If you use Verizon’s forthcoming iPhone as a Wi-Fi hotspot, be prepared to pay $20 a month for a maximum of 2GB of usage per month.

Many smartphones have built-in capabilities to serve as temporary hotspots to let you use your Wi-Fi capable equipment on Verizon’s wireless 3G network.  But that doesn’t mean Verizon will let you use it for free.

The so-called “personal hotspot” enables up to five Wi-Fi equipped devices to share your connection, but not too much.  If you exceed your 2GB plan allowance, the overlimit fee is a striking $20 per gigabyte.  Those fees come in addition to your usual Verizon voice and data plan charges.

Verizon is not singling out the iPhone for the expensive data plan.  The pricing is equivalent to what Verizon charges for a similar service on its other smartphones, according to Brenda Raney, Verizon Wireless’ executive director of corporate communications.

A wireless ISP (WISP) serving parts of Michigan and eastern Iowa has informed customers that due to their enthusiastic use of the Internet, the company was slapping a 5GB monthly usage limit on customers effective Feb. 1.

SpeedConnect, based in Saginaw, Mich., informed customers in a letter that those who exceed the company’s new usage limit face a penalty overlimit rate of $2.00 per gigabyte.  An alternative 200GB “Platinum” monthly usage plan, including phone service, was also announced for $69.99 per month.

That’s a steep rate increase for customers accustomed to receiving around 3Mbps download x 384Kbps upload speeds for $39.95 per month.

Too much for our reader Greg, who says he has been a SpeedConnect customer for the last decade.

“Ouch,” Greg writes.  “I’m changing ISPs over this.”

Company officials blame the usage limits on usage growth.  The company’s letter states, “[growth] is forcing us to make substantial upgrades to our networks and to rethink the way we provide service to our customers.”

Now customers will rethink using SpeedConnect for their Internet access.

SpeedConnect's letter to customers.

SpeedConnect’s attempt to collect upgrade funds from their customers, which the company admits are increasingly turning to broadband for home entertainment and information, comes at the same time the company had no trouble dipping into the kitty to buyout CommSpeed of Arizona’s 2.5GHz spectrum holdings and customers based in Eastern Iowa.

Saginaw, Mich.

AT&T DSL is one alternative.

The same CEO that signed the letter telling customers to use less of their service or pay dramatically more was thrilled about “the exciting new chapter” its merger/acquisition would open.

“The completion of this acquisition is a significant event for our customers, communities, investors, and employees,” said John A. Ogren, President and Chief Executive Officer.

Saginaw residents are not well-served by AT&T, which has left major gaps in the economically-stressed region’s broadband coverage options.  We had a hard time finding landlines in Saginaw and nearby townships pre-qualified for AT&T DSL to offer a price comparison.  After much searching, we discovered AT&T heavily markets DSL Pro ($35/$19.95 new customer promo price for one year) which delivers 3Mbps/512kbps service, or Elite ($40/$24.95 new customer promo price for one year) which offers 6Mbps/768kbps service to those who -can- get the service.

AT&T’s Pro plan delivers comparable speeds at lower prices than SpeedConnect charges, all with no usage limits.  Users seeking higher speeds can use them without fear of overlimit penalties or a $70 broadband bill using AT&T’s Elite DSL plan.

SkyWeb is the other.

Greg also notes he has another wireless option, as do many residents and business across central Michigan’s Tri City area, from SkyWeb, which delivers wireless access at speeds ranging from 3-10Mbps.  The company does not limit usage and offers new customers a month of free service.  A comparable package of services from SkyWeb at 3Mbps is priced $10 less than what SpeedConnect charges.

Wireless ISPs have unique problems trying to keep up with usage demands:

1. Many are individually owned and operated and lack sufficient capital to invest in required upgrades to meet today’s Internet multimedia reality;
2. Many WISPs serve rural areas where growth opportunities are often limited;
3. A few very heavy users could create significant strains on a wireless network that is not infinitely expandable;
4. The arrival of competition from telephone, cable, or even cell-phone wireless data plans can present a major threat to the business plans of some providers.

