The long awaited National Broadband Plan (NBP) for the United States is here.  Unveiled yesterday by the Federal Communications Commission, the 376-page plan calls itself a mandate for improved broadband service for 200 million Americans, bringing access to those who don’t have it, and better speeds and lower prices for those that do.

The report’s authors consider the broadband revolution a transformational change for the country, just as railroads opened the door to coast-to-coast transportation, electricity changed the American household, and phone service opened the door to a new era of Americans reaching out to communicate with one another.

Today, high-speed Internet is transforming the landscape of America more rapidly and more pervasively than earlier infrastructure networks. Like railroads and highways, broadband accelerates the velocity of commerce, reducing the costs of distance. Like electricity, it creates a platform for America’s creativity to lead in developing better ways to solve old problems. Like telephony and broadcasting, it expands our ability to communicate, inform and entertain.

Broadband is the great infrastructure challenge of the early 21st century.

To meet the challenge, the FCC was commissioned to develop a national blueprint for improving broadband service in the United States.  A sense of urgency over statistics showing the United States ranking in the bottom half of nations — losing ground on speed, affordability, and access to both Europe and Asia meant the NBP must deliver concrete answers to improve the country’s competitive broadband standing.

This is a broad mandate. It calls for broadband networks that reach higher and farther, filling the troubling gaps we face in the deployment of broadband networks, in the adoption of broadband by people and businesses and in the use of broadband to further our national priorities.

Nearly 100 million Americans do not have broadband today. Fourteen million Americans do not have access to broadband infrastructure that can support today’s and tomorrow’s applications. More than 10 million school-age children do not have home access to this primary research tool used by most students for homework. Jobs increasingly require Internet skills; the share of Americans using high-speed Internet at work grew by 50% between 2003 and 2007, and the number of jobs in information and communications technology is growing 50% faster than in other sectors. Yet millions of Americans lack the skills necessary to use the Internet.

The NBP goes out of its way to recognize private enterprise’s influence on broadband development in the country, acknowledging America’s for-profit, largely unregulated broadband industry has successfully cherry-picked the most profitable customers for often excellent broadband service.  For others deemed less profitable, a lesser amount of service, or no service at all is available.  The distinction between America’s free market approach and government-run universal service is noted in the report.  For America, the private approach has created a “digital divide” — the broadband have’s and have-not’s.  The reasons for bypassing certain areas varies from the expenses to reach rural homes to affordability issues in the inner city.  Sometimes, it’s a matter of being lucky enough to have a decent provider who is aggressive about deploying service.

The NBP seeks to build upon the private free market approach to broadband and fill in the gaps in service for those left behind.

The FCC’s plan envisions broadband evolution, not a broadband revolution.  The report recommends maintaining a limited government role for broadband, and limited regulations along with it.

Instead of choosing a specific path for broadband in America, this plan describes actions government should take to encourage more private innovation and investment. The policies and actions recommended in this plan fall into three categories: fostering innovation and competition in networks, devices and applications; redirecting assets that government controls or influences in order to spur investment and inclusion; and optimizing the use of broadband to help achieve national priorities.

The NBP sets minimum actual broadband speeds Americans should expect to receive at 4/1Mbps. ADSL providers like Frontier, Windstream, and CenturyLink are already in trouble if this standard gets enforced. They routinely fail to meet these speeds in many areas today.

Among the core goals of the NBP:

• Connect 100 million households to affordable, 100Mbps service within 10 years, permitting high end video streaming and medical diagnostics;
• Define broadband as at least 4/1Mbps service, which automatically disqualifies a number of rural DSL providers and satellite fraudband;
• Pole attachment reform, which would remove obstacles providers encounter when trying to hang wiring on poles, bury it underground, or access rights-of-way;
• Improve rural broadband service and low-income access through Universal Service Fund reform, shifting up to $15.5 billion towards broadband construction and subsidies;
• Target a 90 percent broadband adoption rate among American households;
• Rely on mobile broadband to be an important competitor in the broadband industry by doubling available spectrum for wireless data and expand reach beyond today’s 60 percent coverage;
• Provide $16 billion in funding for a federal interoperable mobile broadband network exclusively for public safety agencies.

