Verizon's iPhone Herd Mentality: Pay, pay more, and pay again.

We’re still trying to wrap our heads around this “deal” spotted in the Verizon iPhone FAQ by Gadgetell (underlining ours):

I just purchased a new smartphone during the holiday season, but if I knew that iPhone 4 was going to be available soon I would have waited. What are my options now?

Current Verizon customers who purchased and activated new smartphones, feature phones or certified pre-owned phones between 11/26/2010, and 01/10/2011, are eligible to receive up to a $200 Visa debit card when they purchase an iPhone 4 at full retail price by 02/28/2011 and return their existing phone. Note: This offer is only available on consumer accounts with five lines or less, who are purchasing iPhone 4 through Verizon Wireless retail stores, telesales, or through verizonwireless.com.

So, if you have recently bought a new Android or Blackberry phone during the holiday season, you can turn it in and essentially get your money back.  But Verizon isn’t giving you $200 — it is paying only as much as you spent on the phone to be returned, up to $200.

Verizon says that earns you the right to go and get in line to pay full retail price for a new iPhone in February.  No discounts or subsidies for you!  The 16GB iPhone runs $649.99 and the 32GB iPhone costs $749.99.

We’re basking in the savings.  Gosh, thanks Verizon!

Not only are customers giving up Verizon’s “new handset subsidy” — often worth hundreds of dollars, they also lose their New Every Two discount and other savings from promotions like Verizon’s Smartphones Talk Free $9.99 monthly discount for 24 months.

For those who simply must have the iPhone, Verizon will make you pay dearly for not waiting.

Having owned the iPod Touch (essentially the iPhone without the phone) and Motorola’s Droid X, I can testify the price penalty Verizon wants you to pay for the iPhone isn’t worth the asking price.  Move on, there is nothing to see here.  This is even more true considering the next generation of the iPhone will likely be introduced in just four months.  What will you do then, and how much do you think Verizon will extract from you all over again to get that phone?

There is no doubt Apple’s iPhone is a fine phone, but there are cheaper ways to get one, ranging from opening a new line on your Verizon account and passing your old phone down to a family member, to finding one on eBay, subsidized in part by selling your existing phone.

Verizon’s silence on data plan pricing for the coveted Apple iPhone is deafening.  In the absence of definitive information, Verizon’s refusal to comment Tuesday about what it plans to charge its data hungry iPhone customers has triggered rampant speculation.

On Monday, the Wall Street Journal reported Verizon was going to keep pricing stable for its unlimited data plans and extend them to iPhone owners, if only to further tweak AT&T’s stingy data plan allowances and pricing:

Verizon Wireless, the country’s largest wireless carrier, is confident enough in its network that it will offer unlimited data-use plans when it starts selling the iPhone around the end of this month, a person familiar with the matter said. Such plans would provide a key means of distinguishing its service from rival AT&T Inc., which limits how much Internet data such as videos and photos its customers may use each month.

But that was before Verizon officials conspicuously avoided answering direct questions about data plan pricing at Tuesday’s press event.  Verizon’s FAQ for those interested in the iPhone doesn’t help (underlining ours):

Are there minimum service and data pricing requirements?

Yes, iPhone customers will need to choose from any of the current Nationwide plans. Customers will also be required to activate a data package, pricing will be announced at a later date.

ComputerWorld seemed to deliver the highest predicted inflation rate of Verizon’s data pricing — guestimating it will cost iPhone owners up to $120 a month for unlimited wireless data:

“Data plans for Verizon iPhone could range from $20 to $90 a month or even $120 unlimited a month,” Rob Enderle, an analyst at Enderle Group told the publication. “The iPhone uses an awful lot of data, so they will have to charge heavily for data and it will be fairly expensive.”

If Verizon wanted to find some way to kill Apple iPhone addicts’ enthusiasm for the phone on Verizon, charging a potential $330 a month for a single line plan is probably the way to do it.

Verizon Wireless has seen some success getting their off-contract customers who have stubbornly refused to upgrade their phones to jump on board the smartphone craze… by lowering their prices.

