ComScore says that there are 77 million people in the United States with smartphones, and Nielsen Media Research says that in Q1 2011 data usage grew to an average of 435 MB per user/per month. I’ve seen studies that say these numbers are likely to double every year for quite some time.
Give ‘em the razor, sell ‘em the blades? No, that doesn’t quite seem to cover it. Get them addicted to crack for free, then start to charge them when they can no longer help themselves. Yes, that seems like a better metaphor.
Verizon (NYSE:VZ) wants us to pay for what we use. That seems fair. One spokesperson said something like, “If you drive a car 50 miles, you expect to pay for the gas.” All true.
Verizon Wireless’ current unlimited plan costs users with contracts $30 per month. I am told that it is grandfathered and that it cannot be taken away unless you sign a new contract.
New smartphone users will choose between paying $30 for 2 gigabytes, $50 for 5 gigabytes or $80 for 10 gigabytes of monthly data usage. Customers who use more than their allotment will be charged $10 more for each additional gigabyte.
How much data is this? Today, it’s a lot. But tomorrow, it may not be enough. As we start to use all of the features of our new smart devices, we are going to use a lot of bandwidth. Will we be able to afford it? Will tiered pricing slow down or diminish our collective appetite for wireless cloud-based services?
Look at it another way. AT&T (NYSE:T) and T-Mobile already have tiered plans. But they are very likely to merge. Can Sprint (NYSE:S) survive? This question may be for another column, but for the sake of this argument let’s say no. That will leave us two carriers: AT&T and Verizon. Both will have tiered pricing and both will have us in a vise. There will be no market pressure on either AT&T or Verizon to lower their rates, and consumers will have nowhere else to go.
This is going to be a very interesting game. Can the big carriers balance their need to increase shareholder value with the market’s ability to pay? Only time will tell.