[flv width=”384″ height=”236″]http://www.phillipdampier.com/video/WNEM Saginaw Air Advantage Broadband Grant 9-2010.flv[/flv]

WNEM-TV covered Air Advantage, another regional WISP that won a broadband stimulus grant last fall to expand wireless access in mid-Michigan.  (2 minutes)

Virgin Mobile has begun notifying their Broadband2Go customers of how they plan to continue delivering “an outstanding customer experience”: by throttling the speeds of any customer who exceeds 5GB of usage per month.

Many Virgin Mobile customers have been in touch with Stop the Cap! about they feel is bait and switch pricing engaged by Sprint’s prepaid mobile division.  At issue — customers who invested $75-150 in equipment to sign up for a service they were sold on being “unlimited.”  Virgin Mobile made the “unlimited” part of its service the focus of its marketing.

The company characterizes the decision to adopt an Internet Overcharging scheme “a difficult choice,” but it’s one that that will ultimately help the company’s bottom line while costing many of their customers a substantial amount of money for a service they might never have purchased had they known it was going to be limited.

As is the case with almost every Internet Overcharging scheme we’ve seen, the same marketing that promised an “unlimited” experience now promises that such usage limits won’t impact most customers.  In fact, the company’s notification states, “you can send over 500,000 e-mails or browse the web for 250 hours a month!”  Of course, nobody except spammers send that much e-mail, so that kind of boasting is ultimately meaningless to customers.

What is more meaningful is that Virgin’s new 5GB cap will effectively mean customers have to heavily ration their online experience, especially if it includes multimedia.  In fact, customers won’t be able to watch more than a handful of HD movies using the service.  That’s a $40 movie pass some customers would have passed up had they known it came with limits.

This notification arrived in our e-mail box this morning. Despite the spin, the e-mail is likely to enrage customers, especially those who only recently invested money in Virgin Mobile equipment they can no longer return for a refund.

In fact, Virgin Mobile’s return to the land of Internet Overcharging is nothing new for the company.  Customer response to the company’s earlier prepaid wireless broadband plans were, to say the least, underwhelming.

Virgin Mobile’s new usage limits are less about “delivering the same quality service you’ve come to expect” and more about protecting Sprint’s more lucrative postpaid mobile data customers who pay more to use the same 3G network.  While Stop the Cap! agrees delivering an unlimited wireless broadband service remains a difficult challenge with the current limits on wireless capacity, Virgin Mobile’s about-face comes uncomfortably fast — just six months after unveiling and heavily promoting its “unlimited” service.  Just as with Clearwire, Sprint has managed to oversell its network and not invest sufficiently in expanding it to meet customer demands.  Nor has either company educated customers about the inherent limitations wireless broadband has, especially on an overcrowded network.

Sources tell us Virgin Mobile, much like Clearwire, suffered from some customers trying to use peer to peer software, sometimes for days on end (simply a ridiculous endeavor on most of the wireless networks we’ve experienced).  But the company did little to explain to customers that such software often does not work well on these types of networks, and using it 24/7 is likely going to create issues not only for that customer, but for others as well.  Instead, blanket usage limits punish everyone.

Customers deserve more than platitudes from Virgin Mobile.  Any customer that wants to cancel their service should be given a full refund by Virgin for equipment costs they incurred when signing up.  Further, Virgin Mobile’s customer policies do not generally allow money on account, but as of yet unspent, to be refunded to departing customers.  That policy should be waived in this instance.  Any unspent funds should be credited back to the customer’s credit card or refunded by check.

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.

AT&T claims every family should have access on the go, which is why they are “introducing” Smartphone data plans for the family.  Only one problem.  There is nothing new about the data plan, which still starts at $15 per month, per line, for up to 200MB of usage.

AT&T changed the plan’s name, but left the same high price in place.  An Internet Overcharging scheme is still an Internet Overcharging scheme no matter how a wireless company pitches it.

The plan, which throws in AT&T Wi-Fi, which customers can also already get, “is designed for families that primarily surf the web, send and receive personal email and visit social networking sites,” says AT&T spokeswoman Mari Melguizo.

But a real data plan for families would let every user on the account share from one data plan, billed once on the account, not per phone.  That’s not on offer from AT&T, although analysts predict the next wave of smartphone upgrades will come only when data pricing comes down, especially on accounts with multiple phones.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/ATT Family Smartphone Data Plan Ad.flv[/flv]

AT&T’s new ad for the same old, overpriced product.  (1 minute)