The entry fee for smartphones on most carriers includes the up front cost of the device (often $199 for the most coveted phones) and a $30 monthly mandatory data plan.  That’s a price too high for many consumers to pay in this economy, and the result has been an increase in the number of customers letting their two-year contracts expire.

AT&T has tried to reduce the bite with a paltry $15 monthly plan that only includes 200MB of usage per month, which is nearly pointless for smartphone users who want to really use the multimedia features the phones were designed to provide. Verizon responded with a holiday season promotional offer charging $15 a month for an even lower 150MB per month, with widespread speculation the “limited time only” part of the offer will soon become “available every day.”

But for most smartphone customers who plan to regularly use data-hungry applications, neither “budget plan” will suffice.  That leaves one alternative for Verizon customers — the $29.99 unlimited plan.  Ouch.

To prod price-sensitive customers, Verizon has offered family plan members the option of upgrading their old phones to new smartphones, and has sweetened the deal with a $10 price break.  While technically a credit on the “additional line” charge, some Verizon employees pitch the discount as a reduction in price for the mandatory data plan.  Where $30 a month sounds obscene, $20 a month sounds somewhat better.

The offer has proven sufficiently successful that Verizon has now extended it until Jan. 30 (note just prior to next month’s iPhone introduction) and any customer who has not upgraded their phone in the last 180 days qualifies.  A new, two year contract is required and the offer is good if you want to add a new secondary line.

Unfortunately, the offer does not extend to the primary line.  Verizon would probably see an even larger number of upgrades if the offer extended to every legacy phone on a customer’s account.

The $9.99 credit applies for 24 months.  Over the life of the contract, that is worth $240 in savings per smartphone, which isn’t bad from America’s Cadillac wireless carrier.

It’s official.  Verizon Wireless will welcome Apple’s iPhone to its network next month, but in a glaring omission, company officials refused to discuss data pricing for the all-important data plans that will power the wildly popular smartphone.

The official announcement of the iPhone on Verizon came late this morning in New York at a press event hosted by Verizon’s president Lowell McAdam.  Joining him was Tim Cook, Apple’s chief operating officer. Neither Steve Jobs or Verizon CEO Ivan Seidenberg were on hand for the event.

“Late in 2010 we started offering the Apple iPad and today we are extremely gratified to announce that the iPhone 4 will be available early next month,” MacAdam said. “Our relationship with Apple has developed over the last two years. Back in 2008 we started talking about bringing the iPhone to a CDMA network, and we spent a year testing.”

“All of Apple is very excited to bring the iPhone to Verizon’s customers,” added Cook.

The new phone will be available for pre-orders, exclusively for existing Verizon Wireless customers Feb. 3.  A week later, anyone can reserve the Verizon iPhone at Verizon Wireless or Apple stores, or online.  The new phones will cost $199 for the 16GB model, $299 for the 32GB model with a new two year contract.  The phones will work on Verizon’s 3G network, but not on their new LTE/4G network.

Verizon is so confident its network can handle the traffic, it is bundling, for free, a mobile hotspot with the phone that will allow up to five devices to share the iPhone’s 3G connection over Wi-Fi.  That means you can use a laptop or home computer with a wireless card and connect to Verizon’s 3G wireless broadband service without any additional equipment.

But Verizon’s press event left some questions unanswered, starting with whether the company would sell unlimited data plans to accompany the phone.

“We talked about the device pricing, but we’re not going to talk about the pricing for the network for that connectivity,” Verizon Wireless CEO Dan Mead said. “We’ll have announcements in the future.”

Another downside: the Verizon iPhone will not be able to multitask.  If you make or receive calls on your phone, your data connection is suspended for the length of the call.  This is common on CDMA cellular networks, and it currently affects other smartphones used on Verizon’s network as well.

As far as Apple sees it, that isn’t much of a problem so long as the phone works on Verizon’s network.

“I can tell you that the number one question I’ve gotten is when will the iPhone work on Verizon,” said Cook. “I couldn’t be happier to tell people that. They will make those sorts of trade-offs.”

[flv width=”576″ height=”344″]http://www.phillipdampier.com/video/AP Verizon to Start Selling iPhone Early Feb 1-11-11.flv[/flv]

Lowell McAdam makes the official announcement.  (2 minutes)