CHICAGO--The Apple iPad has taught AT&T much about changing its business models for its connected device business, said AT&T Vice President David Haight during a speech today at the 4G World trade show here.
Haight admitted that the company has seen only modest adoption of embedded 3G service in laptops. The biggest barrier for most consumers is the two-year, $60 a month service contract. He said consumers would rather pay more for a device than be locked into a two-year service deal. Instead, he pointed to the success of the Apple iPad. On Monday, Apple said that it sold more than 4.19 million iPads in the quarter.
AT&T offers service plans for the iPad that cost $15 a month for 250MB of data and $25 a month for 2GB of data. But unlike 3G-enabled laptops and Netbooks, AT&T doesn't require users to sign a service contract. This means that consumers can cancel the service and restart it at any time.
"People have proven that they are willing to spend $630 on a device, because they didn't have to sign a contract," he said. "Consumers like having more control."
In addition to not forcing customers into lengthy contracts, Haight also said the key to selling connected devices is developing a compelling service around the device.
"You can't connect a device and expect to just sell it," he said. "You need to put some services around it. The biggest lesson we learned is that you must design business models with the end user in mind. You can't just take a technology and force it into the market."
He said the company will be adding more tablets to its device lineup. For example, the Samsung Galaxy Tab will be the first to follow the iPad. Haight said the Galaxy Tab will have a "glorious holiday season." Other tablets won't make it onto AT&T's network until 2011 with several products coming online by the end of the second quarter next year.
So far neither AT&T nor any of the other wireless operators in the U.S. slated to sell the Samsung Galaxy Tab has disclosed service pricing. Given his remarks on Tuesday and the success of the iPad, it's likely that AT&T will copy its iPad business model.
While other device categories, such as cameras, also haven't yet taken off, Haight said there is a lot of opportunity in connecting other types of devices as well as in specific vertical industries.
For example, he sees health care as the biggest industry for growth in connected devices. He talked about the company's partnership with Vitality, a company that uses AT&T's 3G network to provide connected-prescription pill bottles that remind people when to take their medication and allow caregivers to monitor intake. He also mentioned other wellness applications that help patients and caregivers monitor healthful activities.
These applications and others that transmit data automatically from machine to machine often don't need much data. But they do need wide coverage. For this reason, he said the company's existing 3G network is ideal to serve these applications.
Automotive is another industry where embedded 3G and 4G connections will be hot, he said. While people may not need to embed GSP-type devices into their cars, new monitoring devices in cars will have to be embedded that will use the wireless network to transmit data. Again, many of these applications will not require a lot of bandwidth, and thus can leverage AT&T's 3G network.
Still, AT&T recognizes that it needs a faster next-generation network. And Haight said the company is currently testing 4G LTE network technology. It plans to launch the network by the end of 2011, and it will offer service to potentially 70 million to 75 million people. Even though the company will be launching this network, a year behind Verizon Wireless, he said consumers will benefit from the fact that AT&T has upgraded its entire 3G footprint to HSPA+ technology.
Because it takes a long time to fully roll out a network, he said that customers will get the benefit of falling back to AT&T's fast HSPA+ network when LTE (Long Term Evolution) is not available. The comment was an obvious dig at Verizon Wireless and Sprint Nextel, which offer slower 3G data speeds that customers will use when access to 4G is unavailable.