Verizon's LTE pricing: Good deal or gouge?

New 4G data plans hopes to keep heavy users in check

Verizon Wireless' planned rates for LTE data usage are either too costly or a relative bargain, depending on who is offering an opinion.

The nation's largest carrier announced on Wednesday that it will start offering LTE service on Sunday in 38 cities with two new data pricing plans: $50 a month for 5GB or $80 a month for 10GB, plus $10 for each 1GB over those amounts.

For laptop use of Verizon's LTE data service, which is primarily targeted at businesspeople, the first users will need to buy new USB modems that sell for $99.99 after rebate with a two-year service agreement. Verizon said that it will also offer the modems for $249.99 without any long-term service agreement and just a monthly data charge.

The 5GB plan LTE service plan is $10 less per month than Verizon charges for 5GB on its existing 3G EV-DO network -- something that several analysts praised after the new service was announced.

But some critics said on Thursday that Verizon is potentially gouging new customers -- especially unwary ones -- with data plans that tend to lock them in and could result in costly overage costs.

New speed comes with a trap

One early tester of a Verizon LTE modem said he found he gets performance of 21Mbit/sec. with the device on the admittedly uncrowded network. At that rate, it would be possible to use up an entire 5GB monthly allotment ($50) in just 32 minutes.

Verizon is only claiming downloads will be 5Mbit/sec. to 12Mbit/sec., which could still eat up a 5GB allotment quickly if someone isn't paying close attention to his usage.

Dan Hays, a partner at management consulting firm PRTM who has followed proposed LTE rollouts in other countries, said he has noted that the average monthly usage for TeliaSonera's new LTE service, which offers speeds of up to 100Mbit/sec in Sweden, Norway and Finland, is about 15GB a month per user. At that level of consumption, a Verizon customer on the higher data plan would pay a total of $130 a month -- $80 for the initial 10GB plus $50 for the additional 5GB.

In another comparison, customers of Clearwire, which operates a WiMax network also used by Sprint Nextel, use about 7GB per month (at average speeds of 3Mbit/sec. to 6Mbit/sec. At that rate, a Verizon user with the $50/5GB plan would pay $70 a month, including overage charges. Clearwire charges $55 a month, with no limit on usage.

Verizon spokesman Jeffrey Nelson defended the company's new LTE data pricing, saying LTE data customers will get automatic text messages notifying them when they hit 50%, 75%, 90% and 100% of their monthly data allotments. "No surprises, and plenty of time to right-size your usage," Nelson said by e-mail.

He said it was surprising that there's now "a hot new conspiracy theory about duping people into using data without regard to cost" even though some observers initially praised Verizon for charging $10 less for 10MB on LTE than it currently charges for the same amount of data on its EV-DO service.

Nelson added: "I gotta tell you, there is absolutely no future for Verizon in tricking customers into paying for things they don't understand or want."

LTE smartphone pricing

The Verizon spokesman refused to say how the company will charge for LTE voice service once LTE phones are made available in 2011. Currently, voice charges are separate from data charges on smartphones, starting at $30 a month, depending on the plan.

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