Ok, here's the deal - I'm an EE who specializes in network communications. Here's a REALLY simple way to understand how all this stuff works.
The 4G plan Verizon is offering you on your phone is the equivalent of if you had a REALLY high speed cable modem that had one ethernet plug you could plug your computer into. In this case, the computer is your phone. Imagine the cable modem was so small it fit into your phone and hade a radio instead of a landline connection, so you could walk around and do everything you wanted all over the world, (assuming the software could handle the really small screen and underpowered processor) that your computer could do. It knows how to find the data at the Verizon level, and get it to your phone, even if the data is in China. That means you could connect to Pandora with unlimited music, watch YouTube, surf (some) of the Net, use Fring or Skype (assuming Skype worked on your phone) to make free video calls, connect to Picassa, Photobucket, etc. Everything (more or less) works for $29.95.
That's pretty easy, because you're one number on the network and that number never changes, and because the size of the screen and other stuff is fixed, it's easy to calculate how much information comes down the "pipe." For most people, this is about 5-10 GB per month.
Teathering is a different thing, and it can be looked at one of two or three ways from the pricing perspective.
When you "teather" to a 4G device as a "hotspot," you're accessing the "routing" function of the device. There's a difference between a modem and a router - a modem connects one device and modulates/demodulates (MoDeM) the information from the phone company into something a computer can understand. A router understands how to "route" that data to four to eight other devices that know how to talk to a local network (think - your iPod, your GPS and your Laptop.) and get data back to those devices, in addition to your phone, from China.
In the old days, routing was done by women sitting in rolling chairs, plugging patch cables into a "switch" to connect to "Pennsylvania 6-5000" if you've seen the old movie. (PA 6-5000 was the same as 192.168.136.8 as a network address.) Your phone now knows where "Pennsylvania 6-5000 is, and about a BILLION other things that don't require women in rolling chairs. It also knows where your iPod is, and your camera, and your Laptop, assuming they have wireless access to the "hotspot" and you've told them to connect.
So one way to look at pricing is to look at if the "hotspot" costs Verizon anything more to provide. Since you provide the "pipe" (your wi-fi connection) between the router and your devices (iPod, Laptop, etc.) there's no cost to Verizon there. But they have given you a function you'd have to buy - routing services. Today a router costs $19.95, so that's not the cost.
What you're supposedly paying for is the size of the "pipe". If you think about your toilette, you understand how the "pipe" works - if you put too much crap in your toilette, everything stops when you flush it. That's the fundamental "Mobile Broadband" service, independent of 3G/4G - the pipe from Verizon's server to your phone, and the diameter of that "pipe" is how fast <ahem> stuff flows into your phone, and down through the stacks into the sewer..
The "router" is the "Stack" in your house - you're toilette is on the same stack as your shower, your sink and maybe your utility tub (you iPad, iPhone, laptop, and Xbox.) Unlike your house, though, the "stuff" flows from the sewer (the INternet) into your house. And THAT'S what you're paying for - a BIG stack so you can get more stuff if you teather. Or at least that's the argument.
I am a road warrior - I haven't had a home in almost three years. I live on the road in hotels, both in the US and internationally. I'm kinda like George Clooney in Up in the Air, without the good hair, a big beer belly, and a bad smile. My lifeline is my mobile connection. I use it to watch the Steelers' on my Slingbox, watch the NHL and MLB packages over the internet in HD, the occassional streaming movie on Netflix (normally my Netflix DVDs are chasing me around the country/world) Hulu, etc. I've got a lot of "Stuff" flowing into my system.
I have an unlimited Sprint connection at 6-12 kbs in the 4G areas. I also have the Verizon 4G service. My Verizon service doesn't give me an advantage over 4G, and tomorrow, I'll have to pay more to teather, despite the fact that the towers have the same bandwidth capabilities. IMO, at this point, Verizon would be charging me to provide them with my routing services.
I will not be signing up for Verizon's mobile hotspot plan on the 4g until they stop charging me for providing them with my internal "Stack." However, I am the exception - Most people are not going with their primary internet off of a mobile device. And if you already have home internet, regularly eat at McDonalds or some other hotspot provider, etc. $20/month for 2 GB of teathering is going to be more than you need.
