Verizon Wireless Changes Mobile Broadband Plans and Introduces Its Portable WiFi Hotspot

| May 11, 2009 | Wireless Services - U.S. | Competitive Intelligence Report

| Analysts: Bill Ho, Deepa Karthikeyan

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

May 7, 2009 - Verizon Wireless announced the introduction of the MiFi 2200 intelligent mobile hotspot device ($99.99 after a $50 mail in rebate). The combination 3G/WiFi device manufactured by Novatel Wireless connects to the Verizon Wireless data network and connects up to five users via WiFi. In conjunction with the MiFi introduction, Verizon Wireless adjusted its data plan portfolio. Data overage fees dropped for the $59.99 and $39.99 Mobile Broadband plan from $0.25/MB to $0.05/MB and $0.10/MB, respectively. Additionally, the $39.99 Mobile Broadband plan increased its usage limit from 50 MB to 250 MB.

Analytical Summary

• Current Perspective: Positive on Verizon Wireless’ new Mobile Broadband data structure in which it provides for lowered data overage charges and expands the usage limit on its $39.99 plan from 50 MB to 250 MB. As a result, users may be less squeamish about using their mobile broadband service with a $0.05-$0.10/MB safety net. These adjustments are likely to force competitors to follow or at least assess their data plan portfolio positioning relative to Verizon Wireless. These plan changes come stealthily alongside the introduction of the innovative MiFi 2200 pocketable WiFi hotspot that is not yet offered by any other U.S. carrier.

• Vendor Importance: High to Verizon Wireless, as it signals to the market that it is getting serious about fueling data consumption with new devices and lower overage costs. The carrier has been continuously increasing data revenues quarter over quarter, but it needs yet another element to get customers adopting high data usage patterns as it rolls into LTE deployment.

• Market Impact: High on the wireless services segment as Verizon Wireless’ data plan moves will certainly influence AT&T to rethink and likely move its own data overage fees and its $39.99 Data Connect plan usage limit to match. T-Mobile, as a middle of the road value leader, should match or beat Verizon Wireless’ overage rate. Sprint on the other hand should contemplate decreasing its overage fees or increasing its data usage thresholds, but if it wants to keep the value gap story. On the device front, rivals are also forced to introduce devices similar to the MiFi to remain competitive.

Recommended Competitor Actions

• Clearwire should point out that it already has a WiFi/4G solution with its CLEAR Spot, and throughput is greater than that of Verizon Wireless’ MiFi device. Alternatively, Clearwire should be looking for a similarly elegant, slim and portable device for its next iteration of the CLEAR Spot. Clearwire should also point out that its Clear $40 mobile internet plan offers a whopping 2 GB usage at only $10 per additional GB.

• AT&T and T-Mobile should be looking into Novatel’s HSPA version of the MiFi. Both carriers will need to move their data overage fees to at least meet Verizon Wireless’ in order to stay competitive. AT&T will need to meet or beat Verizon Wireless’ $39.99 250 MB plan. The 200 MB Data Connect plan that it had been trialing has ostensibly been made obsolete as 250 MB is now the threshold for $39.99/month.

• Sprint has a tough decision to make about whether it needs to move its overage fee lower than its current $0.05/MB in order to continue to position itself as the preeminent data value carrier. Clearly it needs a similar device solution to minimize the differentiation gap. The company should consider if it wants to launch a similar $39.99 250 MB plan (or better) to ensure that it will continues its data leadership market positioning.

Recommended End User / Customer Actions

• Current Verizon Wireless $39.99 Mobile Broadband plan users should contact customer service to upgrade their limit thresholds to take advantage of a 200 MB ceiling increase from 50 MB.

• Current Verizon Wireless $59.99 Mobile Broadband plan users should ensure that they are upgraded to the lower data overage rate as a better safety net.

• Customers with multiple data user requirements who cannot get wireline broadband should consider Verizon Wireless’ MiFi 2200 as the device can allow for sharing of the 3G plan for up to five people via WiFi. However, they should be aware that through sharing, their 5 GB monthly limit may be eaten up faster.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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