The No. 1 Reason Apple Should Hate Verizon


Verizon's (NYS: VZ) decision to shift to shared data -- with lofty prices to boot -- is being portrayed as a mixed blessing for Apple's (NAS: AAPL) iconic iPhone.

When the new rates kick in on June 28, folks will be able to tie up to 10 mobile devices to a single Share Everything account. This should be good news for the 4G model of Apple's new iPad, as $10 a month is all it takes to get the tablet to slurp connectivity on the purchased bandwidth.

However, there's one aspect of the pricing plan that may eat into iPhone 5 sales when Apple rolls out its next smartphone later this year.

Anyone who's been grandfathered into the unlimited data plans that Verizon stopped selling to new customers last year will have to give that up the moment they upgrade to a new phone if they want a subsidized price.

In other words, it will be a matter of paying $199 for a new iPhone with a two-year contract on a shared data plan or paying $650 for the same phone to stay on the unlimited plan. Even if it's not hogtied to two years of Verizon service, $450 is a big upfront difference.

Some will argue that it's no big deal. AT&T (NYS: T) and Verizon Wireless are already throttling folks on "unlimited" data plans in certain situations. Verizon may actually be doing folks a favor by encouraging them to check out the competition. However, AT&T will probably adopt a similar strategy sooner rather than later. Sprint Nextel (NYS: S) does offer true unlimited plans, but the range and quality of its network isn't the same as market-leading Verizon.

Even if "unlimited" is a lie at Verizon and AT&T these days, there are plenty of users who are infatuated with the illusion of a bandwidth buffet. When the time comes to upgrade their phones without paying an early termination penalty, many may pass on the iPhone 5 or the shiniest new Android to avoid kissing unlimited data goodbye.

Verizon has its customers just where it wants them, captive to the memory of a plan that doesn't exist and without the obligation of subsidizing a new device for those who want to keep on living that lie.

Wireless carriers 1, smartphone manufacturers 0.

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At the time thisarticle was published The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns no shares in any of the stocks in this story and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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