Why it's time to dump smartphone data plans
Time to dump smartphone data plans? Why not? The cell phone market is stagnating--and worse while only a fraction of wireless customers own smartphones. Any way you look at it, the global cell phone market appears to be in miserable shape.
Some recent headlines to consider:
• Motorola loses $3.6 billion
• Sprint Nextel announces plans to cut 8,000 jobs
• Nokia's profits plunge 69 percent
• New subscriber growth at T-Mobile USA (which coincidentally offers the only Google Android phone in the U.S. market) suffers a steep decline.
• While the fourth quarter is usually the best time of the year for carriers, global vendor shipments fell in the period by more than 12 percent compared with a year ago.
(Credit:
Strategy Analytics, Bernstein analysis)
Against this backdrop, the (increasingly few) optimists out there believe that smartphones will ride to the rescue of the wireless industry. Ryan Reith of IDC put it this way:
"As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market."
That's the conventional wisdom and it might be the right prescription during a normal period. But we're living through such a rough patch that not only is North America reaching a cell phone saturation point, but even the optimists at IDC worry that sales may wilt in the face of weakening demand, currency volatility, and reduced access to credit.
In tech-obsessed areas, such as Northern California, New York, Boston, and Los Angeles, you'll find lots of people who have traded up and bought fancier, higher-margin smartphones. They are in the minority. Fact is that smartphones represent 17 percent of the 1.3 billion mobile handsets expected to be sold around the world this year.
The rest may be dying from iPhone envy or whatever. But they ain't close to signing their name to the line which is dotted. The culprit: the exorbitant cost of the various data service plans.
I'm not concerned here with the geeks, the cool kids with the big bank accounts or the corporate types who can justify the purchase to their bosses. For the average Joe, who already pays a fortune for subscription television and Internet service, paying a monthly data service on a smartphone qualifies as a luxury that can be postponed until normalcy returns. A dowdy cell phone is more than enough to put you in touch with the wife and the kids and hey, you can also call Sal's Pizza for Saturday night delivery. Your cell phone may not run Google Latitude just yet. But trust me, Western civilization will survive.
In the meantime, I'd like to offer a modest proposal, courtesy of Bernstein Research's reliably incisive Toni Sacconaghi. In a note published Wednesday, Sacconaghi discussed the impact of the monthly charge for required data service and the effect on sales of Apple's iPhone. Here's the crux of the argument:
"Apple is effectively not participating in 83% of mobile handset market today. To more effectively address this part of the market, we believe Apple should offer an iPhone that does not require the user to sign up for a data plan. Note that we do not necessarily believe that a non-data plan iPhone needs to be priced significantly lower at retail than the current 3G iPhone ($199 in the US, with service contract), but waiving the data plan requirement alone would save users on the order of $30 per month, or $720 over two years-making it accessible to a much larger base of users."
Sacconaghi was writing about Apple and AT&T, but let's extend the analysis elsewhere. Maybe other carriers wind up subsidizing less of the upfront cost of their devices. (Or maybe not.)
That wouldn't be charity. There's a good business case to be made. In Apple's case, Sacconaghi estimates that a non-data plan iPhone represents an additional $7 billion in annual sales and $4 billion in gross profits (assuming 3 percent market share).
Of course, the carriers may deem this nonsense and instead decide to hold out as long as they can. It wouldn't be the first time they resisted change, but there are tens of millions of potential new subscribers up for grabs in an increasingly volatile world.
Charles Cooper has covered technology and business for more than 25 years. Before joining CNET News, he worked at the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet. E-mail Charlie. 
So for 1 mb you end up paying $10.24. I am a geek with a business sense and It quickly became apparent that I can survive using my smartphone just for keeping in sync with my desktop computer using usb.
The one thing I dont really agree with is Verizon's policy of "if you use a smartphone on VZ then you HAVE to have a data plan". I'd rather it be like ATT/Everyone else's policy of "You can use whatever phone you want with any plan you want (cept iPhone)".
The real challenge is to get AT&T and their kind to bite the bullet and give newer iPhone owners the $60 plan they had before -- so users will not only have a lower-priced plan but get back the SMS built into the package. That would probably juice iPhone sales as much as the $199 price did.
