A 4G iPad Requires A Sensible Shared Data Plan

from the cellular-operators-losing-the-battle-for-connected-devices dept

The Apple rumor mill is spinning at full speed again, with word of a new iPad release in March. This would be on schedule for Apple, so the real speculation is around exactly what improvements this iPad will feature. The Wall Street Journal, normally not the town gossip, wrote that the upcoming iPad would feature a smaller 8-inch screen, and would be LTE-enabled. LTE is the latest, fastest network technology available from Verizon, AT&T, and other network operators. But the intention here is not to pile on to the speculation of what Apple might deliver. The intention is to speculate instead as to what the carriers might have up their sleeves with respect to an LTE tablet pricing plan.

When the LTE iPad hits the market, expect to see it sold with a “shared data plan”, or a plan that is connected to a smartphone plan, and share a common pool of MB of traffic per month. Verizon, in particular, has hinted that just such plans will be emerging soon. Lowell McAdam said in December that such plans would emerge “sometime in 2012” to accommodate the increasing number of people with multiple mobile Internet devices. Such devices include smartphones, laptops, tablets, and others. More and more, subscribers are adding devices, and are getting frustrated at having to open a separate account, with a ~$50/month price, just because they choose to browse on their tablet instead of their smartphone. Most customers, rightly, assume that it should make little difference to the operator whether they access the net on their tablet, laptop, or phone. This is just a substitution of the access device. Because of the current punitive billing, owners of multiple connected devices are defecting from the cellular game, and instead opting to use Wi-Fi only on laptops and tablets…and liking it!

Research from The NPD Group has shown how the attach rates (portion that sign on to cellular service) for cellular-ready tablets have been less than stellar, and decreasing over time. In April 2011, NPD says that 60% of tablets only connected via Wi-Fi, but by December 2011, that number had jumped to 65%, showing how Wi-Fi has been winning out over the more expensive and contract-laden cellular offerings. Tablets like the Kindle Fire are sold as Wi-Fi only, contrasting with the earliest Kindles which all had cellular radios embedded. The carriers are at extreme jeopardy of losing the connected device market (and embedded market and M2M) simply because they have lagged in offering the kinds of flexible plans that make sense.

Once a trend away from cellular connection takes hold, it becomes harder to stop. Wi-Fi networks will respond with increased capacity and increased hotspots, OEMs will respond with more Wi-Fi-only devices, and consumer behavior will respond by considering tablets as “portable” Wi-Fi devices, not fully mobile like smartphones. The strategic cost to the carriers is significant. While the trend won’t be stopped, it is certain that carriers could retain significance by offering pooled data plans at sensible bundled prices. This means selling data to a consumer, not to a consumers specific device. And what better way to launch such a new pricing plan than with a device that the market has proven to love – a new iPad?

So whatever the shape of the new iPad, and the fantastic new features that fanbois laud while naysayers explain how they were just repurposed from other devices, we should fully expect an LTE iPad with a new kind of cellular pricing model, which drives up the attach rate, increases device utility at a reasonable price, and creates greater carrier loyalty and long-term gains. If Verizon and AT&T do this right, we could all win.

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Companies: apple, verizon

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Comments on “A 4G iPad Requires A Sensible Shared Data Plan”

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42 Comments
Brad Hubbard (profile) says:

OR they could let you tether

The other option of course would be to just let you tether. The devices are all more than capable of it.

If carriers are serious about offering “bundling” and not wanting to give out two internet connections for two users, just let users use the wifi hotspot on their device with their current data plan and be done with it.

Pete Austin says:

This is an article from HuffPost

The Huffpost Article links to a WSJ article, suggesting Apple are *testing* a smaller screen. I expect they are. Apple tests a lot of things.

But launching an 8 inch iPad seems very unlikely. Consensus is that the iPad that’s about to be released will look very similar to the iPad2, with the same form factor and probably a better (not smaller) screen.

Will a new iPad support LTE? Maybe. I’m sure that Apple tested a version that did. Depends on whether the chipset works well enough, especially re power consumption. I think various Android devices have tried LTE and their battery life sucked as a result. So probably not yet.

