This morning I chatted with Glenn Lurie, president of national distribution at AT&T, about the carrier’s strategy to embed wireless access into anything that isn’t a smartphone, netbook or PC. He said AT&T is working to find pricing models that may include prepaid data plans (we think that’s a good idea) to make 3G access on devices accessible to more consumers.
“There are different classes of devices, and you need to deliver different pricing models if you want to sell more than four of them,” Lurie said. “The reality is you need a whole plethora of pricing models, from our biggest monthly plans to the smallest, and all the way down to prepaid and session-based plans.”
Since the phone market in the U.S. is saturated, (although wireless data use is still growing) carriers are looking for other sources of growth. While getting $2 a month to provide wireless transport to an e-reader isn’t the same as $50 from a cell phone subscriber, there are still profits to be made, and AT&T doesn’t plan to leave them on the table anymore.
“If you had asked me five years ago if we would be doing this, you may have gotten a different answer,” Lurie said. “The goal of finding this incremental revenue is to make money. There is a lot of baggage around average revenue per user (ARPU), but these incremental revenues may bring in $1 per subscriber per month at 50 points of OIBDA [margin] on that dollar.”
Lurie says that from a financial perspective, he expects carriers to start breaking out those segments into greater detail. Carriers may include ARPU, net additions and other information broken out for post-paid, pre-paid and emerging subscriptions. Some of these services for emerging devices have the potential to be like text messages, which use a minuscule amount of data, but are very profitable.
But to make this vision a reality, Lurie says, AT&T needs different pricing models for various classes of devices. He also thinks many of these devices will have access to both a 3G and Wi-Fi radio, and will be able to seamlessly and appropriately switch between the two. AT&T introduced some pricing innovation earlier this year by offering a bundled plan for at-home and mobile access, and Lurie says it plans to do more. He outlined several areas where AT&T wants to offer data access:
- Computers: This consists of smartphones, netbooks and notebooks. AT&T currently has a $60-a-month plan that allows a user to download 5GB per month (when I asked if an all-you-can-eat, unlimited plan was coming, Lurie said that was the 5GB plan), and a $40-a-month plan that allows a user to download 250MB. Lurie said session passes, day passes, and maybe even prepaid would work here as well.
- E-readers: The Kindle has made this a familiar category, and Lurie said the idea of including the cost of access with a subscription is a strong model, but there may also be ways to charge monthly or session-based fees for data access.
- Location-Based Services: These are services for tracking children, pets packages, etc. Annual subscription plans or even including a one-time wireless transport charge when someone buys the device are possible models.
- Everything Else: On the consumer side, this includes things like having a digital camera with 3G access than can ship photos to a picture frame or cell phone. Lurie thinks prepaid options could work here, especially if AT&T was able to deliver an iTunes-like experience where AT&T had a user’s credit card on file. AT&T could notify users that they have the ability to send two more pictures, and ask them if they want to buy more access. Obvious pros are that a consumer doesn’t have to muck around with counting bytes, or make a commitment.
Lurie also mentioned portable navigation devices with cellular access and efforts on the industrial side, such as providing wireless access for smart meters, as areas for growth.