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Verizon backpedals on unlimited iPhone data

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Verizon performed a "two steps forward, one step back" dance on Tuesday, first announcing that it would offer an unlimited data plan for its upcoming CDMA iPhone, then revealing that its bandwidth munificence would be available only as an introductory offer.

"I’m not going to shoot myself in the foot," Verizon COO Lowell McAdam told The Wall Street Journal on Tuesday morning, explaining that limiting data downloads would put his company at a competitive disadvantage against AT&T, the exclusive iPhone carrier in the US until Verizon's iPhone becomes available on February10.

Then the gun went off.

A few hours later, McAdam explained that the all-you-can-eat $30 data plan would be only a limited-time offer. How limited and for what amount of time, he didn't say.

US iPhone iPhans will recognize the parallelism between Verizon's scheme and the way that AT&T managed its provision of data to Apple's überpopular smartphone.

When the iPhone was first introduced, AT&T provided users with an unlimited data plan. Perhaps not coincidentally, when the data hunger of iPhone users began to overload Big Phone's 3G network – most uncomfortably in urban centers chock full of opinion leaders, such as New York and San Francisco – AT&T dropped unlimited data plans for new users.

AT&T now offers two data plans for the iPhone: the 200MB DataPlus for $15 per month, and the 2GB Data Pro for $25 per month. Both also have extra-charge provisions should you go above each plan's limits.

AT&T also offers a $20-per-month tethering service, but only to its customers who have opted for the DataPro plan. Verizon hasn't yet said what its pricing will be for iPhone tethering, but its current plans for 3G devices such as the iPad range for $20 per month for 1GB to $80 for 10GB.

Verizon will now follow AT&T's "hook 'em, then up 'em" strategy for data plans – although the company is to be credited with admitting up front that unlimited data is merely short-term offer to early adopters.

How many AT&T customers will jump ship to Verizon is, of course, unknown. CNNMoney.com reported last month that the Yankee Group projects that 2.5 million AT&T customers will slip over to the Verizon team in 2011. A financial analyst at Nomura puts that number at 1.3 million.

With AT&T being recently named "the worst carrier" in the US by Consumer Reports last December, you might think that the rate of defection would be higher. But AT&T isn't worried – thanks to two-year contracts and high early-termination fees, it has its customers right where it wants them: locked in.

"If you look at the iPhone base, about 80 per cent is either on a family-talk plan or in a business relationship with us," AT&T CEO Randall Stephenson told an investors conference last fall. "Those customers tend to be very sticky. They don't churn very frequently."

As AT&T's iPhone users reach the end of their contracts, perhaps Verizon's ability to suck them over to its service will increase.

And perhaps that might be the right time for Verizon to dump that attractive unlimited data plan and mete out bandwidth on a more favorable basis – more favorable to Verizon, that is. ®

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