Verizon Wireless is contemplating the end of flat rate, unlimited data plans as it introduces fourth generation data networks this year.

“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” John Killian, chief financial officer of Verizon Communications Inc., the wireless unit’s parent, said in an interview at Bloomberg’s headquarters in New York.

Verizon expects “explosions in data traffic” as the company introduces customers to its 4G network, potentially ten times faster than older mobile broadband technology.  Verizon Wireless, already capturing enormous sums of revenue from consumers forced into mandatory, expensive data plans when they upgrade to smartphones, will soon discover some serious limits on those plans.

The irony is, Verizon’s 4G upgrade will bring wireless broadband speeds to consumers they realistically cannot use for much more than web browsing, e-mail, and low-bandwidth apps.  Video downloads will burn through data limits imposed at the level AT&T introduced for its customers earlier this month.

Killian

Wall Street wants consumers re-educated to believe broadband can never be unlimited and must be treated as a precious, limited resource.

“The more bandwidth that you make available, the faster it will be consumed,” said Craig Moffett, analyst at Sanford C. Bernstein & Co. in New York. “From Verizon’s perspective, the last thing you want is for another generation of consumers to be conditioned to the idea that data is always going to be uncapped.”

Moffett’s clients hope that is true because usage limits will control costs and make customers think twice about using their data features on their phones.  Reduced demand equals increased revenue, just what Wall Street ordered.

Verizon Wireless has already set the stage for that increased revenue with mandatory add-on plans that boost customer bills, especially for those buying smartphones.  Although just 17 percent of Americans own smartphones today, Verizon predicts 70-80 percent of customers will upgrade to smartphones in the next few years.  That guarantees an “upgraded” bill as well.

Estimates about current average data usage from smartphone customers ranges from 200-600 megabytes per month, but that was before the arrival of video-friendly 4G network technology and the newest generation of phones optimized for video, which can easily consume ten times as much.

Verizon recognizes the “video threat,” and press reports suggest the limits will only be imposed on the 4G network.  Current generation 3G networks make viewing video tedious, a natural barrier for customers planning to “use too much.”

Verizon’s widely anticipated limits, almost certainly to be equivalent to AT&T’s with respect to allowances and pricing, may dampen enthusiasm for the iPhone on Verizon’s network.  Any existing AT&T customer is grandfathered into unlimited data plans for their smartphones.  If those customers leave AT&T, they will be forced to take a usage-capped data plan from Verizon with no looking back.  AT&T won’t provide unlimited plans for customers returning to their fold.

Belinda Horton, Clarksville, Tenn. speaks with AT&T customer service

Back in April, Stop the Cap! covered the story of Clarksville, Tenn., resident Belinda Horton, who found herself besieged by endless billing errors from AT&T.

She was not alone.  More than 15,000 customers in Tennessee alone have been suffering with an AT&T “unlimited” long distance calling plan that has billed every long distance call at non-plan rates.  At one point, Horton found herself staring at a bill for $1,350.

As of late April, more than three thousand dollars in erroneous charges had appeared on her phone bill over several months, when she was only supposed to have paid a flat rate amount of $25 a month for unlimited long distance.

Horton did secure credits from AT&T, but only after repeatedly calling their customer service department after every inaccurate bill arrived.

For her and other Tennessee customers in the same boat, appeals to the Tennessee Regulatory Authority were supposed to fix the problem.  AT&T’s legal counsel, Guy Hicks, apologized on behalf of the company and promised to make things right.

That lip service was apparently good enough for the TRA, which as we wrote at the time was just a bit premature:

It was disappointing to see the TRA praising AT&T at the end of Monday’s meeting.  This is an ongoing nightmare for some customers, and TRA officials seemed all too ready to applaud the company for its promises to fix the problem while Tennessee residents continue to be overbilled.  The time for praise comes after the company resolves the issue and every customer has been credited for every error.  AT&T has promised it would resolve these billing problems for nearly a month, with complaints still arriving even as the Authority met.

Long time readers can guess what happened next.

Belinda dropped a note to Stop the Cap! informing us she had enough with AT&T and decided to switch to Charter Communications.  But in one last indignity, her final bill from AT&T was loaded with inaccurate charges running over $100.

Now that Horton is a former AT&T customer, the company has been even less responsive than ever.  The TRA is reportedly involving itself in the matter once again, although it’s clear AT&T doesn’t exactly feel threatened by the Authority.

Had AT&T done the right thing, they would have not only credited back the inaccurately billed long distance calls, they also would credit back the $25 a month Belinda paid for a long distance plan she had to fight every step of the way to actually receive.  It’s the least the company could do for a customer who was forced to flee AT&T because they couldn’t resolve their own billing problems.

Belinda writes she has better things to do than spend endless hours fighting with the phone company.  She has been devoting as much free time as possible caring for an ailing friend.  Many people would have simply paid AT&T’s final bill just to be rid of them, but it was Belinda’s friend who encouraged her to stay in the fight and not pay AT&T one penny more than they deserve.

Stop the Cap! is attempting to get Horton in touch with the executive office customer service department at AT&T to get this resolved once and for all.