Analysts Mixed On Data Plans' Tablet Impact



Data-share plans will encourage consumers to use more data, whether through tablets, mobile hot spots, or dedicated USB modems, but will the new plans from Verizon Wireless and AT&T stimulate sales of cellular- equipped tablets?

Analysts are split.

To encourage subscribers to use more data, the shareddata plans make it possible to add data devices such as tablets to a subscription to use up previously unused data bits from their smartphone’s bucket of bits. “We expect these new plans will give us an opportunity to increase overall wireless revenues over time,” an AT&T spokesperson said. “The ability to add multiple devices on a single plan gives customers an incentive to add additional devices on the network. “

Though some analysts see the plans encouraging sales of cellular-enabled tablets, other believe the plans might simply encourage users to connect a Wi-Fi tablet to the cellular network by tethering the tablet to a smartphone. Tethering is included in the new shared-data plans at no extra cost, whereas AT&T and Verizon previously charged extra for the capability. Verizon, for example, charged $20 to activate a smartphone’s tethering capability.

The new plans also reduce another incentive to buy a cellular-equipped tablet. The shared-data plans exclude the option of buying a cellular-equipped tablet at a subsidized price, both carriers said. That reduces the incentive to buy a cellular-equipped tablet. In the case of the 16GB Motorola Droid XYBoard 10.1, users received a $170 subsidy with two-year contract when the tablet was launched. That model launched at $529 with two-year contract and $699 without, a spokesperson said. The Samsung Galaxy Tab 7.7 was $499 with a two-year Verizon contract when it launched in March, but the unsubsidized price was $699.

AT&T and Verizon have offered subsidies only for tablets other than the iPad, and AT&T continues to do so for consumers who don’t opt for a shared-data plan. Verizon dropped tablet subsidies for all data plans at the end of June.

Despite the loss of tablet subsidies under the shareddata plans, some analysts expect the new plans to encourage sales of cellular-equipped tablets, even if only modestly.

“The shared data plans may provide a slight boost in the number of cellular-capable tablets vs. Wi-Fi-only tablets, but it will be a gradual transition,” contended John Weber, associate research analyst at IDC. “Currently, many consumers own consumer electronics, other than their mobile phones, that are Wi-Fi-only. With Wi-Fi seemingly available anywhere and mostly free in the United States, consumers don’t necessarily see the need to have a 3Gor 4G-enabled tablet or laptop — or the need to buy into a multi-device plan.”

For his part, Mark Lowenstein, principal of consulting company M-Ecosystem, said he doesn’t believe the new plans will boost sales of cellular-equipped tablets. “You don’t have to pay full price for a separate data plan [for a cellular-equipped tablet], but you do have to pay a monthly recurring charge [$10] for the privilege of sharing in the shared-data bucket. Most consumers only need cellular connectivity for their tablets occasionally. I believe the majority of consumers will forego the extra cost of the cellular- equipped tablet and the $10 monthly charge and will instead draft off the phone’s hot spot. The phone is always with them anyway.”

IDC’s Weber is not so sure. “Tethering is a good option, with a few limitations,” he said. “First, not all devices are capable of tethering.” Another hindrance, he said, “is that not all consumers are aware of tethering and how to enable it, so it likely won’t be a major factor mitigating the use of cellular-enabled tablets on shared data plans.”

Despite the free tethering option, CCS Insights of the U.K. expects cellular-equipped tablet sales to rise in the coming years in the U.S., although the company expects the share of cellular-equipped tablets to fall because of the growing prevalence of free Wi-Fi service. “Share Everything will be very welcome among handset manufacturers and is sure to provide a boost to sales of cellular-enabled tablets,” CCS analyst Shaun Collins told TWICE. “However, the growing prevalence of free or bundled Wi-Fi access in the U.S. will still result in a declining share of cellular-enabled variants in the market going forward.”

“Ubiquitous Wi-Fi and significant difference in the retail price of cellular and Wi-Fi tablets will drive more consumers to Wi-Fi-only tablets, especially as consumer research clearly shows that a large share of the tablet usage is at home,” Collins said.

In North America, the company estimates that cellularenabled tablets made up 53 percent of total tablet shipments in 2011 but will slowly decrease to about 40 percent in 2016. However, because the overall tablet market will grow, in absolute terms the shipment of cellular-enabled tablets will more than double from 2011 to 2016. Shipments of Wi-Fi only tablets will grow even faster.

Whatever the tablet mix, analyst Jeff Kagan sees the new plans raising sales of cellular-equipped tablets. “Yes I do think these new data sharing plans will boost the sales of cellular equipped tablets versus the Wi-Fi-only tablets, but first customers have to get used to this new way of billing, and that may take a little while.” One reason is that the plans “don’t seem to save customers money, but they really could if you take a closer

For her part, analyst Susan Welsh de Grimaldo of Strategy Analytics sees gains for consumers and carriers no matter how consumers connect their tablet to a carrier’s network. For a tablet owner, including a 3G or 4G LTE tablet in a shared-data plan for $10 a month, or using Wi-Fi and the free tethering option on share data plans, “offers a new value proposition to connecting their tablet for a relatively low cost,” she told TWICE. And for carriers, either option “could increase use of tablets on mobile networks and encourage users to move up to a higher tier of data, thus driving revenue,” she said.

In any case, shared-data plans will encourage people who previously bought cellular-equipped tablets to actually use the tablets’ cellular capabilities, she said. “In the U.S., we have definitely seen a number of people purchase a 3G- or 4G enabled tablet just in case they decided they needed that option — and quite a few of them have never signed up for mobile broadband service on their tablet.”

Strategy Analytics Mobile projects that tablets with active mobile broadband subscriptions (whether prepaid or postpaid) in the U.S. will grow from just more than 3 million at end of 2011 to just more than 20 million by end of 2014, representing an increase in data-plan attach rates from 20 percent to 30 percent from 2011 to 2014.


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