Sorry, carriers, 9 out of 10 tablets sold are Wi-Fi

tim cook new ipad

Approximately 90 percent of all tablets in the U.S. relied on Wi-Fi over 3G mobile broadband last year, according to industry analyst Chetan Sharma. In his most recent wireless market update report that summarizes the industry in 2011, Sharma suggests that carriers aren’t a needed distribution chain for slates; at least not yet.

Perhaps more interesting is Sharma’s chart comparing U.S. tablet sales between Wi-Fi and cellular tablets. Although mobile broadband networks are expanding in coverage and rising in speeds due to next-generation technologies such as HSPA+ and LTE, there isn’t a huge increase in the number of 3G-capable tablet sales. And my suspicion is that most tablets with integrated mobile broadband are iPads for two reasons: The obvious first is that the iPad is the top-selling tablet, but the more important reason is the lack of carrier subsidy and 3G plan commitments.

Wi-Fi vs cellular tablets

This point gets back to a poll I ran just over a year ago, asking readers if 3G is needed in a tablet or if Wi-Fi is good enough. More than 1,300 responses came in with nearly 54 percent suggesting that Wi-Fi-only was more desirable. That’s a much lower result than Sharma’s sales figures, but with our more tech-centric readership, it’s not a total surprise.

Polls aside, why would Wi-Fi be more desirable in a tablet to most people? For starters, a Wi-Fi device typically has a lower up-front cost; even the new iPad with with 4G LTE service adds $130 solely for the option of using mobile broadband. Second is the contract commitment of a 3G or 4G tablet. Apple’s iPad is the lone exception here as there is no contract required. Instead, iPad owners purchase mobile broadband data a month at a time or simply choose not to use the feature.

But for all other tablets sold with mobile broadband connectivity, there’s typically a two-year contract as the carrier has paid for part of the hardware. That means consumers are paying for mobile data each month, whether they use it or not. And there’s another issue with this model: the device life cycle. The mobile industry is changing so rapidly that a tablet purchased now could be perceived as “outdated” in as little as nine to 15 months due to hardware advances. That doesn’t mesh will with a 24-month device commitment with early termination fees upwards of $350.

Contracts don’t make sense anymore

Lastly, there’s the issue of multiple data plans. Although I’ve seen no hard numbers demonstrating it, my gut tells me that most tablet owners already have a 3G- or 4G-capable smartphone. In other words, a tablet isn’t likely to be the first mobile broadband device one purchases. If true, it means that tablet owners are getting a second data plan with carriers, which isn’t appealing. As Sharma notes, however, that’s likely to change soon:

“Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. We expect family data plans to be introduced in the US market soon.”

I agree with his assessment; family or shared data plans will help, although the devil’s in the details of such plans. If carriers continue to subsidize the hardware and require long-term contracts for tablets however, I don’t see the situation changing anytime soon.

I give up on integrated mobile broadband… for now

Personally, I like the freedom of using a connected tablet anywhere I want to. But after buying my first slate with 3G back in 2010, I’ve since opted to go with Wi-Fi models. My new iPad and my Galaxy Tab 7.7 are both Wi-Fi only; if I really need to get connected with either, I’ll simply use my phone as a temporary hotspot and skip both the long-term tablet commitments and extra data plan that’s specific to hardware I’ll likely replace long before a two-year contract. Bring on the shared data plans, carriers, and I’ll reconsider.

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