Verizon’s Shared Data Plan is Revenue Neutral for a Single-User Account

New Verizon Wireless shared data plans are designed to encourage uptake of connected tablets and smart phones. The impact on a single-user smart phone account probably will be "revenue neutral" for both Verizon Wireless and any single smart phone account.

And that was intentional, obviously. Ideally, Verizon Wireless would find the new plans provide incentives for group accounts to add smart phone and tablet devices, while not cannibalizing the single-user accounts.

Verizon Wireless seems to have done so. If one compares the existing cost of a single smart phone,   with a $40 a month plan including 450 anytime minutes, $20 for unlimited texts, and $30 for 2GB of data, plus $30 for 2GB of data on a connected tablet, the person who owns both devices is currently paying $120 per month for the two devices.

With a shared plan that bumps them to unlimited minutes and shares the whole 4GB of data between devices, their monthly total also costs $120 a month.

But the more telling analysis is the cost for a user who does not connect his or her tablet to the Verizon network. Using the same plan as above, that "phone only" user spends $90 a month just for the phone account.

Adding the tablet represents an incremental cost of $10 for the access. Assuming that user upgrades the data plan to about $70 a month (4 Gbytes), Verizon gains an incremental $40 in mobile data spending, for an incremental increase of $50 a month for a single-device smart phone account adding one connected tablet. That's a significant increase in recurring revenue.

If the single smart phone user only wants to upgrade the data bucket to use the personal hotspot feature, the incremental revenue is $40 a month. That is serious money if enough users upgrade.

Verizon Wireless: Biggest Change in Consumer Mobile Pricing in 10 Years

In 2011, about 57 percent of all U.S. mobile subscribers were enrolled in family plans for voice and texting. In a big move, Verizon Wireless has announced "Share Everything Plans" that Verizon Wireless says "will forever change the way customers purchase wireless services." That probably is not hyperbole, even if some U.S. mobile service providers do not yet agree. 


Share Everything Plans include unlimited voice minutes, unlimited text, video and picture messaging and a single data allowance for up to 10 Verizon Wireless devices.  


In addition, the Mobile Hotspot service on all the devices is included in the Share Everything Plans at no additional charge, Verizon Wireless says.


The Share Everything Plans debut on June 28 and will be available to new, as well as existing, customers who may wish to move to the new plans. 

To get started on a Share Everything Plan, customers first select the devices they want on their accounts. That requires a $40 monthly access fee for smart phones. 


The next step is to choose a plan that includes unlimited minutes, unlimited messages and a shared data allowance that begins at 1 GB for $50.  


Customers adding a tablet on their Share Everything Plans can do so for an additional $10, with no long-term contract requirement. The following matrix shows pricing for an account with several different devices, such as a smartphone, a tablet and a basic phone, billed to the same individual.

Step 1	Step 2
Monthly Line Access (per device)	Shared Minutes	Shared Messages	Shared Data	Monthly Account Access (shared with up to 10 devices)
Smart phones - $40 Basic Phones - $30 Jetpacks/USBs/ Notebooks/Netbooks - $20 Tablets - $10	Unlimited	Unlimited	1 GB	$50
	Unlimited	Unlimited	2 GB	$60
	Unlimited	Unlimited	4 GB	$70
	Unlimited	Unlimited	6 GB	$80
	Unlimited	Unlimited	8 GB	$90
	Unlimited	Unlimited	10 GB	$100

67% of Small Businesses Use Tablets

Nearly all small businesses (96 percent) surveyed on behalf of AT&T report they use wireless technologies in their operations, with almost two-thirds (63 percent) indicating that they could not survive — or it would be a major challenge to survive — without wireless technologies.

Some 43 percent of small businesses surveyed report all of their employees use wireless devices or technologies to work away from the office, a nearly 80 percent jump from three years ago.

Perhaps more surprisingly, 67 percent of small businesses surveyed indicate that they use tablet computers, up from 57 percent a year ago. AT&T says.

Video Charging is the Big Issue to be Solved

It is hard to escape the notion that video applications are the key issue for access providers, especially mobile access and service providers. As has been true on the global backbone networks for some time, video is the predominant traffic type.

And since video bandwidth is between one and two orders of magnitude more intense than any other application (voice, for example), the transition to a largely video-driven usage mode has serious implications for access providers.

You don't have to agree with any particular method for cost recovery to note that video really is the preeminent bandwidth problem, going forward. Up to this point, end users have paid the charges. But there are other obvious models. No subscriber to a video entertainment service pays for "bandwidth" in a direct sense.

Consumers pay for access to content, and the bandwidth costs are simply part of the overall cost of creating and delivering the experience. Someday, that principle might have wider application.

 

Top European Regulator Calls for Telco Mergers

It isn't every day that one hears a major telecom regulator call for significant consolidation of providers in a market. But that is precisely what Europe's top technology regulator, Neelie Kroes,European Community commissioner for the "Digital Agenda," says is necessary in Europe.

Further mergers would create  a handful of strong cross-border telecom leaders, which can invest more in mobile and broadband networks to close the gap with the United States and Asia, Reuters reports.

To be sure, Europe's market is more fragmented than that of the United States, China, Canada or Australia, larger countries where a relative handful of leading firms already is the pattern. To the extent that communications is a scale business, larger size makes a difference.

What might not be so clear is the extent to which a wave of mergers and consolidation necessarily would provide a better climate for investments in fiber to home facilities the EC wants to see built.

At a tactical level, current calls for even-lower wholesale rates for leasing copper access facilities to competitors will create a worse climate for fiber investments.

Entertainment Spending Grows, Digital Grows Faster

The communications and major media businesses are alike in some ways. The economics of the businesses favor firms that can operate at scale.


Both have a business-to-consumer as well as a business-to-business component. Among the differences is the advertising revenue models that are more important for much of media. 


Communications still is dominated by subscription sales.


But the "media" business is fundamentally unlike the communications business in one sense. It is based on "scarcity" to a much greater extent than the communications business.


Media also is about "audiences," not "subscribers" or "users." That is not to say subscribers and users are unimportant.


It is to say that media succeeds only when it creates engagement and attention. And that turns out to be a matter of "art," not science.


There is plenty of "media" produced and consumed, but precious little of it attracts any significant amount of advertising support.


That scarcity accounts for the different pricing mechanisms in media and communications. 
Where retail prices can, and do, rise every year in media, prices tend to decline in communications, even as both types of industries shift to a digital format.

Global entertainment and media spending on digital advertising and consumer formats increased by 17.6 percent in 2011, for example, according to PwC.

Digital's share of total spend will grow from 28 percent in 2011 to 37.5 percent in 2016, and digital spending will account for 67 percent of total entertainment and media spending growth to 2016.


That includes both consumer spending on content as well as advertising.


Global spending on digital recorded music formats will overtake physical distribution in 2015, reaching 55 percent of total revenues in 2016.


And global spending on online and wireless video games will overtake console and PC games revenues in 2013.


By contrast, the digital component of consumer magazines will account for only 10.4 percent of spending by 2016, up from 3.1 percent in 2011.

Wi-Fi Overhead Becoming an Issue?

Wi-Fi, the well-known standard for wireless internet, is reaching its technical limits in areas of high usage, a study suggests. Wi-Fi efficiency, measured as a percentage of theoretical ability to handle "bearer" traffic, compared to signaling overhead,  drops significantly in busy surroundings where many different networks and numerous wireless internet enabled devices are operating, the study suggests.

In some cases, the amount of bearer traffic that can be carried can drop to less than 20 percent.