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Verizon's tiered LTE plans fuel 'bill shock' debate

Unlimited mobile data plans could soon become a thing of the past

By Brad Reed, Network World
May 27, 2010 04:26 PM ET

Network World - Verizon's apparent decision to offer tiered LTE services in the near future could spark more debate on carriers' overage fees and so-called "bill shock."

Cell phone "bill shock" hits a nerve, FCC says

According to the Financial Times, Verizon Wireless CEO Lowell McAdam said during a Barclays Capital conference Thursday that users who sign up for the company's 4G LTE services should expect to pay for "buckets" of data rather than pay a flat monthly fee for unlimited use. In other words, LTE plans would give users a certain amount of data they could consume every month before they would have to pay overage fees.

New tiered pricing plans for LTE services could add fuel to the debate over the fees telecoms can charge their customers who exceed their monthly limits, as well as the carriers' obligations to inform customers when they're almost at their monthly limits. A survey commission by the Federal Communications Commission and released Wednesday shows that 17% of U.S. cell phone users said their cell phone bills had "increased suddenly from one month to the next" even if they "did not change the calling or texting plan" they subscribed to.

Although we don't yet know how Verizon plans to implement its tiered pricing system for LTE, it's quite possible that the new data plans could lead to even more potential bill shock, especially if users are unaware that they're about to reach their monthly data limits. An extreme example of this sort of problem occurred last year, when a woman in Oklahoma was billed more than $5,000 for exceeding the 5GB monthly data cap for her notebook on AT&T's 3G network.

This is particularly important because the FCC survey found that carriers didn't do a good job of contacting people when they were about to hit their monthly limits on voice or data. According to the survey, only 14% of users hit with bill shock said that their carrier tried to contact them when they were about to exceed their monthly voice, SMS or data usage, while only 10% of users said their carrier contacted them after their bill suddenly increased.

Of course, from Verizon's perspective it's understandable why the carrier would want to impose some kind of bandwidth caps on their 4G services. Since most voice calls on LTE-capable phones are projected to be made over a VoIP network and not a standard cellular network, carriers will lose the revenues they used to get through minute-based cellular plans.

Additionally, carriers are also worried that allowing unlimited data consumption on their LTE networks will lead to degraded network performance. This may sound paradoxical since 4G networks will undoubtedly deliver much faster speeds than today's 3G networks, but consider that the relative slowness of 3G compared to fixed broadband connections means that very few users are trying to stream long high-definition videos or use bandwidth-intensive peer-to-peer protocols on their 3G connections. Once more users have the ability to use such applications over a 4G connection, however, carriers fear that such high-bandwidth applications will severely degrade network performance if left unchecked.

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