable range to do that," he added.

Although McAdam stressed that today's announcement came more from introspection rather than from competitive pressure, the lower prices will undoubtedly put pressure on biggest rival AT&T. In 2008 when VZW dropped its unlimited plan to $99, AT&T followed up within hours. Sprint and T-Mobile, however, already offer plans that are cheaper by $20, so the four-pronged pricing war of 2008 isn't as likely.

Prior to today's announcements, VZW had also been receiving flak for Chief Technology Officer Dick Lynch's comments that wireless operators will eventually charge consumers for how much bandwidth they use as unlimited plans and heavy data users continue to clog up the network. When asked how VZW will handle heavy data users, McAdam responded that the carrier "loves people that love to use our network." He said the network is strong enough to account for stress on it and that VZW has adopted these new plans after studying usage on the Droid and similar devices. McAdam also said that VZW isn't in a position to worry about usage caps at this point and that it allow tethering on the services going forward.