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Data is cheaper to transmit, so why is Verizon more expensive?

Data is cheaper to transmit, so why is Verizon more expensive?
To be fair, this isn't an issue specifically with Verizon, but Verizon does have the easiest numbers to parse right now. According to some research done by The New York Times' Brian X. Chen, the trouble starts with the feature that we had been hoping for since the tablet boom started a couple years ago: shared data plans. Those plans make it so while data is now cheaper for carriers to transmit, carriers like Verizon are also able to charge more for that data.

The info comes based on the quarterly earnings report from Verizon, which showed that the carrier's average monthly revenue per wireless account grew 6.6%. The reason for this bump seems to be in that more subscribers are opting for Verizon's Share Everything plans, which allow families or users with multiple mobile devices to have a shared data plan. As of Q4 2012, 23% of all Verizon Wireless subscribers had opted for one of these plans. 

The thing is that shared data plans actually come out to be more expensive, or at least the profit margins are higher for carriers, because LTE is more efficient than 3G. Verizon CFO Francis J. Shammo made this explicitly clear during the earnings call, saying:
As more customers choose 4G LTE smartphones and devices, we expect the continued migration of data traffic from 3G to our lower-cost 4G LTE network will drive further improvements in operating and capital efficiency in 2013 and beyond.

So, the more people use LTE, the more Verizon (and other carriers) will benefit, because carriers can charge a premium for the speed, even though the data is cheaper for them to transmit. Add in overage charges, or tiered data plans, because faster speeds mean doing more data-intensive tasks, which uses more data, and carriers get to charge us even more. 

It all comes down to marketing and understanding. Carriers will cry all day about the costs of building the faster networks, and how hard it is to keep up with the bandwidth demands. And, when consumers look at the cost of a plan, we tend to look only at the speed of the connection and how much data we get. The trouble is that those things that we're primed to look for don't matter on the carrier side. LTE is designed to be able to handle huge amounts of traffic at extremely fast speeds. 

So, as carriers move to LTE and beyond, networks get more and more capable of feeding us tons of data at very high speed, and carriers convince us that we should pay more for that privilege, even if the data transfer for carriers gets more and more efficient, and less and less expensive. That doesn't sound like much of a fair deal to us. 

source: NYT

63 Comments
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posted on 23 Jan 2013, 15:46 14

1. ghostnexus (Posts: 96; Member since: 07 Mar 2012)


Petition that!

posted on 23 Jan 2013, 19:13 9

27. JohnnyBravo (Posts: 105; Member since: 02 Dec 2012)


seriously how do we get this going??? Carriers have too much power in the states. The charges are outrageous!!!

posted on 23 Jan 2013, 15:49 14

2. ajac09 (Posts: 1481; Member since: 30 Sep 2009)


All the carriers need to be hit with investigations on there pricing schemes.

posted on 23 Jan 2013, 15:51 4

3. mike2959 (Posts: 560; Member since: 08 Oct 2011)


My question is why my home Internet from Time Warner is any different? 60.00 a month and I can stream 24/7. At 20GB down. Unlimited. I understand everyone in my subdivision streams all at the same time yes it slows down, just like to many people on the same tower. The other thing is unlike wireless carriers, I have no choice in my home Internet provider, Time Warner could charge me 150.00 a month if they wanted to. What is hard to understand is why the wireless carriers are putting out land line companies with unlimited talking, which was a big deal 10 years ago not so much now, but the wireless companies will not take on home Internet providers? All it would take is either Verizon or At&T to go truly wireless.

posted on 23 Jan 2013, 18:11 1

25. lsutigers (Posts: 820; Member since: 08 Mar 2009)


Wireline will be the way of the past in the next few years. Sprint spun off it's residential wireline operations years ago leaving Verizon and AT&T as the only 2 carriers left with residential wireline operations, and even they agree, wireless is the future. Verizon Fios and AT&T Uverse has been somewhat of a flop, while it delivers fast data speeds due to fiber, they realized LTE is already here and can deliver that speed wirelessly, without the expensive infrastructure to every home. Verizon has stopped the expansion of Fios citing an expensive rollout for the return on investment. LTE is the wave of the future and Clearwire has already tested 100mbps + networks in the states. It's only a matter of time before AT&T and Verizon get rid or dissolve their wireline operations and move to wireless. Wireline is only beneficial to enterprise and government concerned with security which is why Sprint kept it's enterprise/government wireline operations. Even as global Tier 1 internet carriers like AT&T, Sprint and Verizon realize wireline fiber backbones will always be there, wireless is the future delivery mechanism to consumers.

posted on 23 Jan 2013, 20:45 1

34. Zero0 (Posts: 592; Member since: 05 Jul 2012)


Doubtful.

