Tiered data plans, like the one from Verizon Wireless introduced last month, were specifically designed to not fulfill anyone’s needs. Most smartphone subscribers consume only a fraction of their data allotment each month, but this is still much more than the minimal plan.
While most smartphone subscribers in the U.S. do not even approach the amount of data they are allotted each month by their wireless provider, there doesn’t seem to be a plan from any major company that will specifically cater to the average user. According to a study performed by Validas, a company that analyzes consumers’ cell phone bills, the average data consumption falls into a slot somewhere between the minimum plan and the next highest 2GB cap, depending on the carrier.
Currently, Verizon (NYSE: VZ) and AT&T (NYSE: T) have both eliminated unlimited data plans in favor of a tiered, usage-based offering. Furthermore, AT&T announced last week that it would “throttle” connections, or slow them down, for subscribers with unlimited plans if they exceed this seemingly insurmountable 2GB threshold.
As is the American way, users were extremely irate when they heard about the death of unlimited and now flock to Sprint Nextel, the only major operator still offering the coveted plan. However, the average Sprint customer, while almost doubling AT&T users in data usage, still does not even use 1GB per month, let alone 2GB or beyond.
Willingly overpaying for the service
Based on the chart below, average Verizon and AT&T smartphone users consumed comparable amounts of data in the past year. The AT&T tiered data plans offer a pitiful 200MB of data for $15 or 2GB for $10 more. The plans are structured so that the average consumer will either go over the minimum plan by more than double, or else only use around 21 percent of the maximum allowance.
Verizon Wireless took a different route with its new “usage-based” billing plan. The plan costs the same $30, but it’s now capped at 2GB. Similar to AT&T, the average Verizon subscriber only uses 20 percent of the data that they are paying for (although one wonders if that’s any worse than the percentage of infinite that unlimited users are privy to).
The table below is based on analysis from Validas of more than 47,000 phone bills from June 2010 to July 2011, and shows that average smartphone customers do not have a plan specifically geared toward them.
Smartphone data consumption AT&T Verizon T-Mobile Sprint
Average smartphone data consumption (MB per month) 425.0 394.2 303.9 778.8
Median smartphone data consumption (MB per month) 155.8 100.2 51.4 371.0
While most customers are backed into a corner by having to subscribe to plans that do not suit their needs, they are willing to overpay to cover themselves; no one wants to experience overage fees.
“Most people are OK with paying a little more for data they aren’t using provided they don’t get any nasty surprises,” said Charlie Golvin, an analyst with Forrester Research. “Customers who are price sensitive will walk with their feet and go to T-Mobile, which only charges $10 a month for [200MB of] data.”