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Summary:

Without a doubt, among the most interesting announcements to come out of Apple’s iPad unveiling were the wireless plans. A close look at the mobile data plans reveals that they may be major competitive advantages.

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As someone who’s followed the wireless industry closely for years, one of the most interesting announcements to come out of the iPad keynote were the wireless plans. The wireless industry in the U.S. has been one of the least consumer-friendly industries for years (just consider the fact that consumers regularly pay as much as $1,000 per megabyte for text messages). There has been a slow change in how the wireless industry prices data, however, and the iPad’s data plans with AT&T highlight this.

This change first drew my attention when the Kindle was originally released with unlimited data access built into the price. This was a sea change in how cellular data is sold, as the cost basically became transparent for the customer. That’s not to say the customer isn’t paying for it, you are, but there’s no monthly line item that you are aware of. Now, the Kindle, and other e-book readers that offer similar services, are something of an extreme example because of the very small amount of data that’s actually used to send a book to the device. The iPad, however, shows that this isn’t an isolated incident.

Let’s take a close look at the iPad’s mobile data plans. For $15 per month you get 250MB of data transfer and free usage of AT&T’s Wi-Fi hotspot network. For twice that amount you get “unlimited” data (read 5GB per month as is standard in the wireless industry) plus access to AT&T’s WiFi network. Despite what many are saying, that $15 plan is actually a pretty good deal for many people. For example, I’m a heavy iPhone user, so the first thing I do every morning is pull out my iPhone and check my RSS feeds. I have it in my hand and am usually accessing the Internet for hours every day. Despite that, I regularly use less than 200MB of data each month. This is possible because I, like most people, have access to high-speed WiFi networks at home and work, where I spend most of my time.

Throw in the free access to AT&T Wi-Fi networks and I imagine that most users can get away with that 250MB of use per month without too much trouble. That means that for the first time people can get everywhere access to almost the entire Internet for the same price that dial-up cost a few years ago. Of course for tech geeks like us we’re going to be afraid that we’ll blow past that 250MB pretty quick and probably spring for the $30 per month plan. Even here, however, we’re getting a pretty great deal compared to the $60 per month that cellular companies regularly charge for unlimited data for your computer, even dinky little computers like netbooks.

Perhaps even more important, however, is the fact that these data plans are available on a prepaid basis and can be cancelled at any time. Up until now, in order to get the privilege of paying $60 per month for 5GB of data for your netbook you would have to pay a couple hundred dollars for a modem. If you want that modem for free you’re stuck signing a contract for two years. The fact that I can get an iPad with 3G capabilities, and then buy service on a month-to-month basis as necessary is pretty great.

The iPad’s data plans are in fact a major competitive advantage for the device. For other companies to compete effectively in this space they’re going to not only have to put together a device that matches the iPad’s hardware and software experience, but that also matches its connectivity experience. This isn’t going to be easy in the short term, and it’s a clear example of how Apple has been able to leverage its relationship with AT&T to get a pretty great deal for consumers (as long as you don’t live in New York or San Francisco). In the long term you can bet that companies like Verizon, Sprint, HTC and Asus are going to be forced to match or beat the pricing and structure of these plans, and that’s going to be a win for all of us, no matter what device we use.

Related GigaOM Pro Research:
How AT&T Will Deal with iPad Data Traffic
With The iPad, Apple Takes Google To the Mat
Web Tablet Survey: Apple’s iPad Hits Right Notes

  1. I agree with you that Apple probably does hold major sway with telecom companies, but the “deal” you seem to find may really be a hidden fee covered up by the pricing. Apple is charging a $120 fee to have the 3g version. From my understanding the electronics to allow this feature are no where near the $120 cost. This leads me to think of this a subsidy to AT&T embedded in each iPad sold.

    1. Alfredo Padilla Eric Tuesday, March 2, 2010

      Eric,

      That’s true, and something I should have mentioned in the article, however note that $120 for 3G data is about the same that you would pay for a subsidized modem, which would require a 2-year contract. In this case you pay the extra but don’t have to sign a contract.

      That said there are also lower-cost modems out there so the price isn’t exactly standard. Whether Apple’s paying any of that $120 to AT&T is a good question, but one to which I, unfortunately, don’t have an answer.

