The iPhone’s Unintended Effect on Data Plans, Will Sprint Be Immune?
Historically, at least with carriers AT&T and more recently with Verizon Wireless, we’ve been seeing the trend of more costly data, especially for heavy data users, that’s correlated to Apple’s iPhone, and in general smartphones. With news that Sprint is about to offer the iPhone 5 alongside its bigger rivals in October for the first time, the news should be a welcomed one for Sprint executives and shareholders as the number three carrier has been struggling to retain and grow its post-paid subscriber base. However, for consumers, the effect of the iPhone 5 could be costly as the device has been known to increase data consumption and that could lead to an end in unlimited data plans.
To preface this, I’ll start by saying that Sprint CEO Dan Hesse has been arguing to maintain unlimited data plans, partially out of necessity to give Sprint some differentiation against its rivals and mostly to keep in line of the company’s ‘simplicity’ model as to not confuse customers. Sprint’s Simply Everything plan bundles voice, data, messaging, and services such as TeleNav GPS, basic Sprint TV, Sprint Radio, and others into a simple plan. With the iPhone 5, could that all change?
The double-edged sword here is that if the iPhone 5 gives Sprint enough leverage to do well–and even exceptionally well–it has to begin to curb bandwidth use, and that could mean we will move from a simply everything plan to a more a la carte offering a la AT&T and Verizon.
In the past, the iPhone was hailed as the device that would revolutionize the way carriers operated and maintained their relationships with customers and manufacturers. The original iPhone wasn’t subsidized at all–users bought from and activated via Apple through iTunes, simplifying the sales process. At that time, while most other smartphones had a $30 or $45 unlimited data plan via AT&T, the iPhone’s data plan was a bargain, coming in at a mere $20 and came with unlimited data and 200 SMS and MMS messages. You can walk out the door with a basic $60 plan ($40 is the cheapest for voice, plus the $20 data plan) that gave you voice, data, and messaging.
However, when the iPhone 3G debuted on AT&T, the success of the original iPhone made the carrier even more money-hungry. Gone was the $20 iPhone data plan in favor of a basic $30 iPhone 3G plan, which gave customers unlimited data, but took away the 200 inclusive SMS/MMS bundle that the cheaper plan from the previous year offered.
And then when the iPhone 4 launched, AT&T abandoned unlimited data all together and in favor of a metered data plan, arguing that consumers who consumed less data will benefit from an overall cheaper data plan starting at just $15 a month, and capping out at $25 per month for a paltry 2 GB of data. For a device that can download Amazon Kindle books, stream music and movies, consume high quality videos on the iTunes store, and more, 2 GB of data isn’t enough for the power user.
When the debut CDMA iPhone 4 launched on Verizon, the carrier did offer unlimited data plan for a short while, perhaps in the hopes of wooing away customers it had lost to its rival when it didn’t have an iPhone on offering. Now, it could tempt away AT&T customers, telling them that unlimited was still an option at Verizon. However, subsequently the carrier announced its own metered and tiered plan, similar to AT&T.
Though the iPhone effect on data isn’t entirely ’caused’ by the iPhone, it is correlated with the iOS-sporting device. At the time the device launched, it caught the world by storm and it’s not until recently that it had a venerable competitor in Android–Android’s market share didn’t grow until more recent–so the effects can be correlated to a high degree to Apple’s device.
Speaking of iOS and Apple, there’s also the issue of the iPad. When that device launched on AT&T in its first generation incarnation, it was hailed as another device that would revolutionize wireless with a contract-free $30 unlimited data plan offering that users can subscribe to and cancel at any time. Besides the low price of a contract-free data pricing, the other cool thing from a carrier perspective is that the iPad didn’t require a more expensive data-only device pricing, like on netbooks, which could go as high as $60 per month just for data. However, as we know, when AT&T went with a metered and tiered plan, that $30 plan is all but a distant dream and memory except to those who were early adopters and were grandfathered in.
So while Apple gave us two steps forward in the way that we think about smartphones, UIs, apps, mobile technology, convergence, design, and the overall user experience, carriers have in the past been pulling us one step backwards. With a more finite and metered data plan, app usage may decrease as consumers may be less wanting to stream, pull from the cloud, share with the cloud, and communicate. So with AT&T’s old motto of ‘more bars in more places,’ I have to ask what good are those bars if we’re too afraid to consume data? And looking forward, I wonder if Sprint will be immune to this ghostly, but ever present, ‘iPhone effect’ on data. Given that Sprint’s customers are already consuming almost twice as much data as customers on other carriers on average, changes in data plan will be meaningful these subscribers.