Will the best tablet data plan please step forward?
Options proliferate as tablet pricing emerges as a testing ground for new mobile data pricing strategies
The U.S. wireless industry has long settled on smartphone and mobile broadband pricing plans--$30 a month, unlimited use for the former; $60 with a 5 GB cap for the latter—though there have been some notable exceptions such as AT&T’s (NYSE:T) tiered smartphone pricing plans. But no such consensus has formed for the tablet. It’s a brand new device with brand new pricing possibilities. Rather than quickly gravitate toward a common data pricing models, operators seem to be experimenting.
Verizon Wireless (NYSE:VZ, NYSE: VOD) and Sprint (NYSE:S) are taking different approaches to subscriptions for the new Samsung Galaxy Tab available in mid-November. VZW is selling the device unsubsidized for $600 with no contract, offering a basic data plan of $20 for 1 GB a month.
Meanwhile, Sprint is following a traditional mobile broadband model, treating the tablet much like it would laptop, netbook, modem card or hotspot router. Sprint’s subsidizing $200 of the device’s cost (bringing it down to $400) in exchange for a 2-year contract. For the high-end plan, Sprint is charging the typical $60 a month for 5 GBs, though it is throwing in a mid-tier plan charging $30 for 2 GBs.
Neither operator has revealed the fine print just yet, so we don’t know what happens after customers exceed their monthly allotments. If Verizon’s recent launch of its ad hoc iPad service is any indication, though, it will take a usage-based approach, probably the closest thing to metered mobile broadband in the industry. Customers buying a Wi-Fi iPad with a tethered Novatel Wireless (NASDAD:NVTL) 4G Router pay $20 for the first gigabyte of usage each month and $20 per gig thereafter. Customers committing to a minimum of 5 GB per month of usage pay a reduced price of $10 a gigabyte.
As for Sprint, it’s a little more difficult to predict where it will go with overage pricing. If it follows the mobile broadband models, customers will get stuck with some hefty fees if they go over their caps--to the tune of $50 per gigabyte. But the introduction of a reasonably priced mid-tier plan may indicate Sprint may go in a different direction (operators usually make customers pay a lot more per megabyte for lower-end mobile broadband plans). It could allow customers to tack on more access a gigabyte at a time or simply be charged a more reasonable metered fee for incremental overage.
When Sprint gets its hands on a 4G Galaxy Tab—Samsung will almost certainly make a WiMax/EV-DO version--things will probably get more interesting. Sprint will likely allow unlimited usage on the WiMax network while capping access over its 3G network.
T-Mobile (NYSE:DT) and AT&T both plan to carry the Galaxy Tab, though neither has announced pricing details. AT&T, however, has been offering the 3G version of the iPad since this summer, which should give some indication how it would price the competitive Android tablet. AT&T is basically taking a prepaid approach to all of its smartphones and tablets (at least the iPad). For $15 you get 200 MBs and for $30 you 2 GBs of data each month. If you use less than your allotment, the plan resets after each $25 billing cycle. If you go through all of your allotted mega-or gigabytes, you have the option of paying another $15 bucks, starting your billing cycle anew.
Assuming AT&T sticks with the same model for the Galaxy Tab—and assuming T-Mobile customizes its own tablet plans, which is certainly its M.O.—customers will have a huge amount of choice in deciding how and how much they want pay for the same device and its data subscription among the four major operators. There won’t be any clear ‘better’ plan. If you want to go with the cheapest and most flexible plan, you can skate by with an AT&T tablet for $15 a cycle with no contract—though you won’t be watching much video on a 200-MB plan. To get the most bang out of your buck you can commit to 5 GBs a month minimum usage with Verizon and pay what amounts to the industry low price for data: $10 a GB. If you want to get the best possible deal on the device itself, Sprint will knock off $200 with a contract, or if you want unlimited data, Sprint and Clearwire (NASDAQ:CLWR) will probably have you covered next year with a WiMax tablet.
Of course, you only have a limited time to act. This being the wireless industry, operators will most likely come to fairly quick agreement on the optimal pricing model for tablet data, resulting in all of their pricing plans coming in line. What that optimal plan will be, though, is anyone’s guess.
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© 2013 Penton Media Inc.
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