Verizon threatens to end unlimited data plans, but “bandwidth hogs” argument doesn’t make sense

Verizon CTO Dick Lynch has warned that America’s number one wireless carrier may do away with unlimited data plans for smartphone customers. Instead, Verizon may institute usage-based pricing, where all customers pay based on how much bandwidth they use.

He made the disclosure in a one-on-one interview with Washington Post technology policy writer Cecilia Kang at the Consumer Electronics Show in Las Vegas.

Lynch gave this reasoning:

“The problem we have today with flat-based usage is that you are trying to encourage customers to be efficient in use and applications but you are getting some people who are bandwidth hogs using gigabytes a month and they are paying something like megabytes a month. That isn’t long-term sustainable. Why should customers using an average amount of bandwidth be subsidizing bandwidth hogs?”

Why not just cap the bandwidth hogs? Put an asterisk next to “unlimited” and note that, like Gmail, there’s a limit so big hardly anyone hits it.

If what Lynch says is true, nearly all Verizon customers would still be able to think of their plans as unlimited, because they’d never come near the super-high bandwidth-hog limit.

A senior Deloitte analyst defended Verizon’s plans to Telephony magazine. “All-you-can-eat business models depend on your ability to predict how much data your customers will consume,” Phil Asmundson, head of the Deloitte’s U.S. technology, media and telecommunications group said. “The iPhone has proven that you can’t make those kind of predictions.” Verizon doesn’t currently sell iPhones but may do so later this year when an exclusive deal between Apple and AT&T possibly comes to an end.

Still, unlimited usage is one of the biggest draws of today’s Internet. Instead, it sounds like Verizon may force the rest of us to begin checking regularly to see how much of a bill we’ve rung up. I’m sure there’ll be an app for that.

Is usage-based pricing fair? Yes. But it’s likely to erode Verizon’s reputation as the place you go to escape AT&T.

Check out our CES 2010 coverage.

[Photo: Saddleback Pigs]