Shared data is great, but there are other ways carriers can monetize tablets

AT&T will follow Verizon Wireless’s lead later this month and begin offering plans that provide a bucket of data that can be accessed from multiple phones, tablets and mobile hotspots. Both carriers will offer complex plans – my colleague Kevin Fitchard breaks them down here – that include monthly access fees based on the type of device: Users can pay $30, for instance, per smartphone plus $10 per tablet to access their monthly data buckets, which are priced separately.

The operators are hoping the new plans will encourage users to up their data consumption across more devices. That’s especially true of tablets, which have quickly become tremendously popular but which carriers have largely failed to monetize. As analyst Chetan Sharma has reported, roughly 90 percent of tablets sold in the U.S. last year relied on Wi-Fi rather than cellular connectivity.

Strategy Analytics this week echoed Sharma’s estimate, saying that only 13 percent of tablet users worldwide have an active mobile broadband subscription. The market research firm said that figure will rise seven-fold over the next few years, though, as LTE networks come online to better deliver data-intensive content such as video. The combination of shared data plans and LTE technology will drive global tablet service revenues to $15 billion by 2017, according to Strategy Analytics. I’m not convinced those two factors alone will drive those kinds of revenues, but carriers looking to boost tablet revenues have some additional weapons at their disposal.

Stand-alone tablet price plans

Many of us view tablets largely as “station-to-station” devices that are most often used where Wi-Fi is easily available – at home, in a restaurants and hotels, or in the office. But as I was reminded last week during a road trip with the family, cellular is sometimes the only connectivity available – and when it is, many users will surely pay a premium for it. Paying monthly data charges for data access doesn’t make sense for those who will use their tablets on cellular networks a couple of times a month. But many of those users will surely pay a premium for occasional cellular connectivity. Which is why I still think pay-as-you-go mobile broadband plans would appeal to a broad base of tablet users.

One alternative to prepaid tablet offerings are contracts that are better suited for tablet users who don’t often need cellular access. Carriers could crib from AT&T’s “rollover minutes” feature, for instance, with plans where data access doesn’t expire at the end of every month. Or instead of monthly buckets, tablet subscriptions could allot data to be used in two- or three-month spans. Any of these strategies would address the fact that most of us simply don’t use our tablets the way we use our phones.

Subsidies

Handset subsidies are an underpinning of the smartphone business in the U.S., where most users happily pay substantially less than retail for a phone at the point of purchase but make up the difference (and then some) through two-year contracts. Those subsidies have been key in selling the kind of high-end, user-friendly devices that spur usage of mobile data.

That model has failed to catch on in the world of tablets, though, which is why cellular-enabled slates are often more expensive than those that support only Wi-Fi. Cellular access is a valuable feature, to be sure, but consumers are balking at the idea of paying extra for a tablet that requires a lengthy data contract.

I understand that monetizing tablets can be difficult for carriers, which are likely to see the gap between data usage and data revenues continue to grow. And I think my colleague Kevin Tofel may be right when he predicts that tablets will eventually replace smartphones for many of us. That day is a long way off, though. Until then, carriers should find more innovative ways to make money from the ever-increasing number of tablets on the market.

Question of the week

How can carriers best monetize the booming tablet space?
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Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

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4 Comments Subscribers to comment

  1. Bradley Baustert Wednesday, August 8, 2012

    Shared data makes sense for Carriers, but how does it make sense for consumers? Why should a customer who already has a 1GB data cap have to pay extra per month to access that same cap on multiple devices? Especially when carriers don’t roll over your left over data month to month.

    In my opinion, the vast majority of people are sticking to Wifi-only tablets BECAUSE carriers are trying to monetize them.

    ^^^If carriers want to monetize tablets, then they need to stop TRYING to monetize tablets. Sell customers a data bucket and let them access it from any device they please. Inadvertently they’ll use more data and spend more money on bigger caps.^^^

    1. You make a great point that shared data plans are much more attractive to carriers than they are to consumers, Bradley. I think eliminating the need for stand-alone tablet plans will boost usage on cellular networks a little, but not much.

      It will be interesting to see whether any carrier actually introduces a shared plan without access fees for additional devices. We might see that strategy from a smaller tier-one or one of the prepaid guys.

      1. Brad’s points are good. However, carriers will probably continue to charge an additional fee for every device that connects to the network, even if it uses a shared data pool. That’s because there is real overhead to supplying the SIM card, tracking usage, multiple devices being able to connect at the same time, billing costs, etc.

        And if they charge any amount, they see $10 as a good starting point. I agree with them that one or two dollars isn’t worth the effort to account and collect. I think $5 will end up being the market rate in the medium term and long term.

        As Brad said, this will continue the pressure for consumers to just use Wifi. And wifi just keeps getting more and more available, and more and more free. In many ways, carriers have created the wifi threat by not offering capped/shared data pools for the past 10 years.

        So, to Colin’s point, “a shared plan without access fees for additional devices”, I think the answer might be as simple as: tethering. Carriers that include tethering in shared plans will automatically enable cellular on all a user’s devices, without the cost of a cellular radio, a SIM card, or the ongoing tracking and management of another device. Also, it becomes very easy for the user to add/remove/change devices, which is not so simple in the shared scenario, where devices are officially connected individually to the network.

  2. The easiest way to share you mobile data plan from your Android phone and for free is http://opengarden.com Our next step is also to increase the volume of data you can share by crowd-sourcing your bandwidth through other peers or acquiring data through the Open Garden app. and network.

    So forget about acquiring an additional contract and try Open Garden Beta now, the app must be installed on all devices and will form a mesh network. Available on Android, Mac OSX and Windows.

    Ideal if you are using an Android phone and a Nexus 7.

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