As AT&T and Verizon discover an increasing amount of their revenue and profits come from their respective wireless divisions, they’re testing the waters to determine just how much more consumers are willing to pay for cell phone and wireless broadband services.

Verizon Wireless has spent the past year closing loopholes of various kinds and herding an increasing number of customers into mandatory data plans which can add up to $30 a month per phone to your monthly bill.  AT&T wants more if you plan on early upgrades for your cell phone.  A quick review:

Verizon Wireless Locks Down Prepaid Phone Models: Anyone who has shopped for a prepaid phone has probably noticed them dangling from hooks in Walmart and other stores at prices starting around $20.  Most of these prepaid phones are basic models or those deemed cutting edge a few years ago.  Take the LG 5600 — the Accolade.  It’s a phone your father would be comfortable with, covering the basics and designed primarily for making and receiving phone calls.  Verizon Wireless’ retail price for its “postpaid” customers (those who get and pay a bill every month) is $199.99 for the Accolade.  Of course, if you sign a new two-year contract, the phone is free.  But you can find the exact same phone, labeled for Verizon’s prepaid service at prices as low as $15.88.

Verizon claims the deep, deep discounts on prepaid phones are made back from the higher prices prepaid customers pay for airtime.  Some enterprising Verizon postpaid customers have sought these models out to replace or upgrade a worn out or broken phone without having to sign a new two-year contract.  Some other prepaid companies have also activated Verizon’s prepaid phones on their own network, including Page Plus.

Verizon has put the kibosh on both practices.  Customers seeking to activate a prepaid phone on a postpaid account must first use the phone in prepaid mode for a minimum of six months prior to its conversion to postpaid use.  Until very recently, some customers discovered a loophole around this requirement — registering a prepaid phone first on Verizon’s website and then activating it by dialing *228.  So long as a phone had never been activated, it often could be used on a postpaid account from the date of purchase.  But now Verizon tracks which phones are intended for postpaid and prepaid use, and that loophole has been closed.

Page Plus, which resells Verizon’s network, also had to stop activating Verizon prepaid phones almost a year ago.

As a result, those who want discounted cell phone service but keep Verizon’s robust network coverage have been forced to buy handsets at retail pricing, purchase one of several mostly refurbished phones direct from Page Plus, or activate an older phone no longer in use.

Avoiding the Data Plan: What drives an increasing number of Verizon off-contract customers towards “creative solutions” for upgrading their more than two year old phones is resistance to the expensive data plan required for most of their newest and best phones.  For these customers, renewing a contract means a plan change that includes $30 a month extra for data services or a phone downgrade to a basic model to avoid a data plan. Verizon’s remaining data-plan exempt handsets are:

• Verizon Wireless CDM8975
• LG Accolade™
• LG Cosmos™
• Pantech Jest™
• Samsung Gusto™
• Verizon Wireless Salute™
• Verizon Wireless Escapade®
• Samsung Haven™
• Samsung Intensity™
• Samsung Convoy™
• Motorola Barrage™

For large families accustomed to mid-level phones, the prospect of being stuck with a Jitterbug-like-downgrade or a $30 data plan has kept many from renewing their contracts, sticking with what they already own.

When AT&T announced the end of its flat rate smartphone plan, it said the lower pricing on smaller allowance data packages would represent “savings” for consumers reluctant to upgrade.  It’s hard to accept the same company that set prices so high for data usage in the first place has consumer interests at heart with usage-limited alternatives, especially when they no longer offer an unlimited option for customers who want one.

Verizon also plans to drop its unlimited plan in the near future.  Also on tap is a gradual shift away from so-called “mid-level” phones that consumers can purchase with a reduced rate, but still-mandatory $10 data plan.  Verizon increasingly will push customers between two stark choices — a high-powered, battery-eating smartphone that will give you a heart attack if you drop it or a very basic, stripped down phone with features commonly found on handsets five years ago.

This kind of pricing is driving some cash-strapped consumers to prepaid alternatives, such as Page Plus and Straight Talk on Verizon’s network and Wal-Mart’s new family prepaid plan on T-Mobile.  This is especially true if customers just want to talk and text.

