Verizon, rivals offer all-you-can-talk plans

By The Wall Street Journal

There's some good news for people who spend a lot of time on their cell phones.

Three of the nation's largest cell-phone companies are rolling out plans that charge a flat rate for unlimited calling, a significant departure from the traditional model, in which consumers purchase "buckets" of minutes. The new plans cost more than most traditional options and are aimed at heavy users, customers that wireless carriers compete fiercely to land.

Verizon Wireless, a joint venture between Verizon Communications (VZ, news, msgs) and Vodafone Group (VOD, news, msgs), said it will charge $99.99 a month, plus taxes and fees, for its unlimited voice plan, available immediately.

Rivals AT&T (T, news, msgs) and T-Mobile USA quickly followed suit by announcing similar plans, which will be priced the same as Verizon Wireless's offering. T-Mobile is the wireless arm of Deutsche Telekom (DT, news, msgs).

• MSN Tech & Gadgets: Top 10 cell phones

The new plans are a sign that cell-phone companies are willing to experiment with the minutes-based model that has underpinned the industry for years.

The carriers are increasingly looking at voice as a commodity and viewing data services like text-messaging and Internet access as the major sources of revenue growth.

Today, customers of the four largest U.S. carriers, which also include Sprint Nextel (S, news, msgs), typically purchase plans that provide a range of a set number of minutes. Customers face an "overage" penalty for going over their limit, a potentially pricey charge that consumers detest.

At AT&T, for example, the overage penalty ranges from 45 cents per minute for a low-end plan to 20 cents per minute for a high-end plan. Under the new Verizon and AT&T plans, customers would get unlimited voice service, but would pay extra for data services.

T-Mobile's plan, which will be available starting Thursday, will include unlimited text messaging and instant messaging. AT&T's plan begins Friday.

• Top Stocks blog: Would you pay $100 a month for wireless?

News of the plans sent shares of the telecommunications companies lower, as investors worried the new plans could trigger a price war.

"No one can predict precisely how all of this will play out, but Verizon has taken the first step in what is potentially a dangerous and slippery slope," said Sanford C. Bernstein analyst Craig Moffett in a note to investors.

A Bear Stearns analyst noted that while Verizon will lose some revenue from customers who ran up big overage bills, it might make up much of that through people with $80 plans upgrading to the $100 unlimited plan for more certainty over their bill.

Existing Verizon and AT&T wireless subscribers will face no penalty for switching to the flat-rate plan from their current plan, and they can do so at any time without extending their contract, the companies said. T-Mobile says it won't charge customers to switch but will require renewing a two-year contract.

Mike Lanman, chief marketing officer for Verizon Wireless, said the new unlimited plan will mainly appeal to "power users" who want a consistent phone bill every month.

The company is targeting consumers such as business professionals or parents who use their wireless phones as their primary phone for keeping tabs on the office and home. Verizon's biggest current plan, for $199.99, includes 6,000 minutes.

"The market (for high-end users) is getting bigger as people rely more and more on wireless," Lanman said.

Pressure on Sprint

The moves by the other carriers could put pressure on Sprint to offer a similar plan or risk losing high-end customers who are attracted to the deals its competitors are offering. Sprint, which is already struggling to regain market share lost to the bigger companies, is testing an unlimited plan with consumers in a handful of cities.

"We have great value plans out in the market today," Sprint spokeswoman Leigh Horner said.

Other flat-rate plans are already available, but with restrictions. Sprint's Boost Unlimited service offers a monthly $45 plan that allows for unlimited calling to anyone in the United States, but the caller must stay within a specified home region.

In addition to changing its wireless calling plan, Verizon is also offering a plan to its wireless broadband customers with pricing based on capacity of downloads. The new plan, which starts March 2, will offer customers monthly data plan options of 50 megabytes for $39.99 a month or five gigabytes for $59.99 a month. A typical low-resolution photo uses about 0.5 megabyte, Verizon said.

This article was reported and written by Amol Sharma and Dionne Searcey for The Wall Street Journal.