Verizon opens door to tiered data pricing and dividends to parents

The nation’s largest wireless carrier might not have the iPhone problem that’s bogged down AT&T Mobility’s network for years, but it knows that “explosions in data traffic” are coming.
Verizon Communication Inc.’s CFO John Killian told Bloomberg that data-heavy applications and devices are already consuming upwards of 800 megabytes of data per month and hinted that the carrier will likely change its pricing structure as more customers move to smartphones.
Verizon Wireless currently counts about 17% of its subscribers on smartphones, but “over time” Killian expects at least 70% to 80% of its customers will be on smartphones.
“We will probably need to change the design of our pricing where it will not be totally unlimited, flat rate,” he told Bloomberg in an interview.
AT&T Mobility has already announced new pricing plans for data and put an end to the promise of unlimited data (except for those grandfathered in) — frankly, it’s only a matter of time before most other carriers follow suit.
Carriers have moved from second- to third- and now fourth-generation networks in about a decade. Nonetheless, it’s become apparent that virtually no network will be able to meet every demand in the near term.
The notion of uncapped data has come as somewhat of a disservice to the carriers only recently. Until wireless networks and worthwhile devices were capable of using anything near one gigabyte per month, the carriers’ open-ended approach to pricing data plans helped them enjoy greater ARPUs (average revenue per user) at a near ubiquitous one-size-fits-all $30 monthly data plan.
Supply only begets more demand and faster consumption.
As carriers ready their 4G networks, they are taking a new look at data and seem to have figured out that tiered pricing isn’t likely to disrupt revenue streams as much as it is able to weed out or get more money out of the biggest users of mobile data. As is expected by many, Verizon is reportedly working toward a tiered data pricing plan portfolio of its own.
Dividends on the way for parent companies
While Verizon Wireless has been paying down debt with all its cash, its parents companies haven’t been reaping equitable rewards. According to The Wall Street Journal, the company could start paying a dividend in 2012 to supply parents Verizon Communications Inc. and Vodafone Group Plc with a steady flow of cash.
Verizon Communications has been getting cash out of the wireless carrier through a debt it owed by the joint venture, but that debt will be paid by 2011, according to Killian.
When the companies meet in December to talk about the partnership, a revived dividend is likely to be a top priority for Vodafone, which owns a 45% stake in the venture. Verizon Wireless paid a dividend from 200 to 2005, but put an end to the payment in 2006. The lack of a dividend has been a sore subject for investors almost ever since.