Verizon Stabs Sprint With Unlimited Wireless Plan

By Saul Hansell

Why would Verizon take the lead in introducing wireless price plans with unlimited usage when it is a leader in the field and gaining market share?

Usually it is second-tier players that attempt to compete with lower prices. In the cellphone market, T-Mobile, the No. 4 carrier, has been the most aggressive among the national carriers. And some regional players like Leap Wireless have unlimited usage plans for as low as $35 a month.

The answer, says Roger Entner, a telecommunications analyst with IAC Research, is to “stick it to Sprint.” Two weeks ago, Daniel Hesse, the chief executive of Sprint, told USA Today that the struggling carrier was considering offering an unlimited pricing plan.

“If we can’t be different, we can’t win,” Mr. Hesse told the newspaper.

Indeed, Sprint started testing a $119-a-month plan with unlimited voice, text messages and data.

Mr. Entner said that by introducing its unlimited plan first, Verizon can steal the thunder from Sprint and probably force that company to cut prices even lower.

“If you know Sprint is going to do that,” he said, “why not move ahead of them and get a ton of exposure?”

Verizon is offering three plans: $99 gets you unlimited voice, $119 adds unlimited text messaging, and $139 includes unlimited data too. (None of these plans, however, are for corporate users who use BlackBerrys and such.)

Mr. Entner estimates that about 10 percent of wireless customers pay $99 or more each month. The average bill is a tad more than $50, he said.

Verizon’s moment in the sun was cut short pretty quickly. By midday on Tuesday, AT&T matched its $99 unlimited voice plan, and then by the afternoon, T-Mobile announced a $99 plan that included unlimited text messages.

Sprint, Mr. Entner said, will have to offer a better deal than Verizon and AT&T to get any traction.

If Sprint can win back some customers, it may be worth it. The bulk of the cost of running a cellphone system is fixed expenses like customer service and billing. The marginal cost of providing each minute of usage is well under a penny, Mr. Enter said.

For now, customers with more modest cellphone needs probably won’t see much more than a gradual price reduction. But over time, the price of unlimited cellphone usage will come down.

“Once you go unlimited, the only way to compete is to go lower,” he said. “You can’t offer double unlimited minutes.”

http://bits.blogs.nytimes.com/2008/0...ref=technology