iPad’s 3G Pricing: Why It’s So Great

40 Comments

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 (s aapl) data plans with AT&T (s att) 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:
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40 Comments

Dailyator

Well wish I would have read this one earlier, but I did here about this when it happened. Glad someone has pointed it out.

mkohpotts

You say: “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.” Here you’re assuming wireless access at home and at work, so you conclude you get “everywhere” access for $15 a month.

As others pointed out previously — let’s assume you’re right, and you can use your iPad to access wireless at work. I can’t (corporate security), but if you can, you’re free riding on the work network all day.

But at home, if you’re using wireless, who’s paying for that connection? If we assume internet @ home via DSL or cable is $20-30, you’re still up to a total of $35-45 bucks for home + out of the house access.

If you’re single (and therefore don’t need to share internet at home w/ spouse, kids) you might just pay the $30 for unlimited data on the iPad…. but then you’re not getting wireless on your laptop / home computer. Not tenable.

I’m still deciding what direction I’m going on iPad. But I find it hard to justify paying for internet at home, PLUS paying for my iPhone data, PLUS paying for iPad data.

RawIsWar

A nokia phone with 3G comes for 150 bucks … and they have us believe that it costs 130 for just the 3g modem?? this is clear shenanigans. plus, the 5G (or unlimited in their lingo) data plan may seem enough for the iPhone heavy user. but start watching hulu (or netflix as in yesterday’s announcement), before long att would be inundated with such such requests/ demands as will never be honoured by anyone. Why would you want an iPad to check RSS feeds.
I cannot accept your comparison of iPad to a computer. Also, the 3G modem charges you make comparison with (desktop you say) is outrageous … but you can get one for 50 bucks most of the time (boingo offers no-contract service – although i cannot attest to the quality). the best thing people can do now is wait for apple to allow at least user multi-tasking. 10 hrs is a joke compared to most netbooks out there (considering this runs at most 3 apps at a time – plus a custom mobile OS).

Eina

Call me when they let me have 1 account with unlimited sim cards for all my devices. I’m not going to pay for 4 data packages for my handphone, my USB dongle for my notebook, my GPS unit and an iPad.

Miguel

If you live in US you can try MiFi (“google” it to know). Here, in Europe, we have MiFi, too, and many telecoms sell USB dongles with a WiFi base conector. One month fee for all your devices (while they have WiFi, of course).

BC

Good article … I was going to buy the 64 GB iPad Wifi but I now I may go for the 3G with the $15 per month plan for when I need to travel. The connectivity and what the iPad does matches my basic needs. I know netbooks may do more but gee they seem part of the ‘old world’ now. We’re in the pad or tablet world now. Actually, if the iPad had a VNC app I could set case studies to run on a desktop. I like the iPad’s minimalist, low energy, green world approach. If it does 90% of the basics it the way to go … the 3G is gravy (if it works).

bluejayz

The iPad will be able to use VNC clients on that already run on the iPhone. As long as the developers did not hard code the screen size to the dimensions of the iPhone screen, you will be able to run it day one on iPad.

plm

The 3G iPad also has GPS and the WiFi only does not. That accounts for some of the difference in price.

iphonerulez

It’s always the same thing. An iPad can’t do all the things a netbook can. That’s probably a good thing for low-tech consumers. It will be far simpler to use and probably a lot easier for them to master the same as the iPod Touch is.

RawIsWar

when they realize the documents they edit are not really not full compatible with doc type. And that they have to pay extra to use the service. and they cannot open a lot of video and audio formats.

tom

i really would like to see apple next release an updated ipod touch with built in 3G and these same prepaid data options available. i really find i prefer a very simply clamshell cell phone for voice and a smartphone as a data only device that i do not carry at all times. a 3G ipod touch would be perfect for me along with this type of plan.

Mark

I like your thinking Tom. As much as I love my iPhone, I could very well make do with an iPod Touch with 3G. Since most of my use of data in the iPhone is usually on WiFi compounded with the lousy service I get from AT&T, I would save a few dollars on data, move to another carrier and get a smaller cell phone,

Ed

You fail to make 1 glaring observation….

The iPad can’t do HALF the things a netbook can. That fact that you think some people can use the iPad on 3G and not reach 250MB proof in the pudding.

The iPad is an overgrown iPod Touch.

The only “Great” thing is that you don’t have to sign a contract which I am sure is simply a factor of AT&T being so scared of doing anything against Apple.

SteveNYC

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.

Alfredo Padilla

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.

Mike Perry

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.

Alfredo Padilla

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.

Chris

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.

Alfredo Padilla

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.

Mike

@ MikeMoreira

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

MikeMoreira

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.

Josh Pigford

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

MikeMoreira

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.

Cold Water

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?

Kasper

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…

Eric

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.

Alfredo Padilla

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.

KenC

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.

Stevo

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.

Comments are closed.