Welcome to AT&T's tiered pricing world: Will Verizon follow?

AT&T overhauled its data plan pricing and put an end to unlimited plans, but the success or failure of such a move will depend on whether competitors like Verizon Wireless follow.

AT&T overhauled its data plan pricing and put an end to unlimited plans, but the success or failure of such a move will depend on whether competitors like Verizon Wireless follow.

The hubbub over the pricing changes is fierce. First, there's the squawking about the end of unlimited data plans (even though AT&T is grandfathering in current users on those models). Then there's the tethering that is finally coming to the Apple iPhone. And then there's the usual moaning and groaning.

In a nutshell, AT&T now has a $15 data plan at for 200 MB of data; a $25 plan for 2 GB of data; and tethering for an additional $20 a month.

Analysts are already handicapping the fallout from AT&T's move, but one big question mark revolves around Verizon Wireless. Verizon could match AT&T's plan and include caps too. Or Verizon could use AT&T's plan as a marketing hammer and court heavy data users to its network.

Barclay Capital analyst James Ratcliffe said in a research note:

Key will be competitive response, if other carriers (especially Verizon) use new plan as marketing tool or follow with similar moves. If Verizon doesn't follow, it could create significant adverse selection problem for Verizon - customers who know they're very high users could migrate to Verizon.

Simply put, heavy users going to Verizon will tax its network so maybe it has to match AT&T's move. Does any carrier really want data hogs?

Other analysts note that Verizon is likely to follow AT&T's lead. Oppenheimer analyst Timothy Horan said:

Tiered smartphone data pricing is positive for the entire communications industry, as data usage will continue to grow, which will provide more consistent and visible long-term revenue growth. We expect VZ and others to implement similar plans. There should be little impact on ARPUs and revenues. While we have been waiting for this move for a while, we are not sure what drove the specific timing other than probably very high-end iPad and iPhone users continuing to pressure AT&T's network and the need to get ahead of the new iPhone with tethering capabilities.

And that brings us to a few other comments about AT&T's pricing moves. The caps on data usage could alleviate AT&T's network strain while encouraging more subscribers to use higher-priced plans.

Macquarie analyst Phil Cusick said:

We see three impacts over time: 1) some reduction in data ARPU per sub or at least slower growth near term, but 2) higher long-term penetration of data, and 3) more ability to monetize customer usage and less risk on the network from abusers.

Indeed, there could be real returns in moving to a tiered data model. If that's the case, AT&T's data pricing plan overhaul is likely to be just the first volley.

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