AT&T’s Increases ‘Early Upgrade Price’ for Data-Friendly Smartphones by $125

Boy Genius Report obtained a copy of an AT&T memo to its sales force notifying them the price for “Early Upgrade Pricing,” traditionally charged customers who must have the latest and greatest, or accidentally lose or destroy their existing phone, is going up — way up, from $75 to $200:

Beginning Oct. 3rd, Early (Exception) Upgrade pricing for Smartphones will increase from the two-year price plus $75 to the two-year price plus $200.  This change does not apply to iPhone or Basic and Quick Messaging Phones.

Example: BlackBerry Torch $199.99 two-year price + $200 Early Upgrade fee = total price $399.99, a savings of $100 off the No-Commitment price of $499.99.

In return for just a $100 discount, customers sign a new two-year contract that begins with the phone’s replacement.  That contract includes the usual early termination fee of $325, which decreases by $10 per month.  AT&T watchers speculate the price change was designed to stop resale of relatively new phones on sites like eBay or Craigslist, where sellers charge near-retail prices and eat the formerly low penalty for an early upgrade.  It also makes the price of getting the very newest phones that much higher.

Cell Phone Lobby Resists Requirement for Early Warnings Alerting Customers Their Data Allowance Is Almost Gone: “It Will Cause Customer Confusion and Frustration”

Liz Szalay had to dip into her 401(k) retirement account to pay the family’s $2000 Verizon Wireless bill, gone wild with data fees her 14-year old son ran up searching for and downloading songs.

“I would never have allowed my son to accrue such charges, if I had known,” Szalay, a secretary in Niles, Michigan, told Bloomberg News. “What I did to prevent this from happening in the future was have his Internet access completely blocked by Verizon, but not before they made off with a boatload of money.”

Had Szalay received a text and/or e-mail message warning her one of the phones on her account was approaching 80 percent of its monthly data allowance, or was already at risk of racking up huge fees, it would have been possible to stop the damage before it began.

Senator Tom Udall, a New Mexico Democrat, wants to make sure she gets that warning.  Udall drafted legislation that would require companies to warn customers when they have used 80 percent of their allotment.

“It’s difficult for the carriers to get up and argue against greater transparency on bills and notifications,” Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore told Bloomberg. “It’s becoming an issue on the front burner of regulators’ minds.”

The industry’s lobbyists are trying to block the legislation anyway.

The CTIA, the wireless industry lobbying group, is fiercely trying to kill Udall’s bill, claiming warnings will cause “customer confusion and frustration” and that carriers already offer customers the opportunity to check their usage by visiting carrier websites or via a text message.

The lobbyist solution requires consumers to be vigilant and check daily to make sure they don’t exceed any limits.  Udall’s idea puts the onus on phone companies to warn customers, who often have family members that have no idea what kind of cash bonanza they can provide a wireless provider just by using data features built into their phones.

Szalay’s son has a phone that doesn’t require a data plan, but incurs an enormous $1.99 in charges for every megabyte accessed online.  Verizon’s own website notes customers can consume 183 megabytes of data streaming music just five minutes a day for a month.  That’s $364 in data charges.  Five minutes downloading games — 440 megabytes or $875 in data fees.  One need not use their phone for hours a day to incur enormous fees for data usage.  Szalay’s son could have managed the $2,000 bill he caused using his phone for less than 15 minutes each day.

Verizon does not allow customers hit with these bills to retroactively sign up for a data plan to cover the costs, which are the same to Verizon whether a consumer incurs them on an unlimited $30 monthly data plan, or on a pay per use plan with a stinging penalty rate.

And the company objects to any government official telling them to warn customers before the overlimit fees kick in.

“We have several measures in place that allow our customers to monitor their usage and protect against overages — this is a proactive approach on Verizon’s part,” Verizon’s Smith told Bloomberg in an e-mailed statement.

How to Protect Yourself

Both Verizon and AT&T are masters of extracting a maximum amount of money from customers’ pockets.  Verizon is increasingly risking its high rating for customer service and quality by finding new ways to nickel and dime even long time customers to death.  AT&T already has earned a bad reputation and can’t drop much further unless it adopts Sprint’s old strategy of driving its own customers away.  Only through education and careful consideration of your family’s actual usage can you safely navigate around these shark-like wallet biters.

