Wednesday, March 3, 2010

iPad’s 3G Pricing: Why It’s So Great

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 data plans with AT&T 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:How AT&T Will Deal with iPad Data TrafficWith The iPad, Apple Takes Google To the MatWeb Tablet Survey: Apple's iPad Hits Right Notes

[link to original | source: GigaOM | published: 11 hours ago | shared via feedly]

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