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.
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.