1.  Avoid cell phone company insurance plans unless you are concerned about theft.  With “early upgrade” plans, even at AT&T’s $200 price, it may not be worth paying an expensive monthly fee for insurance.  Also consider Squaretrade, a third party warranty/replacement provider.  They charge considerably lower prices than most (Google around for coupon codes offering up to 30 percent off).  If your phone breaks or is damaged, and you are not on a contract, you might find a suitable refurbished replacement through websites like eBay.  Just make sure the phone wasn’t designated for prepaid service to avoid activation hassles.

2.  If you want Verizon network quality, but don’t want to pay Verizon’s diamond-platinum pricing, consider doing business with one of the new prepaid providers offering month-to-month service that uses the same network as Verizon itself.  Walmart sells Straight Talk, but also consider Page Plus, which offers 1,200 minutes of call time, 1,200 texts, and 50MB of data use for $29.95 per month.  The only downside is that most prepaid providers don’t sell family plans, meaning each user pays the same price.  Walmart’s new prepaid plan changes that with the introduction of a shared family plan, with additional lines given discounted pricing.  But the discounts are not as good as postpaid plans offer, and the service relies on T-Mobile, which is not well-regarded for coverage outside of metropolitan areas.

3.  Smartphones, in addition to being expensive, often deliver horrible battery life.  Some won’t even make it through an entire business day.  Before seeking out one of these premium phones, consider whether you will actually use their features.  Is it worth the price of a $30 a month data plan if you only occasionally use the phone for wireless Internet?  Bragging rights come with a $200 up front price tag and a two year contract that will run up to $720 just for the data plan over two years.  If you drop it, lose it, or it gets stolen, the retail price for most of these phones is north of $500.

4.  Carriers design “gotcha” data pricing into their assumed revenue models.  They know even with online tools, nobody wants the hassle of checking their allowance for data every day, especially when most stopped checking their voice minutes allowance years ago.  While carriers occasionally waive gigantic bills, especially when the media gets involved, you can restrict data access on some or all of your phones if you do not have a data plan and don’t care about this feature.  You should support Senator Udall’s bill as well.  Carrier excuses that a warning message will cause confusion and frustration are laughable.  Getting a $2,000 wireless bill in the mail will cause far more of both.  That the industry objects to even this common sense approach illustrates just how rapacious wireless companies are for additional profits.

5. Educate everyone on your plan about the implications of using the phone to download music and games or watch video.  Unless you are on a flat rate plan, you may want to simply tell your family not to use their phones for these kinds of services without asking permission first.  This gives you an opportunity to check your allowance before Verizon gets a chance to reduce your bank balance.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Cell Phone Savings 10-12-10.flv[/flv]

We have four reports covering consumer news on cell phones that can save you money:  KSHB-TV in Kansas City takes a look at Walmart’s new prepaid family plan using T-Mobile’s network, WIVB-TV in Buffalo reports Sen. Kirsten Gillibrand (D-N.Y.) wants carriers to stop international roaming charges when customers end up making and receiving calls on a Canadian provider’s network from the American side of the border, WFTS-TV in Tampa provides tips on getting lower rates from your cell phone company and WTEV-TV in Jacksonville helps customers analyze cell phone bills for savings.  (6 minutes)

Telstra, Australia’s dominant telecommunications company, is openly concerned about the prospect of Australians finally shedding themselves from Internet Overcharging schemes like low usage caps and throttled speed.  But instead of doing away with these profit-boosting schemes themselves, they’ve decided to argue that consumers don’t need the country’s newest 1TB usage allowance plans, calling them publicity gimmicks.

Of course, Telstra doesn’t offer a 1TB plan.

Heath Gibson tries to explain away Telstra’s Internet Overcharging in a company blog post:

A terabyte is a lot of data. One provider claimed it’s enough to download about 200 DVD quality movies and still have quota left over.  Whilst my inner geek is salivating at the possibilities, the analyst in me is questioning just how many people currently need, or could even use, a terabyte of data each and every month.

