Verizon and Sprint’s all-you-can-eat calling plans may not upend sector, analyst says

Just weeks after Sprint announced it will test expanding its flat-rate calling and data packages, Verizon Wireless is taking it one step further. In a move that many are saying could change the industry’s competitive landscape, Verizon will now offer flat-rate, all-you-can-talk plans beginning at $100 per month. The new plans, accompanied by a full-fledged marketing campaign, kicked off today across the United States.

Telecom analyst Jeff Kagan, for one, isn’t buying all the hoopla. He said it is still too early to determine if this announcement will prove significant. When Verizon offered pro-rating of early termination fees, all the other major carriers followed up with similar offerings. Yet, as Kagan noted, he expected competitors to copy AT&T when it successfully began to offer rollover minutes, yet most did not match this offering. As far as unlimited calling goes, he could see it going either way. While Verizon is counting on it shaking up the industry, the customers will ultimately be the ones who decide if its worthwhile.

“As customers use the cell phone more and more as their primary phone, it makes sense,” Kagan said. “But I’m not convinced it is the right it time yet. Verizon rolls it out, and we’ll see what happens – if their customers love it, then great. If they start taking business from other competitors, we may see the other competitors jump in. Otherwise, I don’t think this will be the reason to see the other competitors jump in. It is not that important.”

Sprint has indicated interest in this type of all-you-can-talk plan, and the wireless provider is already testing it out in a few markets. Sprint's $120 unlimited plan includes unlimited text messaging, picture messaging, web access and e-mail, but the service is only available in the Bay Area, upper-central California, Minneapolis, Philadelphia and Tampa, Florida. Kagan said the two companies’ participation alone will not be enough to encourage leading wireless provider AT&T to makes its own unlimited move.

“AT&T is the largest carrier, and they are not going to be pressured,” he said. “If they feel like it will do them good, they’ll do it, but they wont do it just to be a part of it.”

AT&T did take a stab at a $100 unlimited calling plan in 2002 but discontinued it after several months. The wireless provider, along with most of its competitors, now offers unlimited plans for users staying within the AT&T network. The wireless customer is evolving, Kagan said, and perhaps wasn’t as attached to their wireless device back when AT&T first offered unlimited calling.

“As the industry matures, customer needs change,” he said. “Maybe at the time, the customer wasn’t thinking about the cell phone as a phone they were using all the time – as a device that was always on that they couldn’t give up. Maybe the customer is evolving and is into that way of thinking now. That is what Verizon is rolling the dice on. They don’t know for sure if it will be wildly successful. It may not be, but it sounds good. They put a great argument forward, but the bottom line is: are the customers going to buy it? We won’t know that for a few months.”

The new plan, which Verizon called a limited-time offer, is targeted at the heavy users, typically enterprise phone owners or those without a landline. Kagan said that $99 currently buys 2,000 minutes of talk, making this plan suited for the power user who spends longer than 33 hours on the phone each month. In the U.S., roughly 10% to 15% of users, totaling 25 to 30 million out of 255 million users, could qualify for a plan like this.

Verizon’s new plan includes unlimited, anytime minutes to any caller in the U.S. – regardless of network and including landline phones – with no domestic roaming or long-distance fees and unlimited Web 2.0 browsing. The individual plans come in three levels -- $100 for basic single line phones, $120 for unlimited messaging and $140 for V Cast, VZ Navigator and mobile email – although data sent and received, taxes and activation fees and international calls are extra.