Photographer: Christopher Dilts/Bloomberg

Verizon Unveils a Cheaper Unlimited Plan to Challenge T-Mobile

  • Carrier charges $75 for standard-definition video, $85 for HD
  • Slicing and dicing market to find new users, see who’ll pay up

Verizon Communications Inc. is introducing a lower-priced, lower-quality unlimited mobile data plan to compete more aggressively with smaller rivals like T-Mobile US Inc., while raising the cost for those who want the clearest videos.

Starting Wednesday, Verizon is eliminating its popular $80-a-month unlimited plan and replacing it with an $85 premium plan with high-definition video and a $75 unlimited data plan with DVD-quality video, according to Angie Klein, a vice president of marketing strategy. The plans are aimed at T-Mobile US Inc. subscribers who pay $70 for unlimited data with standard-quality video or $80 for HD. T-Mobile’s prices include taxes and fees.

The move to two-tiered pricing underscores the challenges carriers have finding new subscribers in a market where nearly everyone has at least one phone. The lower-quality, lower-priced offer could appeal to bargain hunters, while the higher-priced plan will test whether people are willing to pay more for better service.

The introduction of all-you-can-eat data plans clicked with video-hungry consumers nervous about exceeding caps and paying penalties. Now carriers are tinkering with unlimited plans to reach more customers. Earlier this month, T-Mobile aimed a half-off unlimited plan at empty-nesters.

Sprint Corp. and T-Mobile have used price cuts and giveaways for the past three years to lure subscribers from AT&T Inc. and Verizon. Sprint even offered a year of free unlimited data.

All the pressure has taken a toll on Verizon. The largest U.S. carrier saw sales fall 4 percent last year and analysts predict little revenue growth for the next three years. They have a similar forecast for AT&T.

Under new wireless chief Ronan Dunne, Verizon has started to push back. After suffering record subscriber losses at the beginning of the year, the company was forced to join its peers and offer unlimited data, despite fear the move would pinch profits and clog the network with videos. The $80 unlimited data offer was a hit that helped attract 614,000 new customers in the second quarter, 10 times more than analysts expected.

In addition to offering DVD-quality video, described by the company as a resolution of 480p on phones and 720p on tablets, Verizon’s lower-priced unlimited plan will cut data speeds during “times of congestion” to protect service quality. The higher-priced plan, with videos at 720p on phones and 1080p on tablets, will only limit speeds during peak traffic after the customer has exceeded 22 gigabytes of data during the month.

Verizon is also introducing a $70 unlimited data plan for businesses and an $80 unlimited plan for users who want to pay as they go. All Verizon’s new plan prices require customers to sign up for automatic payments.

The new prices come just weeks ahead of the arrival of the new Apple iPhone, a period when the industry engages in its biggest knock-down drag-out promotional activities.

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