Gibson believes the average Australian is better off plans like Telstra’s 50GB DSL service, running $49.30US per month on a two-year contract.  When all the charges and fees are totaled, Australians will pay Mr. Gibson’s company $2,364.50US for two years of service that slows to 64kbps once your monthly 50GB allotment is used up.

“Terabyte plans will have appeal to a special niche and demand for these plans will no doubt grow over time,” Gibson wrote. “But for now my advice to most people would be to look past the attention grabbing headline, check how big a plan you really need and keep in mind all the other things that go in to making a great ISP.”

Australians have already made that decision and they have been voting with their feet to other providers.  On the same day Gibson was dismissing the competition, Telstra CEO David Thodey was responding to it, recognizing the company has lost significant market share because of high prices and poor customer service.

He told The Advertiser improvements were underway.

“The focus on customer service is something that is innate within Telstra, but our delivery leaves a lot to be desired,” he said.

So is their pricing.  Gibson’s views defending rationed Internet service are similar to the arguments broadband providers in the States use to defend their failure to keep up in the global broadband speed race.  Only instead of dismissing the need for unlimited service, American providers try and convince customers they don’t need the faster speeds they don’t deliver.

Verizon this week unveiled a list of 38 major cities where the company’s much-faster LTE wireless broadband service will launch by year’s end.  Dubbed by some as the “list of cities with NFL franchises,” Verizon’s choices delighted some, but puzzled others.

But before the celebrations get out of hand, incoming Verizon CEO Lowell McAdam warned customers need to prepare themselves, and their wallets, for major price changes.

Specifically, the company intends to treat its new 4G network, with top speeds of 5-12Mbps downstream and 2-5Mbps upstream, as a premium product with a premium price.  It comes complete with a classic Internet Overcharging scheme.

“We think there’s a place for unlimited plans,” McAdam announced, “but we think that over time, because we have finite resources, our customers are going to have to shift to a pay-as-you-use model. I would say that clearly over time we will be migrating to a bucket-of-megabytes” price schedule.

Verizon’s finite resources are more infinite than those of its customers, however.

Much like its partner-in-pricing – AT&T, Verizon is preparing to ditch its unlimited data plan for smartphone customers.  Despite the fact its new LTE network will offer a more efficient network experience for both Verizon and its customers, the nation’s largest wireless carrier wants limits on how much data customers can exchange over their new network, with overlimit fees for those who use too much.

Exact pricing has yet to be announced.

Amidst the flurry of excitement over McAdam’s appearance at the San Francisco wireless industry conference, yet more rumors of the forthcoming arrival of a Verizon iPhone also made headlines.  Apple is reportedly releasing a CDMA version of its popular phone soon, and despite the fact there are other CDMA networks in the world, reporters presumed it must be intended for the American market.

After the press conference, the list of cities to get Verizon’s new LTE network became a hot topic for debate.  In western New York, only Rochester made the cut.  For residents in Buffalo, who would like to remind Verizon they have an NFL team, the slight did not go unnoticed.  It made news on the city’s most watched nightly local newscast.

But those of us in Rochester remind our friends in the Queen City they have Verizon FiOS while we are stuck in a broadband backwater with Frontier Communications.  (Besides, the Buffalo Bills training camp is in Rochester.)  The broadband gap between the two cities could have made Rochester a ripe target for Verizon, assuming customers can afford the price of the service plan.

Folks in Austin noted they are not on Verizon’s list either, despite the Texas city’s high-tech-embracing reputation.  Houston, the Dallas-Ft. Worth Metroplex, and San Antonio did make the list.  But fear not Austin, you will be able to use LTE at the Austin-Bergstrom International Airport.

For existing Verizon customers in the chosen places, the imminent arrival of 4G may stall customers from upgrading phones until new LTE-capable models arrive in time for the holidays.  But the Data Grinch That Stole Flat Rate Wireless may still be confounded by the number of customers who let their contracts expire and stick with their existing phones, refusing to expose themselves to mandatory, overpriced data plans.

