The Wireless Big Bang: Shared Data Plans

att-vs-verizonWho wouldn’t want a smartphone with internet access? Perhaps those who try to keep at arms length of “scary” technology? Others may think that technology is a massive invasion of privacy (they may be right).

But the vast majority of Americans have an insatiable appetite to be immediately tethered to information. They love their mobile phones and the majority of new phones sold are now smartphones. Certainly smartphone sales are already increasing.

What’s the roadblock for greater usage?

Expensive data plans—That’s what.

Smartphones can be purchased for $99, even less, with customer upgrades. But these phones come with the stream of ongoing cost of $30 a month for data plans per phone. 3 smartphones in a home=$90/month ($1,000+ per year). 5 smartphones=$150/month, etc. You do the math. Add a tablet and a data plan for the tablet, the price increases. Whoa! That’s a lot of moolah to get your emails, check out ScoreCenter,  and post stuff on Facebook.

But that may all change very soon. Verizon Wireless and AT&T, which dominate the wireless industry, are playing a business game of “chicken” to see who will flinch first. Rumor has it they will flinch soon. When they do, they will introduce a bundled data plan and that will likely happen this year, even as soon as this summer.

The new shared plans would let customers split one potful of Internet data between their phones and tablets potentially providing a “savings” for families with a lot of web-connected gadgets. Those “savings” may be illusory since they will encourage the whole family to have data plans not just some members. The concept of shared family plans is not a new one. U.S. carriers already offer family plans to consumers based on calls and texts, so the shared data plan is merely the next horizon.

Furthermore, instead of subscribing to separate data plans for a smartphone, a tablet, and a modem from the same carrier, a single data plan could be pooled among all three devices, thereby paying one overall lower fee for the entire package.

These data plans would also benefit the carriers. People who already pay for a data plan for their cell phones are often reluctant to buy another one for their tablets. A single cost-effective plan shared among all devices could ring up higher overall sales for the carriers.

For AT&T and Verizon Wireless, the industry goliaths, the rewards of offering shared data can be significant. The risk for carriers is that customers who are currently happy to pay (or minimally willing to pay) for separate data plans —for their children or an iPad — will consolidate them and lower their bills. Hence, the game of chicken. But with the right financial modeling, no doubt increased reliance on data plans in families makes for a higher margin families for the carriers and greater consumer loyalty.

The approach also may increase network traffic and costs. Today, a consumer may have an unlimited data plan or pay for 2 gigabytes of data a month, but perhaps only use 750 megabytes. With more devices tied to the same data plan, the unused portion would shrink. But on the other hand most wireless customers only use their carriers for their phones. If the price is right, they may add an iPad, or other device. Verizon seems to have the most urgency to take the shared-data approach and may blink first. “We are probably going to launch data share plans this summer,” Fran Shammo, Verizon Wireless Chief Financial Officer, recently said. “We think we will be the leader in this category. It will be a new innovative pricing plan for data. You can expect tiered pricing.” Furthermore just last week he said the company will start shared-data plans on new LTE devices, which means people upgrading from the 3G standard would have to give up their unlimited plans. That’s another way Verizon Wireless could hedge against merely discounting their current customers. Upgraders would be “moving away from, if you will, the unlimited world” and shifting into a tiered shared-data plan, Shammo said.

Change is right around the corner. A digitally tethered consumer is a knowledgeable one. The marketing implications are significant.

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