Despite doing research on 3G cellular service for the past five years, I’ve thus far held off on buying any 3G service (or a smartphone that requires 3G service). The use case really isn’t there: I spend almost my time at work or at home, both locations with good Wi-Fi. Throw in free Wi-Fi at friends, Starbucks (NASDAQ:SBUX) and many bakeries, and there isn’t much time in any day when I’m not being irradiated with 2.4 GHz radio waves.
So do tablets need 3G? Apple (NASDAQ:AAPL) has both WiFi and 3G+WiFi models, Amazon (NASDAQ:AMZN) sells Kindle models with 3G (but only for books, not for free content), while Barnes & Noble (NYSE:BKS) eschewed a 3G model with its nookColor. Fresh off its initial iPad partnership with Verizon Wireless (NYSE:VZ), Apple is rumored to be preparing a dual GSM/CDMA 3G iPad 2 for launch next year.
These sort of 3G-enabled devices have provided business for chipmakers for the past few years — and in particular, the dual-mode device is the bread & butter for the growth of Qualcomm’s (NASDAQ:QCOM) chip division. Meanwhile, Verizon, AT&T (NYSE:T) and the smaller carriers hope to use these additional 3G devices to sell more 3G data plans — while at the same time hoping these plans won’t get used, or that users will offload into local WiFi hotspots.
So do tablets and netbooks and notebooks need their own data plans? Or conversely, how / why will users buy 3G data plans (or real 4G as it becomes available)?
One path is the one the industry has been on the last few years: more smartphones, bigger screens, more computer-like features. I think that’s great for certain apps — notably traffic maps — but not for editing a spreadsheet on Google Docs.
The network operators’ preferred option is to have cellphone users buy a second 3G plan for their laptop or whatever. So instead of having one data plan, you have two. Not a bad option if you have an expense account, but do you get 3 data plans if you have a cellphone, laptop and tablet?
A third option is the Wi-Fi hotspot — like the MiFi cards Verizon is bundling with the Wi-Fi iPad to pretend (for now) it’s a CDMA iPad. It’s a great option for a college student or young adult (since anyone under 26 is still a child) to have wireless data available for all his/her personal devices at all times.
The future I’d prefer to see — although the jury’s clearly still out — is widespread availability of tethering, as was introduced by the Palm Pre (PALM), now available on the Droid X and other Android phones, and technically feasible on the iPhone, even if AT&T (or Apple) tries to block it.
A shift to tethering would have two major benefits for mobile phone consumers. First, cellphones could go back to being cellphones. Rather than creating ever larger (but still inferior) imitations of a PC, cellphone makers could focus on making small pocketable devices that make phone calls, send text messages and can be used for light internet browsing.
Secondly, the use of Wi-Fi for tethering a laptop or tablet would decouple these products from the carrier subsidies and contracts — allowing users to replace them as needed, and keep their computer when switching their phone between carriers.
It seems like we keep coming back over and over again to the same issue between 20th and 21st century telecommunications. Back in the 20th century, you had one (or maybe two) wireline phone[s], one cable TV account, one Internet connection. In the 21st century, the network operators are hoping that you’ll keep adding new service plans every time you buy a device.
Am I going to use twice as much data if I own an iPhone and an iPad? Of course not. Does AT&T have the chutzpah to increase my DSL (or U-verse) bill if I add another PC or PDA at home? Of course not.
So until we get back to the per-household (or forward to the per-gigabyte) pricing, the idea of buying a new account is going to deter 3G adoption for tablets or laptops, except for that small niche of relatively price-insensitive businesses or consumers.
Meanwhile, Wi-Fi as a substitute for 3G still needs considerable improvement. Walking across campus with an (unactivated) Palm Pre acting as a Wi-Fi PDA, it was clear that our network and access policies were not designed for smooth handover from hotspot to another. Plus tablets and other devices need to bring back that great 1990s Internet innovation: offline browsing. (Hint: ignore the META REFRESH tag if there’s no network connection.)
Disclosure: No positions in mentioned companies