The plan is a marked departure from the FCC under former president George W. Bush.  Just two years ago, the Commission suggested there were few problems with the broadband industry as-is.  Michael Powell, who served under Bush’s first term as Chairman of the FCC, advocated free market deregulation, and dismissed concerns about the digital divide, calling it a “Mercedes divide,” suggesting broadband was like an expensive car he’d like to own but can’t afford.

Perhaps Powell can afford that car today, as honorary co-chair of industry front group Broadband for America, which has made its presence known through Powell on several national cable news channels in interviews about the broadband plan.  The BfA’s role as an industry-backed player is not disclosed in interviews.

Opposition to parts of the NBP is likely to come from:

• Broadcasters, concerned about the further loss of the UHF TV dial for wireless broadband service expansion;
• Utility pole owners who will likely oppose changes in compensation formulas for pole attachment fees;
• Incumbent broadband providers who fear the NBP may lead to government-backed competition in their service areas;
• Consumers who may balk if Universal Service Fund reform adds an additional five or more dollars a month in fees to broadband bills without price reductions from real competition.

Some of the greatest concerns about the plan come from consumer groups, who recognize the plan has many good points, but relies too much on working with the same companies that got the United States into this position in the first place.

The Senate Commerce, Science and Transportation Committee has scheduled a hearing for Tuesday, March 23 at 2:30 p.m. to review the plan. The House Subcommittee on Communications, Technology and the Internet will hold its own hearing on the plan next Thursday, March 25.

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Bloomberg Business News carried extensive coverage about the National Broadband Plan, its winners and losers, and other implications of a coordinated plan to improve service across America. (14 minutes)

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CNBC aired more skeptical coverage about the National Broadband Plan.  Clueless Michelle Caruso-Cabrera is also back still insisting 99 percent of America already has access to broadband, but she speaks in terms of zip codes, not actual broadband coverage, and it’s unclear if she includes satellite “fraudband,” which promises broadband speeds but doesn’t deliver.  Caruso-Cabrera also bashes Net Neutrality along the way. (13 minutes)

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From a less “business news” standpoint, the NBC News Channel explained the National Broadband Plan to ordinary consumers yesterday in terms of how the plan would affect them. (2 minutes)

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Local Washington, DC Fox affiliate WTTG-TV also explains the National Broadband Plan, suggesting it will bring “high speed access for all.” (3 minutes)

Tomorrow, the Federal Communications Commission is anticipated to release its long-awaited National Broadband Plan (NBP) for the United States.

The proposed road map to better broadband is supposed to bolster availability in rural communities, improve access in urban and suburban areas, and lay the groundwork for 21st century service and speeds.

FCC Chairman Julius Genachowski and Blair Levin, executive director of the FCC Broadband Initiative, have provided plenty of clues along the way.  But one thing is certain — the true impact of the NBP will be to pass a de facto national stimulus program for corporate lobbyists, who will spend the rest of the year loving the goodies in the plan and lobbying away the parts they don’t.

Everyone but consumers have plenty of cash on hand to pay for a full assault on Capitol Hill, bending the ears of lawmakers to deliver the changes they can believe in, and outlawing the changes they don’t.  Since those words will be underlined with fat campaign contributions, more than a few lawmakers are likely to listen.

National Public Radio’s Morning Edition asked the question, will the National Broadband Plan come up short? (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The Winners

Public Institutions: To be a health care provider, a school, or library is a good thing these days.  Some of the most generous and non-controversial elements of the NBP will be directed to public institutions.  The cosmetic impact can’t be beat.  Every elected official sees great potential from ribbon-cutting a showcase project that improves health care, local schools, or a nearby public library.  To all three will come fast access fiber connectivity, tele-learning funding, and support for educating the public about broadband.  Libraries will be given special attention to address connectivity, schools will likely find free or low cost fiber in their future, and the digitization of health care records and results will also promise improvements in health care delivery.

None of these projects will create a significant competitive impact on current broadband players, and even earmark-wary politicians will pose for the cameras to launch an inner-city library’s fiber project.  Public safety will also be provided for with plans to improve connectivity and leveraging broadband for our first responders.

