Verizon Wireless has settled a complaint brought by consumer group Free Press that accused the wireless carrier of violating federal rules allowing customers to use their phones as mobile hotspots or for tethering with the apps of their choosing.

The Federal Communications Commission announced Verizon had agreed to pay $1.25 million to the U.S. Treasury for violating the conditions of its 700MHz “C”-Block licenses, which carry the provision that Verizon not “deny, limit, or restrict” customers from using the applications or devices of their choosing.

Instead of abiding by those rules, Verizon Wireless reportedly pressured Google to disable and restrict tethering applications in the Google Play Store, forcing most customers to purchase Verizon’s Mobile Hotspot/Tethering service which, at the time, was priced at an additional $30 a month. Verizon Wireless’ recent plan changes now include tethering and mobile hotspot service for no additional monthly fee, although customers are subject to usage caps and overlimit fees.

“The FCC sent a strong signal to the market that companies cannot ignore their pro-consumer obligations,” said Free Press policy director Matt Wood. “Unfortunately, the fact that Verizon worked to block these apps in the first place is a clear indication that wireless providers have a strong incentive to discriminate against certain content and applications, an incentive that continues to threaten online freedom and innovation.”

Free Press notes consumers of other carriers lack the same protection Verizon’s customers have under the law. Verizon agreed to the more consumer-friendly language as part of its purchase of the frequencies where the company operates its 4G network.

Amazon.com has quietly introduced a 50 megabyte usage cap on Kindle owners using 3G-equipped models to browse web pages over AT&T’s 3G wireless network. Customers exceeding the limit after July 1 reportedly began receiving this pop-up message on their device:

The Experimental Web Browser is currently only available for some customers outside of the United States and may be limited to 50MB of browsing over 3G per month. This limit does not apply when customers are browsing over Wi-Fi.

The new usage cap does not affect users browsing Amazon.com, Wikipedia, and the Kindle store.

Web browsing on an electronic ink display instinctively has a built-in cap: the limited patience of the user trying to browse websites that were never designed for the Kindle experience.

But some enterprising hackers managed to jailbreak the Kindle device and turn its free 3G connection into a wireless mobile hotspot.

That means Amazon was footing the bill for Kindle owners who have re-purposed the device to provide Internet connectivity to wireless phones, laptops, tablets, and other Wi-Fi enabled devices.

At AT&T’s prices, Amazon decided to pull the plug after 50MB, which is barely enough for a few dozen busy web pages accessed during the month.

Sprint is notifying their mobile hotspot customers the company is now prepared to enforce their formerly soft-capped 5GB plan with a $50/GB overlimit fee, billed at $0.05/MB increments.

Sprint has long informally capped customers using their phone as a Wi-Fi hotspot or tethered device, but until now was not prepared to enforce the limit because it could not accurately track usage.

“Starting June 2012, and effective on your next bill, your phone or tablet’s Mobile Hotspot on-network data allowance will be limited to 5 GB,” reads the message sent to Sprint customers.

Customers will begin receiving text message alerts when they reach 75% of their usage allowance, with repeated alerts at both 90 and 100%. When the 5GB limit is reached, Sprint will give customers the option of continuing service at the penalty price of $50/GB billed in megabyte increments, or shut the service down until the next billing cycle.

Some customers have been confused by the change, in part because Sprint has made a series of sometimes-confusing adjustments to their data pricing. But the company insists it has always had a limit on its mobile hotspot service, even if not enforced.

Smartphone customers using broadband on their phone still receive unlimited access. But other devices with mobile broadband access are usage capped based on the usage tier selected.

Verizon Wireless unveiled their new “Share Everything” Plans this morning, claiming consumers wanted “simpler, easier-to-understand” plans that let them share their data plan across multiple devices:

But a closer examination of the plans, to be introduced June 28, shows many Verizon customers will face substantially higher cell phone bills if they choose one of Verizon’s newest plans. Perhaps more importantly, customers upgrading to a new subsidized phone/contract renewal on or after that date will be forced to forfeit any grandfathered unlimited data plans they still have with Verizon.

“It is an effort to move ARPU up,” Walt Piecyk, an analyst with BTIG LLC in New York told Bloomberg News, referring to average revenue per user, a measure of how much each customer spends each month.

Obviously acknowledging that customers are using fewer voice minutes and are increasingly finding ways around text messaging charges, Verizon’s new plans sell customers on the idea they can now talk and text as much as they want, but as far as data is concerned, customers will potentially pay much more for less service.

Those light on talking and texting are most likely to be hit hardest by the new cell phone plans.