    2. It’s far more likely that Apple’s margins on the wifi-only iPads are lower than Apple’s norms, and that they are made up by higher margins on the 3G iPads. This is what they’ve done on iPhones and iPods, etc.

    3. I highly doubt you will ever get a deal from Apple – have you ever considered the type of markup they have on their computers. And then the “great” pricing from AT&T is no different than what is already in place. I pay the same for unlimited data on my phone.

  2. I never really noticed before, but it seems like you in the US have horrible conditions. In Denmark one of the main provides (old national telecom – http://www.tdc.dk) seems to have a 9$/1GB a month. And by regulation mobile companies cannot make contracts with a binding period for more than 6 months. Nice to for once not to be left behind…

  3. But I already paid for a data plan and a smartphone. It fits in my pocket.

    Will this $15 plan shrink my phone bill by a dime, or is it just another expensive gadget with a $200/yr. (after taxes and fees) supplement to AT&T’s bottom line?

  4. This article is month old news by all accounts. Nothing new

    1. Didn’t realize someone’s personal thoughts/opinions could be considered “old news”…but to each their own. :)

    2. I agree. I’m buying the Wi-Fi only version mostly due to the fact I already have an iPhone with a 3G plan can’t see double dipping.

  5. When the subject matter being a month or more past, yup. How about posting an article about the latest news, i.e production stalls, launch availability, just some current events to throw out there.

  6. @ MikeMoreira

    How about you write up something yourself, since your so unhappy about a authors thoughts?. If not, then just shut it please.

  7. I agree with most of these comment’s. It is simple really. $629 before taxes plus $30 per month before whatever fees AT&T is a $1000 device. And that is the 16GB. “The one you want” is at least 32GB and so now it is $1200. Ouch. And that is on TOP of whatever cell plan you are already paying. Too spendy I think for most people. The credit card industry will love the day this device comes out.

    Wait until the 2G version and save some bucks and wait until the competition at least drives prices down.

    1. Alfredo Padilla Chris Tuesday, March 2, 2010

      Chris and others,

      I’m not arguing that you should definitely buy the iPad with 3G, I’m sorry if the article came across that way. Rather I’m saying that in the world of data cellular pricing, the iPad’s pricing model is a good deal by comparison. I, for instance, am still not sure whether I’ll go with the 3G iPad, stick with the Wi-Fi version or wait for the next generation.

  8. I can’t access the network at work, and have averaged 670MB per month so far.

    1. Alfredo Padilla Galley Tuesday, March 2, 2010

      That’s good to know, and the 250MB plan is definitely not right for some people, but if someone like me can get away with it on a month to month basis I think it could be a good fit for the vast majority of people.

  9. You’re right, the two iPad data plans are good ones. Apple should negotiate something similar with AT&T for the iPhone and, when the exclusivity ends, with other cellular providers.

    They ought to also negotiate a plan with the same data caps but that can be share between an iPhone and an iPad. It’d help convince people to own both.

  10. Tough to say whether this argument is true with respect to data usage. On one hand, the iPad is a larger device and the benefit of its mobility is much more comparable to a netbook than a phone (I’m talking about the mobility aspect only). That is to say that people may well use this in a lot of areas where they have a good chance of using WiFi. So you’re right, they will use a lot less data in that respect.

    But ultimately, this is a device that is ideal for the consumption of video. If they starting coming up with all these new ways to read a magazine like they’re starting to hype, you’re going to see quite a bit more video interactivity. With a screen like that, it begs to be used for video. That’s likely to be a bandwidth monster.

    What would impress me the most is if you had a choice…

    1] Signup for a 250MB plan for $15 and if you exceed 250MB you stop using data.
    2] Signup for a 250MB plan for $15 and if you exceed 250MB you push into the $30 unlimited plan.

    Call me a skeptic, but my guess is that they are going to default you into option 2. Either approach will have people that support it/hate it. My hope is that they allow the customer to make the choice easily.

    What no one wants to see is data “overage” charges. People will flip out if that happens.

    1. SteveNYC,

      Actually I think you’re giving them too much credit, what they’ll do instead is option 3: start charging you outrageous fees per MB once you pass the 250MB limit. That’s standard in the wireless industry, if they do end up offering either of you’re two options I’d be thrilled and it would be another step forward for consumers.

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