1081RA Verizon Shared Data Plan Signals Carrier Business Model Change
What is Happening? Verizon Wireless rolled out its anticipated “shared data” plan this week. The plan, which emphasizes tiered data usage pricing that can be distributed among multiple user devices on the same account, is set to go into effect over the coming weeks. Much like when ATT Wireless announced its own tiered plan two years ago, debate has begun among consumer groups, public utility advocates, and media regarding the perceived fairness and costs of such a plan.
What interests Saugatuck most about the Verizon plan is that it signals what the ATT plan implied: a fundamental shift in wireless carriers’ business models and strategy. We see Verizon’s core business proposition of this new plan as data first, with voice and text messaging “thrown in;” in other words, voice and texting become subsumed into data-first plans. This is a complete pricing and business model shift from traditional wireless carrier strategy.
Really, it is a tipping point / watershed event in the evolution and use of mobile technology and carrier business models, i.e., from telephony to data streams. The applications for which wireless networks were conceived and built – voice and text (machine) messaging – have become afterthoughts, while data streams become the critical revenue generator, and the driving force of the new carrier business model.
Why is it Happening? Most telephony and wireless industry observers have seen carrier pricing plans like this emerging and developing for quite some time. It’s been clear for at least a few years that voice traffic, while growing substantially for decades, would become secondary to data traffic in terms of sheer volume. Music and video have been the contemporary drivers of that data traffic growth, especially for consumer users. Meanwhile, location-driven app usage (e.g., maps, navigation, e-commerce, shopping) is growing among consumers and enterprise/commercial users, and on the commercial front, the use conferencing and integrated messaging apps is booming as wireless devices and services take over and expand the value of business telephony.
Given the growth of wireless data usage, then, data-usage-centric pricing plans had to emerge.
What makes plans like Verizon’s most interesting, however, is the sharing component that encourages use of multiple devices by a single user or account holder. At the end of the day, carriers are in the network bandwidth business, and will do anything practical and legal to increase traffic that uses bandwidth.
Allowing and encouraging the use of multiple devices does add to the convenience of wireless connectivity for users, and reflects the now-standard home and office usage pattern of using multiple devices via wifi. Verizon is betting that this behavior will extend to non-wifi, cellular data usage, increasing its network traffic and revenue. And the more devices are used by account holders, the more likely it is that at least some will be used simultaneously, again increasing overall traffic – and revenue.
Market Impact We are unlikely to see the disappearance of voice telephony any time soon. What the Verizon plan signals is that voice communication remains an important function, but is no longer a critical feature of mobile device marketing and use. For wireless carriers, the business emphasis, and the marketing emphasis, is different now.
In the US market, this suggests more carrier emphasis on rolling out 4G LTE networks that enable more bandwidth for data usage. It will be interesting to see, though, if network build-out can keep pace with increasing data use. It’s still not unusual to read or hear complaints about slow 4G networks in areas with high concentrations of smartphone use. And given the investment required, and the time-intensive regulatory approval processes in some areas, carriers may end up behind the bandwidth curve in many areas as user demand outstrips bandwidth supply.
We should see continued, and expanded, carrier underwriting of mobile data usage devices, at least in the US market. Carriers will want to get as many devices as possible into the hands of users in order to increase bandwidth use. Where such pricing plans catch on overseas, we will see combinations of carrier service+device bundling well beyond what is seen today, likely with long-term contract deals where such are legal.
For enterprise IT and network buyers and users, we expect to see increased or renewed wireless carrier encouragement and promotion of collaborative IT and services. In the US especially, carriers have long targeted small and mid-sized businesses as customer for networking services, so look for more aggressive SMB-oriented marketing of conferencing, collaboration, and similar services along with the devices for their use. We should see, for example, more aggressive carrier marketing to business buyers and users that emphasizes video conferencing and multi-tasking location-based services.
We may even see carriers get back into selling notebooks and ultrabooks, or bundling wireless data services with such devices via channel partners. Earlier forays into selling computing hardware turned sour when carriers were unable to provide adequate tech support, but the current era of web-based customer self-service, along with a much more PC-savvy customer base, may work in carriers’ favor. Wireless carriers are already selling/reselling tablets today, and the functional lines between smartphones, tablets and PCs will continue to fade.
It is difficult to see at this point what the effects of such plans will have on larger enterprises. Saugatuck’s research indicates that most do not provide their users with wireless devices and services; instead, they negotiate discounted rates and device prices with carriers in exchange for exclusive or volume deals with those carriers. Such pricing plans are unlikely to be bested by Verizon’s latest plan. But plans like Verizon’s are likely to affect, and be affected by, data usage among the growing numbers of work-at-home, mobile, and other decentralized/disassociated users as the Boundary-free Enterprise™ org and management model becomes more established and as use of collaborative/social applications continue to grow as part of daily business operations (1061CLS, Mobile and Social: Building the Boundary-free Enterprise™, 27Apr2012).