Verizon Wireless, the biggest U.S. mobile provider, will stop offering customers unlimited data service plans on July 7, meaning higher prices for heavy users of services such as mobile Web surfing.
Verizon Wireless plans to charge $5 more per month than its biggest rival, AT&T Inc, which stopped offering unlimited data services last year. Unlike AT&T, Verizon is not offering any new cheaper option for low data users.
Under its new terms, customers who limit their data use to 2 gigabytes (GB) will pay $30 a month, according to the venture of Verizon Communications Inc and Vodafone Group Plc, which currently charges its customers $30 per month for unlimited data use.
To put this in perspective, two hours of streaming music to your cellphone every day would generate 3.5 GB of data downloads per month, according to the Verizon Wireless online data use calculator.
In comparison, AT&T charges $25 for 2 GB of data and also offers a $15 per month plan for customers who only use 200 megabytes of data.
AT&T has said the lower priced plan helped it add millions of new customers who might otherwise have not been willing to pay for wireless data services.
Customers who use more than their plan allows will have to pay $10 for every extra Gigabyte of data they use, according to company spokeswoman Brenda Raney. This charge is in line with what AT&T offers today.
Verizon's heavier data users will also be able sign up for a $50 per month plan for 5 GB or $80 a month for 10 GB, Raney said.
Since Verizon is not cutting its lowest monthly fee for data services, Pacific Crest analyst Steve Clement said the move would be relatively neutral for (Verizon's revenue), with the potential for upside as people take larger buckets of data or start paying the fee for going over their limit.
Customers who view data fees as a key factor might move from Verizon to rivals such as Sprint Nextel Corp, which still offers unlimited data services. But Clement expects that might not be a huge bonus for Sprint.
The risk you run, I guess, is that people balk at caps and move to carriers that don't cap data, Clement said. People make carrier decisions for lots of reasons. I don't know if the amount of data is high on your list.
Both Verizon and AT&T sell the Apple Inc iPhone, which created an explosion in demand for services such as mobile web-surfing and downloading of mobile applications.
Telecom shares were basically flat after the news, which was widely expected.
Verizon shares closed up 2 cents at $37.82 on the New York Stock Exchange, where AT&T shares were down 5 cents at $31.63. Sprint shares closed down 4 cents at $5.39, also on NYSE.
(This story was corrected in paragraph four to reflect that Verizon's website calculates two hours of daily streaming music as generating as much as 3.5 GB per month of data downloads, not 9 GB)
(Reporting by Sinead Carew; editing by Matthew Lewis and Andre Grenon)