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New AT&T smartphone data plans will change the market

AT&T has announced new smartphone data plan pricing which could create a fundamental shift in the US smartphone market.

The new plans, due to take effect for new contracts starting on June 7th, offer a low usage 200MB monthly data plan for just $15 called Data Plus, and a second plan at $25 monthly for 2GB called Data Pro. Additional gigabytes cost $10 each if you have the 2GB plan. The 5GB ‘unlimited’ $30 plan is gone, unless you’re already on it. Tethering will also be offered for an additional $20 per month, as long as you have the 2GB plan – and importantly this option will cover the iPhone as well as other smartphones. The new 2GB plan will apply to the iPad as well, replacing its genuinely unlimited plan, unless you’re already on the unlimited plan or sign up before June 7th.

What does this mean? For low data users, who probably represent the majority of smartphone customers, the cost of running a smartphone on AT&T is about to get a whole lot more attractive. For example my wife, who has a smartphone and uses it for daily email, Google Maps and occasional surfing burns through a massive 50MB on a typical month. The new pricing will chop her monthly data plan cost in half. A different user who pulls a lot of video and busts through the 2GB ceiling on a regular basis would likely pay more than currently.

I expect that this pricing will attract a boatload of new smartphone customers to AT&T, due to the lower cost of entry. But hey, guess what? June 7th sounds awfully similar to the date of the rumored announcement of the new iPhone, and I wouldn’t be surprised if we actually see Steve Jobs and AT&T announcing the lower cost plans on stage together. This would be a real coup for Apple as it would surely attract a whole new demographic to the iPhone, who previously rejected it due to the cost of the data plan. The same goes for AT&T’s other smartphones of course, but I just have a feeling that Apple may be the primary beneficiary of this new pricing scheme. Enterprises could also potentially save money by moving low data users to the new 200MB plan.

So I expect this to increase in smartphone market share at the expense of non-smartphones, since the lower cost entry point will encourage fence sitters to jump on the bandwagon. This is good news for AT&T because they should be able to increase average revenue per customer while adding people who will place minimal demands upon their data network. I also think the majority of mid level data consumers will be unaffected apart from enjoying a reduced plan cost down from $30 monthly to $25. The heavy users and those who use tethering will probably see an uptick in monthly cost.

I would expect other carriers to follow suit, although those choosing to continue offering an ‘unlimited’ plan could clearly differentiate themselves in this fiercely competitive market. I’m talking about you, Sprint 4G.

For iPad 3G owners, the situation is a little different. It would be pretty easy to go through the 2GB monthly limit on the iPad 3G if you enjoy Netflix and other data-intensive media streaming services on a regular basis. So if you fall into that category it might be worth signing up for the current genuinely unlimited plan before June 7th to get grandfathered in. Once that 2GB limit comes along, owning an iPad 3G could become a whole lot more expensive.

Wireless carriers and home broadband providers have been toying with the idea of scrapping unlimited plans in favor of charging based more upon usage. With AT&T’s new plans, this is becoming a reality, which will surely help smartphone adoption rates. If you’re a heavy data user however, prepare to spend a little more each month to feed your habit.

Neil Berman

facebook.com/theonbutton

theonbutton.com

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Jun 2, 2010 - Posted by | Analysis, Apple, Mobile | , , , , , , , ,

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