HuffPost certainly doesn’t know, so it doesn’t seem sensible to speculate on a linkbait article

R says:

OR they could let you tether

They offered plans with larger caps (incl. unlimited) than they could provide. Since everyone started actually using the data they were paying for, their response has been to look for ways to prevent them from using as much. e.g. shaping and disallowing tethering. In a nutshell, they don’t want you to use what you paid for, because they can’t supply it.

Of course, this isn’t to say that they don’t want to gouge you as well…

Josef Anvil (profile) says:

The Wireless Myth

The funniest part about all of this is that the service providers want us all to believe that wireless service is more expensive to provide than fixed service and thus they have to charge a premium.

They tell us “..but we have to charge more because of the network costs and all the towers we have to build.” Seriously??? You want me to believe that it costs more to put up 10 towers than it does to dig up miles of land and lay cable? Copper and fiber infrastructure costs waaaaay more than wireless. Why else do you think that developing nations build out wireless networks first?

With IMS architecture the service providers have been merging their fixed and wireless networks for at least the past 5 years, so it can’t be the network that is so expensive or data rates on fixed broadband would be ridiculous (although it should be mentioned that the SPs want to cap that too).

So yes, you should be able to tether and yes you should be able to get plans that allow 20GB of traffic per month for a reasonable fee, but that wouldn’t be nearly as profitable as the current set up.

Anonymous Coward says:

There Will Be No Change

The telcos have no intention of following the reasonable advice they are being given for free here. The surest guide to their future behaviour is their past behaviour. Look at what happened with fax machines. It would have been trivial for them to be designed so that it was easy to have both a fax machine and a telephone sharing the one phone line. Did that happen? No, because the telcos preferred the extra revenue from dedicated fax lines. So now fax machines are dead.

Now customers want to share the one mobile phone account between a tablet and a phone, without paying significant extra charges. Sounds reasonable to the customers, but the telcos hate it. The telcos are addicted to their existing high prices and will not be giving them up.

Wi-Fi (or even plain old network cables) will win.

John Doe says:

I have not intention of using an LTE tablet

I am waiting on the next gen Samsung tablets to arrive before I jump in. I have no intention of getting a cellular capable tablet but a WiFi only tablet. Like you said, cell phone companies are killing us with plan costs. But I am not optimistic like you on a combined data plan being the answer. Yes, it will take a combined data plan to make this work long term, but cell companies are getting stingier and stingier with the data caps. While you can only consume so much data on a smartphone before you go cross eyed, a tablet will make it easier to consume bandwidth. With the low limits on plans now, you will cap out quickly. No thanks. I will tether to my 4G phone as needed, though I won’t pay for that privilege. 😉

Jim O (profile) says:

Killer App for Wi-Fi

I’ve always thought it’d be awesome for some company (Google?) to make a WiFi router that makes it easy to share. Most people are afraid to leave their routers unlocked for fear of nefarious activity.

Imagine if NYC had a million 802.11 routers that each let devices automatically log on as they passed by. There would be some security risks, sure… but it’d be a free distributed alternative to a cellular network.

There could be a bunch of different business models associated with it. The network could be free to access so long as a user is running a node. The network could be pay for access with some of the money going to “node” owners.

I’d ditch my data plan if this became popular. Hell… the cell companies were just griping that they can’t keep up with demand. They should love it too.

Anonymous Coward says:

If I had only two choices from which to select who I believe is the worst at taking advantage of consumers, entertainment companies or cell companies, the latter win hands down in my book. Having studied all the data plan offerings, Sprint came out on top for my needs, and everyone else ran a distant second. Even so, $150/mo. (and I negotiated a significantly reduced rate) seems a bit high.

Hence, every thing I have that can access the internet is, but for my family’s phones, Wi-Fi only.

nasch (profile) says:

The Wireless Myth

The funniest part about all of this is that the service providers want us all to believe that wireless service is more expensive to provide than fixed service and thus they have to charge a premium.

