AT&T executives couldn't be happier with the company's progress in signing up customers to its Mobile Share Plan and its new LTE 4G wireless service, AT&T's head of mobility Ralph de la Vega said on the company's third quarter conference call with investors and analysts on Wednesday.
De la Vega was almost giddy when talking about the growth of the company's Mobile Share plan and how it's driving an uptick in data revenue.
"Two million customers signed up for Mobile Share in the first five weeks," he said. "A third of customers are signing up for the 10GB or higher plan. We are seeing higher ARPU (average revenue per user) than we expected... And we're thrilled with the progress."
In July AT&T followed Verizon Wireless in offering customers data plans that allow them to share a certain amount of data each month with other people on their plans as well as with other device, such as tablets and laptops. The service comes with unlimited voice and text messaging for a flat fee; more expensive plans offer more data.
While subscribers that don't use that much data can subscribe to the smallest tier of service, subscribers also have the option of subscribing to much bigger buckets of data. De la Vega said that more than a third of customers on these plans are subscribing to the highest tier, which is 10GB or more of data per month. This service costs a whopping $120 per month for the data alone. It costs subscribers an additional $30 a month for every smartphone connected to this plan.
Data as growth engine
AT&T eliminated its unlimited data plan for new subscribers in 2010. De la Vega said that today more than two-thirds of the company's smartphone subscribers are now on a tiered plan.
Now the company wants to see more people sign up for the shared plans in yet another effort to increase revenue. The reason is simple, AT&T expects people to add more devices to the network and thus bump up their data usage and increase revenue for the company.
De la Vega also said he was pleased to see that the Mobile Share plan is encouraging people to move off the unlimited data plans. And he said that 15 percent of its unlimited data plan users have switched to the Mobile Share service.
"The more customers we have on usage-based plans the better we are," he said.
But many of these subscribers may be moving to the Mobile Share plans begrudgingly. AT&T hasn't cut off any unlimited data users who were grandfathered into the those plans and it's allowing people to keep them indefinitely. But it's been doing all it can to discourage heavy usage. For instance, last year the company began slowing down heavy users on unlimited plans. Amid much criticism from consumers, the company clarified its policy for heavy usage in March. And now only customers using more than 2GB worth of data in a month are throttled.
Many unlimited plan users have complained that the throttling negates the purpose of the unlimited data plan. But AT&T says it's simply protecting its network and its revenue growth potential.
AT&T and Verizon, which has also eliminated unlimited data and now offers shared data plans, are moving in this direction because cell phone penetration in the U.S. is almost 100 percent. And smartphone penetration has also surpassed 50 percent. Wireless providers cannot grow simply by adding new customers. They need to increase the amount of money that subscribers spend on their networks. And de la Vega says he sees data as that revenue generator of the future.
The Mobile Share plans are designed to encourage customers to add more devices to their service and thus increase the need for more data. Under the old plan structure, consumers were hesitant to sign up for separate data plans for devices like tablets. Now they can simply add these devices to their plans for a nominal fee. De la Vega said that AT&T is adding several new tablets, including a few exclusive to AT&T, in the next quarter and he expects to see customers adding these devices to plans and increasing their monthly spend.
He also alluded to new services the company will introduce in 2013 that will allow people to use the AT&T network to monitor their homes and provide entertainment to their cars.
"We plan to us our smartphone and data customers as a base on which to launch other new services," he said. "Future growth is in data and the services we layer on top of that."
De la Vega said he was also pleased with the progress of the company's 4G LTE deployment. And he said that the company covers roughly 135 million people with its 4G LTE service today. And it's on pace to more than double its coverage by the end of the year.
He also said the service is performing very well, delivering 12 Mbps downloads on average throughout the network. He said that speeds on the network for Android smartphone customers has increased by 50 percent since last year when the company was not offering LTE service.
He said the company's HSPA+ network, which it also calls 4G, has also been performing well delivering download speeds of 2Mbps to 6Mbps a second on average. He noted that speeds of both the LTE network and HSPA+ network are often faster than averages. He added that the LTE deployment has helped alleviate congestion on the older 3G and HSPA+ network and as a result, dropped calls have improved by 34 percent since last year. And call quality has also improved.
"We are thrilled with the performance of the network," he said. "We are being conservative when talk about the speeds. In some cases, the LTE network is even faster than Wi-Fi."
Consumers seem to be responding to the improved network performance. And de la Vega said that AT&T saw the lowest churn rate in the third quarter in the company's history. What this means is that fewer people are leaving the company's service.
But AT&T still has big challenges ahead, including how to compete with its biggest rival Verizon Wireless. While AT&T only gained 155,000 new contract customers during the quarter, Verizon Wireless gained 10 times more customers or 1.5 million new contract customers. Verizon is also much further along in its 4G LTE deployment. It has just covered its 400th market with LTE, and it reaches about 260 million Americans with its LTE service.
AT&T will have to sell a lot of new services and get consumers to sign up for a lot more data to continue to grow in this market.