Verizon Wireless 4G LTE Initial Major Metropolitan Area Deployment

Akron, Ohio
Athens, Georgia
Atlanta, Georgia
Baltimore, Maryland
Boston, Massachusetts
Charlotte, North Carolina
Chicago, Illinois
Cincinnati, Ohio
Cleveland, Ohio
Columbus, Ohio
Dallas-Fort Worth Metroplex, Dallas, Texas
Denver, Colorado
Fort Lauderdale, Florida
Houston, Texas
Jacksonville, Florida
Las Vegas, Nevada
Los Angeles, California
Miami, Florida
Minneapolis/Saint Paul, Minnesota
Nashville, Tennessee
New Orleans, Louisiana
New York, New York
Oakland, California
Oklahoma City, Oklahoma
Orlando, Florida
Philadelphia, Pennsylvania
Phoenix, Arizona
Pittsburgh, Pennsylvania
Rochester, New York
San Antonio, Texas
San Diego, California
San Francisco, California
San Jose, California
Seattle/Tacoma, Washington
St. Louis, Missouri
Tampa, Florida
Washington, D.C.
West Lafayette, Indiana
West Palm Beach, Florida

Verizon Wireless 4G LTE Initial Commercial Airport Deployment (Airport Name, City, State)

Austin-Bergstrom International, Austin, Texas
Baltimore/Washington International Thurgood Marshal, Glen Burnie, Maryland
Bob Hope, Burbank, California
Boeing Field/King County International, Seattle, Washington
Charlotte/Douglas International, Charlotte, North Carolina
Chicago Midway International, Chicago, Illinois
Chicago O’Hare International, Chicago, Illinois
Cincinnati/Northern Kentucky International, Covington, Kentucky
Cleveland-Hopkins International, Cleveland, Ohio
Dallas Love Field, Dallas, Texas
Dallas/Fort Worth International, Fort Worth, Texas
Denver International, Denver, Colorado
Fort Lauderdale/Hollywood International, Fort Lauderdale, Florida
George Bush Intercontinental/Houston, Houston, Texas
Greater Rochester International, Rochester, New York
Hartsfield-Jackson Atlanta International, Atlanta, Georgia
Honolulu International, Honolulu, Hawaii
Jacksonville International, Jacksonville, Florida
John F. Kennedy International, New York, New York
John Wayne Airport-Orange County, Santa Ana, California
Kansas City International, Kansas City, Missouri
La Guardia, New York, New York
Lambert-St. Louis International, St. Louis, Missouri
Laurence G. Hanscom Field, Bedford, Massachusetts
Long Beach/Daugherty Field, Long Beach, California
Los Angeles International, Los Angeles, California
Louis Armstrong New Orleans International, Metairie, Louisiana
McCarran International, Las Vegas, Nevada
Memphis International, Memphis, Tennessee
Metropolitan Oakland International, Oakland, California
Miami International, Miami, Florida
Minneapolis-St. Paul International/Wold-Chamberlain, Minneapolis, Minnesota
Nashville International, Nashville, Tennessee
New Castle, Wilmington, Delaware
Newark Liberty International, Newark, New Jersey
Norman Y. Mineta San Jose International, San Jose, California
North Las Vegas, Las Vegas, Nevada
Orlando International, Orlando, Florida
Orlando Sanford International, Sanford, Florida
Palm Beach International, West Palm Beach, Florida
Philadelphia International, Philadelphia, Pennsylvania
Phoenix Sky Harbor International, Phoenix, Arizona
Phoenix-Mesa Gateway, Mesa, Arizona
Pittsburgh International, Pittsburgh, Pennsylvania
Port Columbus International, Columbus, Ohio
Portland International, Portland, Oregon
Rickenbacker International, Columbus, Ohio
Ronald Reagan Washington National, Arlington, Virginia
Sacramento International, Sacramento, California
Salt Lake City International, Salt Lake City, Utah
San Antonio International, San Antonio, Texas
San Diego International, San Diego, California
San Francisco International, San Francisco, California
Seattle-Tacoma International, Seattle, Washington
St. Augustine, Saint Augustine, Florida
St. Petersburg-Clearwater International, Clearwater, Florida
Tampa International, Tampa, Florida
Teterboro, Teterboro, New Jersey
Trenton Mercer, Trenton, New Jersey
Washington Dulles International, Dulles International Airport, Washington, D.C.
Will Rogers World, Oklahoma City, Oklahoma
William P. Hobby, Houston, Texas