Wireless Companies: It can’t hurt to be a big telecommunications company with a wireless division, either.  That’s because one of the major priorities for the NBP will be finding additional wireless spectrum to improve mobile data services in hopes they can provide increased access in rural communities and increased competition in urban ones.

More airways for mobile data will be “a core goal,” FCC Chairman Julius Genachowski said in February.  That means AT&T and Verizon stand to gain the largest benefits from expanded spectrum.  Smaller carriers like T-Mobile and Sprint will also benefit to a lesser degree.  The FCC wants to double the number of frequencies available to wireless carriers — 500MHz that must be reallocated from other uses and delivered to providers in new broadband spectrum auctions.

Those with the deepest pockets will win the most spectrum, which assures in priority markets where spectrum is in demand, AT&T and Verizon will likely outbid others.

With a mobile broadband future at stake, that guarantees added pressure on smaller players to merge so they can pool resources to compete for needed airwaves.  That could ultimately reduce competition and choice among wireless providers. Pricing is unlikely to drop either, so long as providers try and recoup their auction expenses.

Levin, in particular, is a proponent of wireless competition.

“We don’t know necessarily whether wireless is going to provide perfect competition to wired. But we do know it’s a very important piece of the puzzle,” Levin believes.

Consumers know better, especially in a country replete with $60-for-five-gigabytes monthly usage plans.

Since wireless broadband is increasingly delivered by the same companies providing wired broadband, wired providers show few signs of fear from bolstered wireless competition.  AT&T U-verse and AT&T Mobility are AT&T.  Verizon FiOS, DSL, and Verizon Wireless are all Verizon.  Comcast and Time Warner Cable are both major investors in Clearwire, a wireless “competitor.”

Equipment & Infrastructure Providers: If you haven’t bought shares in Corning, manufacturer of fiber optic network components, or Cisco, which supplies broadband infrastructure, you might want to consider it.  Both companies, among dozens of others, stand to reap millions in profits from the sale of components to construct 21st century broadband.  All of the major equipment manufacturers and their respective trade associations have already submitted piles of comments to the FCC to help identify priorities and speed implementation of the NBP.  Not only do they promote the use of their products, they also speak in terms of helping to create  thousands of new jobs for those building the next generation of broadband.  What’s not to like about that?

Big Broadband Users: Major companies like Google and Amazon are expected to benefit from improved broadband, especially if it also includes increased competition and open access to privately owned networks.  Constructing larger national and regional networks assures increased capacity and reduced pricing, especially if networks face additional competition.  To underscore the point, the NBP is expected to announce a review by the FCC of the wholesale rates big carriers charge for access.

The Losers

Broadcasters: The nation’s broadcasters are clearly the biggest potential losers in the NBP.  Threatened with plans to capture large amounts of the UHF television band and selling it off to wireless providers may cripple at least some of the nation’s free over-the-air broadcasters.  For some at the FCC, the fact that less than half of all Americans watch television over-the-air must have made their frequencies a rational target.  Most Americans pay a cable, telephone or satellite company to deliver local stations.  If the FCC reallocated half of the current UHF dial and sold it to wireless carriers, the remaining channel space would mean a far more crowded, interference-prone TV dial.

Some wireless industry advocates of the reallocation plan believe stations can get by with reduced power on a network of cell-tower-like relay transmitters delivering signals to more distant suburbs in their service area.  Reduced power means reduced interference, they advocate, although it also means significantly reduced coverage areas, especially for rural Americans which depend on distant stations for free over-the-air television.

Right now, the NBP reallocation proposal will likely be “voluntary,” meaning stations can give up their channel and move to a different one, earning compensation from a federal auction fund to pay 100 percent of the expenses involved with the channel change.  The National Association of Broadcasters, the television industry’s trade association, fears what begins as “voluntary” may evolve into “compulsory.”

Open Access Proponents: Least likely to be included in the NBP is a broad-reaching requirement that broadband providers open their networks, usually a duopoly in most American cities, to would-be competitors at fair terms and prices.  The industry has been down this road before with traditional telephone service, and spent countless millions fighting proposals that would allow consumers to choose different local telephone companies.  In the end, choice for residential phone service over landlines never really got off the ground because the terms and conditions never made economic sense to would-be competitors.