One strand of optical fiber has a larger bandwidth than all of wireless radio. It's also serving a smaller population (one household). Mobile networks will be flooded if everyone uses them, at least for the foreseeable future.

posted on 23 Jan 2013, 15:52 5

4. mike2959 (Posts: 560; Member since: 08 Oct 2011)


I meant truly unlimited. Then the rest would follow.

posted on 24 Jan 2013, 03:39 3

38. rallyguy (Posts: 620; Member since: 13 Mar 2012)


Sprint has unlimited. Yes their service is not up to speed with Verizon. But that's why you pay the premium price for Verizon. Every company changes if the customer demands it. Right now, people are paying it so why change? If they started loosing millions of customers to Sprint I'm sure they would consider changing their business strategy to mirror Sprint.
Remember when we had "home calling areas" for mobile phones? Once one major competitor dropped it, they all had to.

posted on 23 Jan 2013, 16:01 4

5. glenwf (Posts: 11; Member since: 14 Jun 2012)


It's called a free market system. if you don't like the pricing, contract length, etc.... then go to another carrier or go prepaid. If you want the best, most reliable then go with the carrier in your area that offers the best and STFU

Also, for the writer of this piece who claims share plans are more expensive here's some basic math:

VZW 1 year ago: 700 min + unlim text + 2 smartphones, 2GB each = $159.99
VZW today: unlim minutes, unlim text, 4 GB shared data = $150

this math is almost identical for AT&T

posted on 23 Jan 2013, 16:13 3

6. HDShatter (Posts: 1021; Member since: 17 Jan 2013)


Tmobile prepaid $70 - unlimited everything no data throttle, with 4g data and soon lte.
ot
tmobile $30 - 100 min of talk, unlimited texting, unlimited 3g data + 5gb of 4g data,

posted on 25 Jan 2013, 20:25 1

59. metalpoet (unregistered)


tmobile also sucks in about half the country, I wouldnt hesitate to go to them if they had faster than 2g speeds in my state!

posted on 23 Jan 2013, 16:24 5

7. Whateverman (Posts: 3271; Member since: 17 May 2009)


The problem with the math you provided is, it's a "One sizes fits all" kind of solution that they are throwing out there with no alternative.

Take my account for example...

2 Smartphones w/ $30 unlimited data (Average about 3GBs - 4+GBs per month)
2 feature phones w/ data blocked
2 $5 texting plans
1400 minutes/month
total bill before taxes $180 / $225 after.

Now, no matter how you slice it, buying a phone out right to save my unlimited or going to shared data plan, my only option is to give VZW more money. That's why this article needed to be written. Thank you Michael!

posted on 24 Jan 2013, 03:42 1

39. rallyguy (Posts: 620; Member since: 13 Mar 2012)


"my only option is to give VZW more money"

Why not switch to a different carrier? Why should they change if you are going to keep feeding them your money?

posted on 24 Jan 2013, 10:32 1

47. Whateverman (Posts: 3271; Member since: 17 May 2009)


Because I'm under contract for a few more months and I don't want to pay the ETF either.

posted on 25 Jan 2013, 20:26

60. metalpoet (unregistered)


because if verizon is the only consistant carrier in your area, than youll do whatever they want and pay whatever rate that want to charge even if my cellphone bill is more than my car payment or rent!

posted on 24 Jan 2013, 19:45 1

53. jherz6 (Posts: 216; Member since: 23 May 2008)


Theres always a way around having to pay outright for a new device to save your unlimited data. Add a line of service for ten bucks using a simple phone which requires no data and use it to upgrade your line of service. You will not loose your unlimited data. Whats a extra ten thats lunch once a week.

posted on 24 Jan 2013, 20:31 1

54. Whateverman (Posts: 3271; Member since: 17 May 2009)


Yeah, I thought about doing that, but I'm still not sure. There is still the matter of my wife's upgrade too.

posted on 28 Jan 2013, 11:55

63. forgingsteel (Posts: 13; Member since: 11 Apr 2012)


Can you expand on this? Use what to upgrade your line of service?

posted on 23 Jan 2013, 16:25 4

8. akhi216 (Posts: 61; Member since: 01 May 2011)


You're missing the point which is that is they're charging 50 GB for LTE data that it's cheaper for them to provide and they're forcing people to pay for unlimted talk and text regardless of whether they need it or not.