The cost of these wireless services are simply outrageous as compared to what consumers get in most other Industrialized nations and this is documented extremely well all over the Internet - FOR CHRIST's SAKE!
These obscene wireless industry profits do NOT resemble anyone's reality of a reasonable profit margin and does duplicate the obsessive greed we have seen recently on Wallstreet.
These wireless industry wantabe rocket scientists apparently have never heard the very wise concept - a little of something is much better than a lot of NOTHING!
A reasonable profit margin would drive many more users to use these services - but only a drunk and stupid consumer buys the current high priced garbage now offered.
Enough said...
Apple have clearly stated that they aren't in it for market-share
why would they reduce price ?
these analysts r seriously getting paid too much
they said that they don't plan on releasing a cheaper phone
and playing in the lower end segment of the market
where most phones r sold
if they really cared about market-share
they would have released a cheap IPod music phone long long back
it's the same with Macs
they could easily reduce profits
and double market-share but they don't !
it may sound weird but it's Apple for you they always do things differently
'think different' was their slogan for a long time afterall !
They are not as different as you think. All their products aren't made in the US. The maximize profits by making them elsewhere. That doesn't sound like a company that "Thinks differently" to me.
Separately, on the original topic, Apple has deals with the carriers to share in the recurring subscriber revenue. Still think they would make more money by selling a phone with no data plan? Don't you think the carriers have a clause in the deal that says Apple won't sell iPhones without the std. package of AT&T iPhone services?
Don't want an iPhone with the data plan required, get a Touch and a free Razr and stop complaining. The iPhone "whole product" is the phone and a two year AT&T subscription, it is profitable for both those partners, so they will stick with that whole product for now. Don't like it? Don't buy it. Let freedom reign.
While we're at it, better privacy controls matched to diligence over ownership over information about the user (so-called personal entropy) belongs to the user as do user bug reports & names in which they have build recognition (equity) for which they share in no upside when providers use that information (eg, SEO is really "small business marketing" / user- generated content that is used by others up to a point of unknown returns - "fair use" for some but not all, to name other instances).
Hey we are about to lose free analog TV (even with 4 month delay) ... Why not charge for AM radio too?
1 MB of data is roughly equivalent to 10 minutes of voice traffic. AT&T offers unlimited data for a premium of $30/month (plus an extra $30/month for tethering), but unlimited voice is a $60 premium over basic service. Unlimited text messages: $20/month. So, you've got 3 separate items that permit you to use unlimited bandwidth, but you have to pay a charge per function on that bandwidth.
Yet despite the high cost, you still get locked hardware, punitive contract terms, and intentionally messed up firmware (feature lockout so they can charge you additional for features the phone normally comes with; remove basic phone software and replace with links to for-pay services, etc.). It's larcenous.
Treat all data as data...
-R
I have a G1 and I'm not paying much more for data service than I did with my Razor. My minute plan hasnt changed, and with the razor I had to pay 9.99 a month for unlimited texting and picture messages. With the G1 data plan thru Tmobile I pay 24.99 a month for 400 messages and unlimited data access. Of course this means I cant text as much, but with IM, Email, and countless FREE applications there is no need to text as much.
Do people really pay 60 bucks for data service thru AT&T? really? Maybe its time to try a new service provider.
It seems to me that the wireless carriers (ATT?) are becoming monopolies in an emerging market (cell phones) which require a completely different infrastructure. The government should open up the use of all towers to all carriers. This would cause carriers to really compete over prices based on their costs, not on their power in a given market. Ultimately features such as data plans would become cheaper (as well as our typical plans). Maintaining the towers could be contracted out to carriers in the area and paid for by the taxes on usage. While we may pay more in those taxes, the overall costs of the plans shoudl decrease and you would see more priced based competition as well as a drive to add features which right now are priced at a premium or not available.
- by jimspice February 5, 2009 6:27 AM PST
- I found the way to go was voice plan only, but smartphone with WiFi. For my purposes, this was enough. Unfortunately, my carrier of choice chose to disable that functionality in its phones (starts with a V, ends in an N, has an ERIZO in the middle) so I ended up buying an old but fully functional one (Samsung SCH-760) on eBay and having it activated. The new Omnia does have WiFi, but you need the data plan to get the lower price.
- Like this Reply to this comment
-
Showing 1 of 2 pages (51 Comments)