Not that I would take a cell company at their word on anything. But cell service is a much more finite resource if I understand it right. A wireline ISP doesn’t have to do much to increase its capacity unless they’re at the point where they have to lay fiber. On the other hand, if a cell company’s towers are saturated they have no other option but to put up more towers (or degrade service or raise prices to discourage uses, or something else the customer doesn’t like). Someone more knowledgable set me straight if I’m getting this wrong.

nasch (profile) says:

There Will Be No Change

It would have been trivial for them to be designed so that it was easy to have both a fax machine and a telephone sharing the one phone line. Did that happen? No, because the telcos preferred the extra revenue from dedicated fax lines. So now fax machines are dead.

Methinks email and cheap scanners have more to do with that than the cost of phone lines. If fax machines were still the most convenient option for sending documents, people would still be paying for the phone lines to use them (which some businesses still do).

BigKeithO (profile) says:

There Will Be No Change

I think you guys in the US just have ass-backwards companies. We’ve got 3 main mobile providers in Canada, sure there’s smaller players but they are really small. All of the 3 majors allow tethering and my Android device has allowed allowed me to setup a WiFi hotspot off of it.

I believe that even Rogers (typically the worst of the big players) has even allowed shared data plans for at least 2 years now.

If we can have this stuff in Canada with only 3 major carriers I think it is more than just the lack of competition holding you back in the US.

Derek Kerton (profile) says:

The Wireless Myth

I suppose I’m the resident telco apologist, so let me have a crack at this. There are reasons why moving a cellular MB is more expensive than a fixed MB. Here are some:

– Fixed infrastructure was put in place decades ago (cable and phone lines) and amortized long ago on telephone and cable TV revenues. You don’t have to dig new trenches. The new found windfall of selling broadband connectivity over those same copper lines has none of the expensive capex of doing the same on wireless. Developing nations don’t have this amortized infrastructure, so they build wireless first.

– The fixed cables are simply fatter pipes. And the cable operators can pump every and any frequency down that pipe – it’s all theirs. Every improvement in end-device compression, multiplexing and modulation schemes results in vast improvements in total bandwidth (ex: CWDM or DOCSIS). In wireless, we are historically working within 5MHz channels, and carriers often have maybe 20MHz in a region. Mobile carriers, with LTE, are approaching the Shannon-Hartley theoretical limit for how much data can be crammed in a limited band width.

– Much of the fixed data business in the world is done in densely populated cities. There’s a reason datacenters, banks, movie production studios, etc, all locate near the big peering centers and fiber interconnection spots. It’s cheaper to wire a dense city for lots of Terabytes, because the cables are non-interfering and so capacity is unlimited. Each one carriers its signal, and another can be laid next to it. With wireless, density actually causes problems. The airwaves are interfering, so capacity is not unlimited.

– In less dense areas, it is also more expensive to invest in cellular, because few users are there to pay back the infrastructure. And the USA has lots of rural areas. Now, this argument applies to both fixed and mobile…but mobile covers a far wider swath of the country than fixed broadband.

– Cable companies and telcos were often given the rights of way for their networks, as part of franchise agreements with governments and in a deal that they would offer universal service. In contrast, cellular carriers must outbid each other at auction to get access to more spectrum. The last auction for LTE spectrum raised $19B. This is a cost fixed providers don’t have to pay. And instead of the municipality offering you right of way so that there will be cable (or phones), cellular carriers usually end up fighting the town or NIMBY citizens for every tower they install.

Not to say that cellular carriers won’t try to extract every penny they can from the customer…they certainly will. But there are additional costs and limits that you don’t have with fixed lines.

Derek Kerton (profile) says:

There Will Be No Change

But the free advice to the carriers is in their best interests.

If they continue to gouge us for our second and third devices, they will lose the long-term opportunity to have those devices connected. Eventually, nobody will want non-phones to have a cellular radio. We’ll all use wifi. Wifi will get better, then we’ll start switching our phones off cellular data, too.

DH's Love Child (profile) says:

OR they could let you tether

This is the biggest issue. The carriers way oversold capacity and now, rather than invest in the infrastructure, they’re putting all kinds of limits on it. Well, seems to me that if you don’t want people to use your service, don’t sell it.

