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Analyst: Operators must cut fees on shared data plans

Mon, 08/13/2012 - 3:23pm
Maisie Ramsay, Wireless Week

A well-known industry analyst is telling wireless operators to cut fees on shared data plans.

The bucket data rates introduced by Verizon Wireless and AT&T this summer come with steep surcharges for adding devices, even though each device draws from the same pool of data.

"While it is a great start, to be truly effective, some of the fees need to be reduced or completely eliminated," Chetan Sharma stated in a report released yesterday. Sharma heads a management consulting and strategic advisory firm focused on the wireless industry.

Cutting the fees could increase the plans' attractiveness to subscribers, helping drive up consumer demand and increase revenue.

The shared data plans met mixed reviews when they made their debut earlier this summer.

Verizon's plans, mandatory for customers purchasing subsidized smartphones, are more expensive for some subscribers than its previous data options. AT&T's are voluntary, but like Verizon's, charge costly monthly fees for adding devices.

AT&T's shared data plans will become commercially available Aug. 23; Verizon's went live on June 28. Both Verizon and AT&T's shared data plans include unlimited voice calls and text messages.

With nearly every consumer in the country already owning a cell phone, it is becoming increasingly difficult for operators to find sources of organic growth. Sharma reported that revenue from new subscribers fell below the 5 percent mark for the first time during the second quarter, and he expects that number to drop to 3 percent by year-end.

As a result, operators must glean more income from their existing subscribers by upgrading them to smartphones and rolling out new products.

"This means that the new revenue will have to come from: a) converting non-data to data subs, and b) launching new services in different verticals for the existing subs," Sharma said.

Sharma said the number of prepaid subscribers in the United States passed the 100 million mark for the first time last quarter. Given that prepaid customers are less lucrative than postpaid subscribers, "the significant opportunities are in the [smartphone] upgrades and non-data to data conversion," Sharma said.

Smartphone penetration in the United States currently hovers just past the 50 percent mark, allowing headroom for growth. More customers are buying tablets and other devices in addition to their smartphone – another opportunity for expansion.

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