Intellectual Property Law

The iPhone Pushes Verizon to Unlimited Wireless Plan

By Cynthia Brumfield

Verizon Wireless is announcing today a new mobile phone plan that gives customers unlimited domestic calling for a flat fee of $99.99 to $139.99 a month. It's a first for a major mobile carrier because wireless companies in the U.S. almost always bank on the extra revenues generated when customers exceed their "bucket" plan minutes.

Verizon claims it is giving away the gravy of extra minute charges so that it can lock in "high value" customers, i.e. those who pay more than $100 per month. Why, however, is Verizon working so hard to keep these high-end customers? In a word: the iPhone.

Look at the chart below which compares the quarterly mobile customer net additions between Verizon Wireless and its main rival, AT&T, which also happens to have the exclusive right to serve the iPhone in the U.S.

Until the second quarter of 2007, when AT&T began offering the iPhone, Verizon Wireless was the mobile carrier to beat. Its superior network and popular mobile broadband services spurred Verizon Wireless to growth rates that exceeded those of Cingular (now AT&T Wireless).

But, once the iPhone captured the lust of mobile phone users, Verizon Wireless lost its momentum. Although both carriers are doing very well, when it comes to gaining new customers, Verizon now plays second fiddle to AT&T. During Q4 07, for example, Verizon Wireless added slightly more than two million net new mobile customers. AT&T, however, added roughly three million (2.7 million) new wireless customers and the trend line doesn't look good for Verizon Wireless.

So, with no handset in sight that can compete with the iPhone, Verizon Wireless hopes pricing will keep its high-end customers from gravitating to Apple's shiny toy.

Full post as published by IP Democracy on February 19, 2008 (boomark / email).