Shared-Data Plans Will Have Minimal Effect on Usage, Wireless Experts Say

Verizon Wireless and AT&T’s recently announced shared-data plans caused controversy and fostered a debate on how carriers should treat wireless data usage (CD July 19 p11). Despite public interest groups’ concerns about the costs, industry experts said it’s too early to judge how their plans will affect the U.S. wireless market. The plans are unlikely to significantly change the continuing spike in data usage, said some experts we interviewed.

The expense may cause users to be more disciplined in their data use, said Joel Kelsey, a policy adviser for Free Press, among the groups that was concerned about the changes. “Even so, I think we'll still see data use grow and expand."

Consumers who already use data are not likely to be fazed, particularly since they're already willing to pay more if they go beyond their current data limit, said Recon Analytics analyst Roger Entner, who has clients in the wireless industry. Under AT&T and Verizon Wireless’s new plans, consumers get charged an additional $15 for every gigabyte of data used above the purchased amount. “Ultimately the people that are using wireless data actively enough to go above the limit are willing to pay for additional data,” Entner said. “If it costs another $15, it costs another $15."

"We think users will pick an amount of shared data that corresponds to their current data use habits,” said Courtney Lamie, communications director for the Application Developers Alliance. The wireless industry began moving away from unlimited data plans well before the new shared data plans were announced. “Unlimited data plans are like a blank check that the carrier writes,” Entner said. “We've already seen the limits of how much unlimited voice and text an average consumer will use in a month, but the amount of data has not flattened out yet."

The service bundling consumers face in the new shared data plans isn’t new. “Corporate shared data plans have been in place for a long time,” said Don Bowman, chief technology officer for Sandvine, which helps wireline and wireless ISPs manage Internet traffic. “And bundling has been around since time began. It’s just that they're now figuring out how to use it with regard to consumers’ data usage."

The wireless industry’s growth increasingly comes from current subscribers using multiple wireless-capable devices, while the number of new subscribers continues to slow, Bowman said. “The consumer interest is certainly there for this type of plan, since it allows people to put multiple devices on the same plan,” he said. “For instance, when tablets were first coming on the market, carriers found that people weren’t willing to pay for a second data plan."

Developers are taking note of the shared data plans, though their introduction was hardly a surprise to the industry. “To some degree, developers have always known that these sorts of plans were a possibility,” Lamie said. “Data limits are a concern for all app developers, but they're taking those limits into account."

Data compression technology has been especially important in adapting to new data limits -- and that technology continues to improve, Lamie said. Developers may also make their apps friendlier to the data-use-conscious by giving users a choice of fidelity options similar to the ones Netflix uses to stream its content, Bowman said. Developers may also increasingly sell ad-free versions of free apps. Rovio, for instance, markets an ad-free version of “Angry Birds” that uses far less bandwidth than its free counterparts, he said.

It’s still not clear whether the Verizon and AT&T plans will have a long-term effect on the rest of the wireless industry, some experts said. T-Mobile, for instance, has come out strongly against the shared-data model (http://xrl.us/bnhw49). “There’s not enough mileage on shared-use plans yet to really tell,” Bowman said. It may be difficult for smaller carriers to adopt a similar shared data plan simply because such plans are technically complex and expensive to carry out, he said. “Verizon had the technological ability and the spending power to put this in place."

Public interest groups criticized Verizon Wireless and AT&T for having similar pricing structures for their new plans, Kelsey said. “While there are subtle differences, at the end of the day it equals out on the bill,” he said. “The pricing seems to be the hallmark of a market with decreasing competition.” The U.S. wireless market “is more competitive than anywhere else,” said Richard Bennett, a fellow at the Information Technology and Innovation Foundation, a free market-oriented think tank. “If we don’t have competition here, we don’t have it anywhere. Consumers need to analyze the specifics of each plan and determine for themselves whether it’s good for them.”