The forthcoming Samsung Galaxy Mega may have a screen only 0.7 inches smaller than the Nexus 7, but Sprint doesn’t view the Mega as a tablet, rather as a phone – at least it’s selling it like one. Sprint revealed on Monday that when the Mega goes on sale later this year, it will come with the same unlimited data options as its regular smartphone plans.
This is interesting because the Mega doesn’t fit neatly into the strict dichotomy carriers have created for smart devices. For carriers that still offer unlimited plans like Sprint and T-Mobile, smartphone plans can be unlimited, but tablet plans cannot. The reason comes down to a basic cost-benefit analysis. While there will always be some customers that consume vast volumes of data when the network spigot is left open, the average smartphone usage (currently about 1 GB a month at the major U.S. carriers) is low enough that the carrier still gets a healthy return on unlimited plan pricing.
The thing about tablets is that they’re much more immersive devices than smartphones. Their larger screen sizes and longer battery lives promote hardcore data usage: more multimedia streaming and higher quality video streams, a PC browsing experience rather than a handset browsing experience, and “HD” apps versus standard smartphone apps. Several studies have shown that the typical cellular-enabled tablet eats up to three times the data of the typical smartphone.
The common wisdom among carriers since the birth of the connected tablet is that they’d be crazy to unleash slates on the network without clearly defined data caps.
But the Mega and increasing number of large-screen “phablets” are mucking up the carriers’ math. Presumably a consumer would use a 6.3-inch Mega the same way they would use a 7-inch Nexus or a 7.9-inch iPad mini. That means a big influx of Mega users could increase average data consumption on Sprint’s network without increasing its revenues.
So why is Sprint allowing the Mega as an unlimited data device? My bet is for simplicity’s sake. Sprint lately has made a big deal of its commitment to unlimited data. The last thing it wants to do is quibble with its customers over what constitutes a tablet and what constitutes a phone. Remember the Mega has all the functions of a phone – it makes calls and texts – so Sprint simply couldn’t shove it into its data-only mobile broadband plan category where tablets typically reside. Unless it treated the Mega like any other smartphone, it would have to create a special set of plans for it.
Also, while the Mega is a handsome device, it’s probably not going to sell in enough volume to have a big impact on Sprint’s revenue models. This is going to become a bigger issue for unlimited carriers, though, as more hybrid devices make their way into the U.S. market. As Kevin Tofel points out, a lot of device makers are putting core mobile phone functions into their 7-inch slates. Those features are typically disabled when the devices make their way to the U.S., but that may not always be the case.
Carriers will have to decide whether to treat these devices as phones or tablets. That decision will be far easier at carriers like AT&T and Verizon, which did away with unlimited plans long ago. They’ll simply attach the tablet/phone to their shared data plans just like any other gadget and then charge customers separately for their voice and SMS services. (Update: AT&T confirmed it will sell the Mega like any other smartphone: available on it both its Mobile Share and individual plans as well as to customers grandfathered into its unlimited plans.)
For Sprint and T-Mobile, the decision will be more difficult, but I wouldn’t feel too sorry for them. They will still make plenty of traditional service revenue on these hybrid slates even if they make less money on data. They may sell you a Mega with an all-you-can-eat gigabyte buffet, but you won’t have the option of turning down the voice-and-text salad bar.