Should the FCC try to mandate that cable and telephone industry broadband lines be opened to third party competitors, that will unleash a full scale lobbying assault on Washington.  In an election year, antagonizing big telecommunications companies is unlikely.  Besides, the industry can always sue, claiming any open access mandate violates their corporate constitutional rights.

The Jury Is Out

Consumers: That’s you and I.  Don’t expect the FCC to announce large, government-constructed, fiber to the home projects for every American now living with a broadband duopoly that delivers the least amount of speed for the highest possible price.  When a significant minority of Americans believes any government project to improve broadband is really a Barack Obama Socialist Wiretapping project, no national scale version of municipal fiber is forthcoming.  Not even close.

Most of the media attention will likely focus on speed goals, cosmetic projects for local institutions, and general statements about increased competition.

The immediate benefits for consumers will be nebulous at best.  We’ll likely gain more from Net Neutrality protections.  The only likely direct benefit, should it come to fruition, is the plan to create a nationwide, free wireless network to ease the digital divide.  Specific speeds, technology used, and service areas aren’t known at this point.  But private providers will work particularly hard to prevent this plan from ever seeing the light of day.

Consumer complaints about telecommunications companies have been skyrocketing.  The Better Business Bureau reports that the most complaints the group received in 2009 pertained to cell phone providers and the cable, telephone, and satellite-providers.

Consumers are screaming for competition and they get rate increases instead.

Without clear measures promoting increased competition and oversight, American broadband will evolve into an expensive, usage-limited experience for most urban customers, and “good enough for you”-slow speed DSL service delivered by a de facto telephone company monopoly in rural areas.

Relief for consumers does not come from handing additional few-strings-attached benefits and resources to the same providers that are responsible for the current state of broadband service in America.

Hollywood: Lobbyists for the music and movie studios have been peppering Washington with demands that broadband-related legislation include increased penalties and restrictions to reduce copyright theft.  They seek a mandate that repeat copyright offenders be banned from broadband service, that consumer electronics incorporate digital rights management technology to thwart unauthorized distribution or access to copyrighted content, and increased financial penalties for those who try.

Should the FCC incorporate these concepts in the NBP, it will likely create a consumer backlash because of past memories of overzealous copyright controls that hamper legitimate use of purchased content.  It will also raise opposition from consumer electronics manufacturers.

Cable and Telephone Providers: There are benefits and risks to companies like Comcast, Time Warner Cable, Verizon, AT&T, Frontier Communications, and Windstream, among others.

Reform of the much-maligned Universal Service Fund, which currently benefits traditional telephone customers, could be a game-changer for many companies.  Currently, Verizon and AT&T pay more into the USF than they receive from it.  That is especially true for Verizon which is abandoning rural markets by selling off service areas to smaller providers.  The USF provides a subsidy for rural phone companies to deliver affordable service at comparable pricing enjoyed in larger communities.  By transitioning the USF into a Broadband Service Fund — using the money to construct and improve broadband service — many companies stand to benefit.

Frontier, CenturyLink, and Windstream are among those specializing in “rural phone service” and could use funding to defray the costs of broadband networks otherwise built with investor money.  Verizon and AT&T could earn broadband funding for projects in their service areas currently not delivering broadband, or only providing anemic DSL service.

That has cable companies worried, particularly if the funds can be used to provide service in areas where they already offer service.  Even worse, the thought of a new wireless broadband entrant in a community already served by cable and telephone company broadband.

McSlarrow

The cable industry is also worried about a proposal to let consumers ditch cable-owned cable boxes in favor of their own purchased alternatives.

Cable companies rent tens of millions of cable boxes that they control and manage. The FCC wants consumers to be able to purchase and manage their own devices capable of utilizing the services cable operators provide, without having to pay several dollars a month to borrow one from the cable company.

Kyle McSlarrow from the National Cable & Telecommunications Association sent a letter Friday to Genachowski offering the FCC a compromise.  Offering seven points the NCTA says cable is willing to voluntarily abide to, McSlarrow suggests consumers should be able to buy such devices, but that they should not be required to access every possible service on offer from his cable members.  Indeed, such devices also must incorporate security and copyright controls to limit unauthorized access and use of cable-delivered content.

That guarantees the same success rate consumers have today with CableCARD technology, which few consumers use or understand.