Verizon has plans to offer LTE TV service in the future while they charge an arm and leg for service, they will presumably charge a fee for using the LTE TV service in addition to raping people with data charges...good luck with that.

posted on 23 Jan 2013, 16:34 7

9. MichaelHeller (Posts: 2705; Member since: 26 May 2011)


There are huge areas of the USA where the only choices for wireless service are Verizon and AT&T. That's not a free market, that's a duopoly.

posted on 23 Jan 2013, 17:14 1

13. androiddownsouth (Posts: 598; Member since: 02 May 2012)


Michael, should Verizon and AT&T be penalized for being the only carriers willing to operate in those areas? By what you said, if it weren't for them, there would be no coverage at all there. Other companies have the opportunity to place towers in those areas. The fact that they obviously choose not to is not the fault of VZW or AT&T.

posted on 23 Jan 2013, 17:29 3

18. belovedson (Posts: 998; Member since: 30 Nov 2010)


@android.

are you blaming the people for companies building towers in order to make profit off of them? wtf

posted on 23 Jan 2013, 17:41 3

19. androiddownsouth (Posts: 598; Member since: 02 May 2012)


All I'm saying is the duopoly in certain areas is not due to anything negative on the part of VZW or AT&T. Other carriers have the same opportunity to provide service to these areas, but choose not to. It actually is the free market in action due to the fact that they chose to put towers in those areas and no other company did. At least they are willing to provide services to people living there.

posted on 23 Jan 2013, 19:19 3

28. JohnnyBravo (Posts: 105; Member since: 02 Dec 2012)


maybe they dont have the resources to place towers there. Point is ATT and Verizon are TOO strong. Dan Hesse has even said there is a HUGE gap between Att/Verizon and Sprint, who is the third largest carrier in the states. Its like comparing Saturn to Pluto. Hell T-Mo is even pondering leaving the states as one of their execs said that there isnt any room for a 4th carrier.

I love Verizon's coverage but their pricing sucks!!! I understand that you pay for what you get but it shouldnt be this high.

posted on 23 Jan 2013, 20:21 1

33. androiddownsouth (Posts: 598; Member since: 02 May 2012)


That is like penalizing someone for being TOO successful. I too wish the pricing were lower, but the company obviously reinvests more money into it's infrastructure than anyone else, thus providing service in more places more reliably than other carriers. Being more reliable is what Verizon is known for, and for good reason.

I don't have an answer for the pricing issue, and I'm not necessarily defending it. I'm just saying Verizon is the largest carrier for a reason, and since it isn't low prices it must be the quality of the network.

posted on 25 Jan 2013, 20:30

61. metalpoet (unregistered)


sometimes the successful need to be taken down a peg or two or TWELVE! maybe all i want is My Galaxy S3 to have 4G LTE 4GB/ month, 200 minutes, and unlimited texting and not have to pay $1110 for that one line!

posted on 24 Jan 2013, 13:01 1

49. corporateJP (Posts: 2431; Member since: 28 Nov 2009)


The goverment allowed this, not the people. Verizon is the only real choice where I live. Nobody wanted them to buy Alltel and AT&T screwed us with the leftovers. We had no choice. Not everybody lives in the "big city". The government still has archaic laws written in the days of analog cellular that were never rewritten because of lazy buracracy or lobby might. We can't have more towers. Do some research.

You come off as a carrier fanboy.

posted on 23 Jan 2013, 17:28 3

17. belovedson (Posts: 998; Member since: 30 Nov 2010)


finally some legit journalism. feed the people info like this and back it up with numbers.

also you might want to look up how obama's administration doesn't seem to f'en mind that tech companies profit margin is higher than the crap big oil pulled on us

posted on 23 Jan 2013, 17:51 3

20. Gawain (Posts: 420; Member since: 15 Apr 2010)


Not true, where T-Mo or Sprint are not available there are dozens of regional carriers. Using the back-woods to justify the argument doesn't work because those local/regional carriers are fiercly competitive, Cincinnati Bell and Bluegrass Cellular are two prime examples.

Also, you did not offer any insight to the fact that the carriers paid billions just to have the right to build out the network. Verizon paid somewhere north of $10B for C-Block, that was before a single LTE panel was even lit up. Don't be so quick to discount the cost of building the network either, besides the infrastructure, the people involved are the single most expensive element in the whole equation.

posted on 24 Jan 2013, 13:13 1

50. corporateJP (Posts: 2431; Member since: 28 Nov 2009)


That "regional carrier" excuse is worse than calling the "rural" reasoning an "excuse".

We don't have any regional carriers where I'm at anymore, they were all bought by Verizon and AT&T. AT&T barely works, so by default T-Mobile works even worse. You get kicked off of Sprint for excessive roaming after a few months.

Cincinatti Bell and Bluegrass are poor examples.

You need to get out of Eastern Ohio and Western Kentucky and see the rest of the country for what it is, my friend.

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