Verizon’s Shared Data: Good for Industry, But Some Customers Will Bail

The new data plans implemented by Verizon Wireless reflect an approach that could benefit the U.S. wireless industry, Fitch Ratings said in a report.

“The new pricing structure taken by the industry leader is a disciplined pricing action that could create more cash flow stability longer term within the wireless industry,” the credit ratings agency said.

Verizon Wireless, the largest U.S. wireless provider, this month unveiled its Share Everything Plans, allowing its customers to share data and connect up to 10 devices.

Data is increasingly becoming a larger source of revenues for wireless providers. In the first quarter, data revenues at Verizon Wireless, AT&T and T-Mobile USA grew 19 percent year over year to $14.2 billion, representing 41 percent of service revenues, according to Fitch.

The shared data plans could provide a greater incentive for Verizon customers to connect their tablet computers to the Web via the wireless carrier’s high-speed data network. Analysts have said tablet subscriptions on wireless networks have been sluggish.

Though Fitch appeared to be relatively optimistic on the Share Everything Plans, it expressed the view that Verizon could face slightly higher churn and lower gross adds in the coming quarters.

“These new plans represent a price increase for a portion of Verizon Wireless’ subscriber base,” Fitch said. “These increases are sometimes material, depending on whether the legacy rate plans have low recurring charges for text messaging or calling minutes. As a result, prices have generally increased for new subscribers.”

AT&T is expected to adopt a similar shared data strategy, while Sprint and T-Mobile USA have showed no interest in moving in that direction.

Excluding AT&T and Verizon, the rest of the industry “will be able to differentiate more on price, value-enhancing services, and/or size of “data buckets,” according to Fitch.

“Although, profitability will remain lower due to scale, pricing power, and high device subsidies,” Fitch cautioned.

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