Regardless of what comes from tomorrow’s National Broadband Plan, look beyond the happy talk, general promises, and visionary language.  The devil is in the details, definitions, schedules, and clear path from tomorrow’s platitudes into next year’s broadband improvement reality.

Virgin Mobile’s Broadband2Go prepaid mobile broadband service is increasing usage allowances in hopes of attracting new customers at current prices.

The service, launched last June, has not been as successful as it could be, especially in markets where competitors like Cricket offer no-commitment wireless broadband for $40 a month for up to 5GB of usage, for a lower initial cost.

Sprint, which now owns the Virgin Mobile brand, isn’t lowering prices, but it is increasing usage allowances.

Before:

$10 buys you 100MB of access that expires 10 days after activation.
$20 buys you 250MB of access that expires 30 days after activation.
$40 buys you 600MB of access that expires 30 days after activation.
$60 buys you 1GB of access that expires 30 days after activation.

Now:

The high end Virgin Mobile plan now matches many postpaid plans for pricing and usage allowance, without a two year contract.  But it’s still priced $20 higher per month than Cricket.  ConnectedPlanet notes:

According to Virgin Mobile chief marketing officer Neil Lindsay, more than 70% of Virgin’s customers said they signed up for Broadband2Go because of the flexibility to change the plans as they needed more or less bandwidth and to pay only for what they needed. Virgin is targeting those cord cutters, such as students or families, who may be using the Broadband2go as a replacement for their at-home Internet service. Virgin’s own surveys indicate that this at-home group already includes 16% of its Broadband2Go customers. Of its user base, 30% also use the card more than four times per week, and 47% asked for additional data on their existing plans.

In turn, Leap Wireless, which owns Cricket, is hinting it may be looking at its own pricing and usage allowances to maintain competitiveness.  No specifics yet, but Leap’s 4th quarter earning results were hardly impressive, reporting a wider loss than Wall Street analysts expected, as competition and a weak economy helped erode profits.  The company does not plan to expand into new cities in 2010, but will offer nationwide coverage for existing customers with expanded roaming agreements.  Also on the way — smartphones from Blackberry and at least one Android phone.

Beyond the nation’s largest wireless phone companies, there are a handful of regional providers delivering service to customers the big carriers bypass.  In one of the nation’s most rural states, Alaska Communications Systems is the first to announce it is effectively matching Verizon Wireless and AT&T’s unlimited pricing plans.

ACS operates a CDMA network in scattered regions across more populated sections of the state.  The company provides 3G access in limited parts of their coverage area — namely larger cities like Anchorage, Juneau, and Fairbanks, but also saw it worth their while to provide service in and around Prudhoe Bay to serve oil workers.

The company also announced an unlimited data plan for $40 a month, although it’s limited to smartphone customers only.  Wireless broadband customers using the company’s USB dongle will pay $80 a month for standalone service, with significant discounts if they bundle other ACS services on their account.

“Alaskans deserve the best network and the best value in wireless service,” said Heather Eldred, ACS assistant vice president, product development. “Wireless data is an area where ACS will distinguish itself in the market and we’re proud to match compelling data plans with the state’s best 3G network.”

ACS also joins Verizon and AT&T in compelling smartphone and other advanced phone owners to purchase a data plan, currently priced at $40 a month for unlimited access.

ACS' Coverage Map (click to enlarge)

Other regional players may be forced to match AT&T and Verizon’s new pricing, but if they have data-capable networks, they’re also likely earn new revenue from compulsory data plans whether customers want them or not.

To keep track and compare what’s on offer, Billshrink plotted the pricing options for the four major American carriers, which will likely serve as a guideline for regional carriers that want to stay competitive with their larger brethren.

Click to Enlarge

Early reaction and declarations of a price war notwithstanding, yesterday’s “price cuts” from Verizon Wireless and AT&T Mobility on their unlimited calling plans may bring price increases for many customers who don’t need all of the components of the wireless industry’s Cadillac plans.

First, an explanation of what has changed.

