Sunday, May 20, 2012

Family Data Plans Will Have More Revenue Impact than Capped Plans

Verizon Wireless is getting ready to launch a new "family data plan" or "multiple device plan" that could have important ramifications for the whole U.S. mobile business. 


As customers now can buy plans that support multiple users or phones on a single account, so Verizon Wireless is planning to allow users to purchase multiple-device plans where a single bucket of mobile data can be shared across a number of account devices.


That will represent the biggest change in mobile data pricing since the advent of capped plans, but will have more-important consequences. If history proves an accurate guide, Verizon Wireless will sell many more smart phones, while many more users will start to use mobile-connected tablets as well. 


That, in fact, was the reason family plans for voice and texting were adopted as well. At the point where almost every adult already had a cell phone, family plans were designed to effectively lower the cost of adding incremental devices for the one big population of untapped users: teenagers. 


In principle, the same thing should happen as Verizon Wireless and other service providers adopt the same approach. AT&T has said it also will do so, while T-Mobile USA says it will not do so. One suspects that objection by T-Mobile USA will fall, if the plans reshape consumer expectations, as one might suspect will be the case. 


The big difference for family data plans is that Verizon also is trying to wean customers off "unlimited" data plans for smart phones. The "stick" of capped data plans will be counter balanced by the "carrot" of multiple-device plans. 


"A lot of our 3G base is on unlimited," Verizon Communications CFO Fran Shammo said. "When they migrate off 3G they will have to go to data share. That is beneficial to us," Shammo says


One might expect that gross revenue will grow as users adopt the new plans, the same way gross revenues have grown when users have switched to family plans for voice and data. On the other hand, revenue per device should decline. 


Conceptually, family data plans and capped data plans are distinct issues, but are linked to an extent as Verizon is making changes to both policies at the same time. 

Verizon says "customers will not be automatically moved to new shared data plans."  If a 3G or 4G smart phone customer is on an unlimited plan now, and they do not want to change their plan, they will not have to do so. But the expectation generally is that, as new devices are purchased, most of those new phones will be bought with capped data plans. 

The exception is that customers who purchase phones at full retail price and are on an unlimited smart phone data plan will be able to keep that plan. 

Still, the big change is that Verizon's revenue metrics increasingly will shift from "revenue per customer" to "revenue per account." For service providers, the revenue impact of family data plans will have more impact than the shift to capped data plans. 

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