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Verizon Wireless LTE Announced 10-7-10.flv[/flv]

Verizon Wireless’ announced LTE network was a common topic on local newscasts in several cities. We include WIVB-TV in Buffalo, noting that city didn’t make the cut, WCVB-TV in Boston which spent plenty of time on the resurgence of the rumored Verizon iPhone, WLFI-TV in West Lafayette, Indiana which discussed the network’s implications for Purdue University students, and a promotional video from Verizon itself interviewing visitors to a Boston pizzeria gushing over the speed of Verizon’s newest technology. (5 minutes)

Bad marks to Time Warner Cable, who left large areas of metropolitan Rochester, N.Y., with barely/non-functional Internet service and non-working “digital phone” service for 10 hours yesterday.

No explanation for the outage has been given, which resulted in inaccessible websites and traffic bouncing back and forth between equipment in western New York.  “Digital phone” customers were unable to reach… anyone. Customer service lines were jammed as the outage began just after 12 noon.

The disruption extended from Monroe County into both Wayne and Ontario counties, where residents in Newark and Canandaigua also reported service problems.

Time Warner Cable’s automated customer service attendant was the Helen Keller of cable outages:

“I’m not seeing an Internet outage in your area,” came her reply — even after a local employee recorded a message telling callers there were problems with phone and Internet service across the Rochester region.

While some websites still worked, many more were unreachable.  Some customers reported slow, but working service in the early evening.  Full service restoration to the area would not happen until 10pm.

Time Warner Cable’s social media representatives took several complaints from local residents about the extended outage, without reminding them they are qualified to receive service credits for the interruption.

Here at Stop the Cap!, we will remind you, and in fact encourage you to request a full day of credit for the phone and Internet service you did not have from the cable company yesterday.  Of course, we represent your interests and they represent theirs, which is why credits come only to those who ask.

Stop the Cap! Presents Your Easy Service Credit Request Menu

Customers can request one day of credit for both phone and Internet service (assuming you have both services, of course).  Make sure you request -both- credits if you are entitled.

Sample Request You Can Cut and Paste:

I am writing to request one day service credit for the phone and Internet outage that occurred in Rochester yesterday, Wednesday Oct. 6th.  We were without service for most of the day.  Please credit my account.

Methods to Obtain Credit:

1. Use Time Warner Cable’s Online Chat system, select Billing Inquiry, and type to a customer service representative.
2. Call (585) 756-5000 or toll free 1-800-756-7956 and speak with a customer service representative.
3. Use the Online E-Mail form, select Billing Inquiry, and send a message requesting credit.

[Update: 2:47pm ET:  A day’s credit was provided just three hours after submitting the request using the e-mail method, so this was as painless as can be.]

Stop the Cap! reader Kevin dropped us a note again this evening to let us know Clear users are still being throttled even without running peer-to-peer software, and that those throttled experiences run into days, not the 15-minute increments a company official claimed yesterday.  Perhaps Clear’s definition of “minutes” differs from the acceptable norm.  Regardless of the reason, it’s an unpleasant experience at best to pay a generous fee every month for service that effectively tops out at 250kbps (that’s 0.250Mbps) when the punishment throttle is active.

But even more ironic, Clear’s annoyance with a purported flood of customers running peer-to-peer applications on their network could have been tempered had the company avoided advertising the service in 2009 on the very notorious Pirate Bay:

Although we enjoy the irony ourselves, it is fair to mention Clear probably didn’t intentionally target the world’s largest torrent tracker website, but was instead mass advertising on a range of websites targeting users thought to be “early adopters.”  But every advertising network we’re aware of allows advertisers to opt-out of specific websites, and Clear hadn’t bothered when our reader captured this image.

That makes Clear’s apparent battle with peer to peer traffic partly one of their own making.