Verizon started the ball rolling announcing a $30 price cut on their Nationwide Unlimited Talk plan.  Formerly $99.99, customers now pay $69.99.  For those with multiple phones on a single account, Verizon’s Nationwide Unlimited Talk Family SharePlan, which includes two lines, now drops to $119.99.  AT&T immediately matched Verizon’s new pricing.  AT&T’s Nation Unlimited plan is now also $69.99 and their shared line plan, FamilyTalk Nation Unlimited is $119.99 and also includes two lines.

Customers currently paying more for a wireless plan with either carrier have to call customer service at either carrier to switch to these plans.  You won’t incur a service charge or extend your existing contract.

Verizon’s plans with unlimited calling and texting features have also dropped in price.  Verizon’s Talk and Text plan costs $89.99 per month, down from $119.99. The Nationwide Unlimited Talk & Text Family SharePlan is now $149.99 per month.  AT&T customers can add unlimited texting to an existing plan, and the rates for doing so remain unchanged — $20 for single phone accounts, $30 for family plan accounts.

However… Here comes the tricks, traps, and gotchas.

For big families with multiple phones, these unlimited plans bring a nasty surprise  — the additional charge for each third, fourth, and fifth line is $49.99 per month for each phone, not the traditional $9.99 each for those on plans with minute allowances.

Those who receive employer-related discounts from the wireless carriers may find those discounts do not apply to the Unlimited talk plans.  Verizon declares all of their unlimited plans are not eligible for any monthly access discounts, period.

AT&T goes out of its way to define what they believe a “voice call” means:

Unlimited voice services are provided primarily for live dialogue between two individuals. If your use of unlimited voice services for conference calling or call forwarding exceeds 750 minutes per month, AT&T may, at its option, terminate your service or change your plan to one with no unlimited usage components. Unlimited voice services may not be used for monitoring services, data transmissions, transmission of broadcasts, transmission of recorded material, or other connections which do not consist of uninterrupted live dialogue between two individuals.

Both AT&T and Verizon Wireless may try and up-sell you on the new data plans when you call to change your plan.  Customers calling both carriers have reported customer service representatives only too willing to provide steep discounts for new handsets or try and convince you to add one of the company’s new data plans.  Take advantage of their offer to upgrade your phone and you’ll likely discover yourself forced to also take a mandatory data plan with it anyway.  The list of phones falling under this trap keeps expanding.

Last year, Verizon started requiring customers choose data plans for the LG EnV Touch and the Samsung Rogue.  With this week’s changes, customers activating LG Chocolate Touch, LG EnV, LG VX8360, Motorola Entice W766, Nokia 7705 Twist, and Samsung Alias2 are now also subject to required data plans.  Don’t expect Verizon Wireless representatives to sell you on their cheapest pay-per-use option, which is priced at $1.99 per megabyte.  I’ve witnessed Verizon Wireless’ store employees pushing Verizon’s new unlimited $29.99 data plan.  If customers complain that’s too much, the $9.99 data plan for a piddly 25MB of access is offered next.  If it looks like a balking customer might cost a sale, the representative will grudgingly sell you pay per use plans.

AT&T customers buying many midrange and “quick-messaging” phones are also going to be required to spend at least $20 a month on a combination of texting and/or data plans. Customers using phones like the LG Neon or the Samsung Propel are affected, and weren’t required to buy data plans before.  Unlimited data for quick-messaging devices is priced at $15 a month.

If you already own a top of the line phone, your data plan charges remain the same.  Verizon customers using Windows Mobile, BlackBerry or Android phones will still pay $29.99 a month for unlimited data.  AT&T customers using the iPhone, BlackBerry, Nokia smartphone or Windows Mobile phones will also pay $29.99 a month for unlimited data.

Customers using wireless broadband with a USB dongle are also unaffected by these changes.  Whether you tether or use the dongle, your usage is limited to 5GB per month.

Existing customers will not be forced to add a data plan until their contract is up for renewal or they upgrade their phones.

Do These Changes Save Customers Money?

For most, the answers is no.  In fact, these pricing changes guarantee higher bills for most customers down the road.

Only a tiny percentage of customers pay for unlimited calling plans because most calling-allowance plans provide generous usage ranges, free night/weekend calling, and often free calling for the most frequently called, or those who are also customers of your wireless carrier.  AT&T even rolls-over unused minutes from month-to-month.  Paying considerably more for an “unlimited” calling option makes little sense for customers not exceeding existing calling allowances.