Verizon formerly charged $50 a month for a basic Nationwide Talk Share plan that included 700 shared voice minutes. Smartphone users also paid $29.99 a month for unlimited data. Together, that amounts to $80 a month. Under Verizon’s $40 “Share Everything” Plan, customers can talk and text all they want, but their unlimited data plan is gone, replaced with a 1GB basic plan for $50. That costs $10 more than customers used to pay on Verizon’s 700 minute plan with an unlimited use data plan. Need 2GB a month? Add an extra $10, bringing you a Verizon phone bill of at least $100 a month for the first line on your account, before taxes and fees.

Other family member lines may also be hit. Verizon used to charge $9.99 a month for extra lines on a shared account. The new price is $30 for a basic phone, $40 for a smartphone. Those family members with smartphones on an older Verizon account each would also incur $29.99 a month for their own individual data plan, which was also unlimited.

Although the base fee for the additional line with a data plan still remains around $40 a month, family members will be forced to share the primary line’s data bucket. Customers will quickly find a 1GB data plan is not going to last long on an account with two or three smartphones. That means expensive upgrades, which start at $10/GB.

Accounts with a mix of smartphones and basic phones face an even stiffer price hike. The $9.99 a month customers used to pay for a basic phone for grandma will now run $30 a month. She won’t be talking or texting much, so the extra features built into Verizon’s new plan will represent a pointless $20 monthly rate increase and an invitation to set grandma up with her own prepaid cell phone instead.

Verizon’s new “Share Everything” concept clearly builds major profits into Verizon’s future:

• Customers are forced to pay for unlimited voice and texting services, even as those services lose popularity, costing Verizon little to nothing;
• Data customers are encouraged to add additional devices to their account, but as more data gets used, ongoing upgrades to your data plan at an increment of $10/GB or more will be required;
• Customers considering a new Apple iPhone or other smartphone will be forced to forfeit any existing unlimited data plan to upgrade, which guarantees future profits from customers consuming increasing amounts of data.

Foreshadowing Bill Shock?

T-Mobile is suspicious about the value of forthcoming family shared data plans likely to be introduced by its larger competitors AT&T and Verizon Wireless later this year.

Andrew Sherrard, senior vice president of marketing for T-Mobile announced the company would not jump on the family data bandwagon, preferring to leave the current model of individual data plans for each device in place:

Some of our competitors are backing away from simple, unlimited data and moving to family shared data plans. But would this approach actually deliver a better value to consumers?  Do families really want to keep track of each others’ data consumption? We don’t think so. Just imagine mom’s email is suddenly unavailable because her teenage son watched an HD movie on his phone, consuming the family’s data allotment.

T-Mobile believes that consumers today do not want a ‘one size fits all’ approach to shared family data plans, nor would they benefit from that model.  So, what is the right way to price data for customers who want affordable, unlimited access to what, unfortunately, is a limited resource?

Here’s how we see it:

Data plans should be flexible and affordable. At T-Mobile, customers have the option of only paying for the amount of data each member of the family believes they will need. Customers can choose affordable no-annual-contract data for tablets and other data-only products they share – paying every month or buying in daily or weekly installments.

Data should be worry-free. With our unlimited data plans, there is no surprise data cap or bill shock. Customers simply pay each month for the amount of high-speed data they select and (in contrast to our competitors) T-Mobile customers can continue to use mobile data on their device at reduced speeds after they reach their limit without incurring overage charges.

Customers who pay more, should get more. T-Mobile smartphone customers with 5GB or 10GB data plans also get our Smartphone Mobile Hotspot feature included. This means, with a capable T-Mobile smartphone (most are), customers can power up to five Wi-Fi enabled devices with fast, 4G data. So rather than needing to account for each device on a shared family data plan, customers can use their existing data plan to power multiple devices, while still saving hundreds of dollars annually.

T-Mobile has adopted a traditional usage cap model that provides a set usage allowance but imposes no overlimit fees. Subscribers who exceed their allowance have their wireless data speeds reduced to levels resembling dial-up for the remainder of their billing cycle.

Verizon Wireless’ recent announcement it would kick customers grandfathered on unlimited use wireless plans to tiered data plans with overlimit fees has created controversy and has angered some Verizon Wireless customers. T-Mobile’s marketing strategy could draw some disaffected customers from larger carriers.

T-Mobile ultimately believes a shared data plan can create havoc on families trying to control their shared allotment of data for each month. Without careful coordination, consumers may find substantial overlimit fees on their wireless phone bills when they exceed their allowance.