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Shared Data Plans from Verizon - Pushing Users Up the Spend Ladder, Connecting More Tablets

by Philip Kendall | Jun 12, 2012

Verizon Wireless finally unveiled the details of its new shared data plans, which it has been hinting at for quite some time. The new plans launch June 28.

Strategy Analytics has been recommending shared data plans for some time, based in part on our consumer research that shows strong consumer interest in sharing data across multiple devices. We have observed numerous markets that have launched shared data plans over the last year, such as Canada and a number of European countries - finally the wraps are off on the first major US operator to launch its shared data plans.

The basics:
  • the plans include unlimited voice calling and text messaging
  • a per device fee is charged: smartphone for $40, feature phone for $30, adding a tablet is $10 a month, a USB stick modem or notebook/netbook is $20 a month (as they consume more data) - a real benefit for connecting tablets for example is that there is no contract for this extra device, so a user could drop the tablet from the account
  • the fee per GB of data runs as low as $10 a GB for the highest plan (10 GB for $100) but the first GB is $50/month, users benefit from cost savings by doubling that to 2GB - the second GB comes in at $10. Other options include 4 GB for $70 (so adding those next two GB is only $5/GB), 6 GB for $80, or 8 GB for $90.
  A Benefit - Simplicity in Plans For users, especially on shared plans, not worrying about the level of use for minutes and texting is a plus. We expect to see some new innovations in the market around on-device management of data usage to help consumers and parents monitor the sharing of data on their plans - and the ability to double your GB for only an extra $10 is likely to push some family adopters of the plan into the 2GB or 4GB categories for peace of mind, rather than going with the base plan of 1 GB.   The Impact? At first glance, it seems the impact would be to push more users to higher spend tiers - potentially alienating the person thinking of upgrading to a smartphone and encouraging them to look to one of the value-oriented carriers in the US market. Yet as Verizon Wireless has a heavy contingency of family plan subscriptions, these new plans may make it easier to share voice, text and now data among family members, who can add an additional smartphone for $40 or tablet for $10. The aim is to get more people on family plans upgrading to smartphones and also connecting their tablets. Current family plans for smartphones required an additional data plan for the phone ($30) plus a $10 fee to share voice minutes - the benefit now is that voice and texting are unlimited for all the phones on the plan for that same $40. There may be a downside to tablet activations, however, as the new plans no longer charge a fee for using a smartphone as a mobile hotspot to tether other devices with WiFi - a tablet with WiFi can share the data using smartphone WiFi tethering for no extra fee. Yet the new pricing scheme is an additional motive to buy a tablet with integrated 4G LTE - especially as the difference in cost for tablets with 4G LTE compared to WiFi only declines - and while some tablet vendors are not likely to close that gap soon there are others that are likely to work with operators to develop new promotions to go along with new data plans.   A smart move - and new innovation AT&T has already been preparing for shared data plans, recent comments made it seem as though they were more interested in plans to share data between a smartphone and tablet to drive tablet growth rather than plans that shared data on multiple smartphones on a family plan so as not to lose the value of a required data plan for each new smartphone, but the pricing approach from Verizon Wireless (adding a smartphone is still $40 to capture that value as on today’s family plans) leaves room for AT&T to also address the family plan segment without risking erosion of value from new smartphone additions.   Opportunity for Competitors? Ahead of the shift to VoLTE, Verizon is attempting to retain the value of voice by making unlimited calling the default. While this strategy may ease some users into higher spend plans, it may also leave room in the competitive market for data-centric plans from other providers. Some segments of consumers use very minimal voice today, preferring to communicate with text, instant messaging, social networks, or even old-fashioned email.
  • Value-oriented users in this group could be attracted by plans with unlimited texting and a mid or low level of data (say, 500 MB or 1 GB) for a much lower monthly cost. Voice could be set at 100 minutes a month or even on a pay-by-the minute add-on basis.
  • Heavy data users could be attracted by plans that offer a double the GB for the same price, but leave out voice and texting, which could be add-ons.
When AT&T and Verizon Wireless both moved from unlimited data plans to tiered pricing with data caps, Verizon did not create an entry level plan but AT&T did. We will be watching to see how AT&T crafts its response, which has also been in the works but not unveiled. Watch for more analysis of the data pricing strategies in the US and other markets in our Mobile Broadband Opportunities (MBO) service over the coming months as the competition responds to this move by Verizon.
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