Changes to calling plans and the features associated with them occur year to year, but many customers prefer to remain on legacy plans that may offer fewer minutes, but have far fewer revenue-enhancing tricks and traps.  Verizon customers hanging on to their America’s Choice II FamilyShare plan offered four years ago maintain 700 minutes of calling time between multiple phones, get free night and weekend calling, and can access data features on their phones that deduct from their airtime allowance instead of billing for data usage charges.  The price?  $60 a month for two lines.  The equivalent plan today is priced at $69.99 for the voice calling plan, plus a mandatory data plan for the increasing number of phone that require one.  Even for phones on a pay-per-use plan, any data access will incur a minimum charge of $1.99 per month.

Where the real money will be made is from overpriced data plans forced on customers whether they want them or not, especially for midrange phones.

Wireless consultant Chetan Sharma estimates fewer than 10 percent of these customers buy data plans.

“There’s a significant number of consumers out there who like the idea of a cutting-edge handset but not of paying for services,” Michael Nelson, founder at Nelson Alpha Research told Business Week.

Wall Street analysts know mandatory data plans will bring exceptional new revenue to both major providers, especially at current prices.

“We could see a move upwards rather than downwards [in revenue/earnings],” says Jennifer Fritzsche, an analyst at Wells Fargo Securities in Chicago, who recommends buying shares of AT&T and Verizon Communications.  “Any kind of voice pricing is very much a commodity,” Fritzsche tells Bloomberg News. “Data is the future.”

JPMorgan is celebrating the potential windfall for both companies and their stocks, estimating just two percent of customers will realize any savings from these pricing changes, while many more will see prices increase.

For Verizon Wireless, it’s party time.  Even though Credit Suisse analyst Jonathan Chaplin estimates the carrier will sacrifice $540 million in voice revenue, they’re likely to gain $630 million in data plan sales. The costs of providing the service are likely to be minimal, considering most of the customers now forced to choose a plan are unlikely to use it much.

“Price War” or “War on Customers”

Still, some on Wall Street are unhappy with the prospects of any pricing changes that head downwards, especially if it sparks a price war.  Some have dumped their wireless stocks as a result of industry trends this year.  But what they may need to worry more about is the prospect of middle class customers switching from traditional postpaid two-year contract plans to prepaid services that offer light and medium mobile users better value with fewer tricks and traps.

As families face the prospect for $100+ monthly bills just for cell phone service, with mandatory data charges likely to add another $20-30 on top of that, will non-power-users stick with AT&T and Verizon for service?  Sprint and T Mobile argue they already offer better value for the hard-hit middle class, but prepaid mobile has garnered new respect for its simpler plans and easy-to-understand billing (and taxes and fees are typically included in the prepaid plan price.)

Formerly the domain of those willing to pay a steep per minute fee and buy top-up cards at convenience stores, today’s prepaid wireless plans often offer month-to-month service with familiar “minute bucket”-allowances or unlimited calling, and operate on Verizon, AT&T, Sprint, or T-Mobile’s nationwide networks.

A real price war has broken out in the prepaid wireless sector, with competitors offering unlimited calling plans as low as $40 a month.  Straight Talk, using Verizon Wireless’ network, goes even lower for a simple 1,000 minute/1,000 text/30MB web access plan for $30 a month.  The only downside is a very limited selection of phones.  Regional players like MetroPCS and Cricket offer comparable pricing for their unlimited plans, but their network coverage is a shadow of the larger players, roaming agreements notwithstanding.

As major carriers pile on extra fees for services many customers don’t want, many will find far better values in the prepaid phone marketplace.  Without the two-year contract common on major carriers, customers can switch providers at will, taking their phone number with them in most cases, if one provider doesn’t provide good service.  Best of all, they don’t have to pay for a cancellation fee or take services they don’t want or need just to satisfy AT&T and Verizon’s quest for cash.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WIVB Buffalo Price War Between Cell Phone Providers 1-19-10.flv[/flv]

WIVB-TV in Buffalo appeared to be drinking the industry’s Kool-Aid about the benefits of new, ‘lower pricing,’ but towards the end even they admitted there are tricks and traps involved. (3 minutes)