As much as I like the idea of always connected devices, I will probably not get one until some carrier gets their shit together and makes it both affordable AND reliable. So far, none of the carriers and provide either with their data connectivity.

John Thacker (profile) says:

In April 2011, NPD says that 60% of tablets only connected via Wi-Fi, but by December 2011, that number had jumped to 65%, showing how Wi-Fi has been winning out over the more expensive and contract-laden cellular offerings.

I don’t particularly see a move from 60% to 65% in two surveys as being sufficient evidence of a huge jump. It could be noise. Please don’t just read into things what you want them to say.

John Thacker (profile) says:

OR they could let you tether

The carriers way oversold capacity and now, rather than invest in the infrastructure, they’re putting all kinds of limits on it. Well, seems to me that if you don’t want people to use your service, don’t sell it.

So what’s your suggestion? That Verizon and (especially) AT&T should simply say, “sorry, no new signups allowed, only existing customers?” Or that they should increase prices so people drop off?

Investing in infrastructure isn’t cheap, and the bandwidth challenges for wireless (with high range, as opposed to WiFi) are real. More investing in infrastructure would again lead to higher prices. (Wireline infrastructure is not free lunch either, as you can see how Verizon chose to stop expanding FIOS to more rural areas and sold its holdings there.)

Fixed wireline broadband plus short range solutions like WiFi are an entirely different technology than wireless. The technological limitations may mean that it’s a better solution than long range cellular data for most people, but we shall see.

John Thacker (profile) says:

The Wireless Myth

You’re confusing fixed cost with cost per bandwidth. Bandwidth limits wireless compared to wired; it’s cheaper to set up towers, but it doesn’t scale (to users/density/distance) as well. WiFi + fixed wired broadband avoids a lot of the problems by being low range.

Wireless is especially good in low density areas, including rural areas and developing countries.

Data rates on fixed broadband are pretty ridiculous if you’re talking about lines that are actually guaranteed to not be oversubscribed, like an OC3. And if you’re not a Tier 1 network, then yes, you’ll have to pay per data for transit too.

In fixed broadband, consumer grade connections are much cheaper because they’re oversubscribed and there’s no guarantee of service. Yet people want wireless connections that are as cheap as the oversubscribed consumer fixed wired broadband without being oversubscribed.

Endtimer (profile) says:

There Will Be No Change

Wow, someone who actually thinks Canadian plans are better. Ok, let’s do this.

Unless you have special plans, you pay for incoming calls.

No flex data plans from the major companies. If you don’t use all you’re data, too bad, you’re still paying for it. If you do use all you’re data, you can pay up to 2 per megabyte over your limit.

Throttling. Oh the Throttling. Up untill January all of the ‘big 3’ companies throttled all video streaming. To my knowledge only Bell has since stopped.

Your company may send text messages about anything from new offers to how long it’s been since you checked your voicemail. God help you if your plan doesn’t include texting.

And that’s just the shit they do with cellphones. The crap they make us swallow as internet service providers would make you cry.

DH's Love Child (profile) says:

OR they could let you tether

Instead of AT&T spending $30 billion to try to buy a competitor perhaps they should, you know invest in their own infrastructure.

Maybe instead of VZW and AT&T spending all those lobbying dollars, they should invest in the infrastructure.

Perhaps, they should have realized BEFORE they started selling data plans that they were going to have capacity and performance issues and marketed accordingly so that they don’t have to come back to customers and say “You know that unlimited plan you THOUGHT you had, well….”

Derek Kerton (profile) says:

Re:

Ummm. I’m pretty sure I read into things exactly what was said. You are, of course, free to question the NPD research, but I did not cite it even slightly out of context.

Also, I have plenty of anecdotal evidence to support that theory, but that doesn’t count for much unless you trust my sources, as I do, and it comes from multiple different sources. My sources are cellular carriers who have sold 3G-enabled tablets, only to see them disconnect from the network and not re-subscribe.

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