What’s in a data plan? Consumers should know their limits

Kansas City StarOctober 30, 2012 

Working up a holiday shopping list? New cellphone, iPad Mini, NetFlix subscription – check, check, check.

Now don’t forget the wireless plan that makes all those family gifts work on the move. Pricing has changed dramatically since last year.

Phone calls and text messages come in unlimited quantities in the latest featured deals from the big four wireless phone companies — Verizon, AT&T, Sprint and T-Mobile USA.

The competition lies in data.

“Data” means the stuff consumers increasingly gobble up as they use wireless devices to browse the Internet, download or update apps, play online games and watch videos. Consumers have gotten used to buying a data plan for each device.

Now, however, the wireless industry has split.

Sprint and T-Mobile continue to pitch their offer of unlimited data plans for cellphones and other devices such as tablets.

Verizon and AT&T have introduced shared data plans. These allow a household to connect up to 10 devices – phones, tablets, hotspots – to one pool of data that they share.

The key: It is a limited pool. Shared data pricing means consumers have to pay more to use more data. It’s just like the traditional cellphone plans that charged more for more minutes of voice time.

Shoppers now need to know how much data they use, and which of their family devices use more of it.

“I use a tremendous amount of data, so I’ve elected not to enter into the shared data plan,” said Sam Hayes, who is keeping his unlimited AT&T data plan on the job at G.W. Van Keppel Co. “Several of our people are in one, but I am not.”

AT&T said 2 million customers turned to its Mobile Share plan in the first five weeks it was available. A third of them bought the biggest monthly pools of data AT&T is offering.

It may be those early adopters were heavy users of data-devouring features. Or they may not want to risk going over the limit; about 15 percent had unlimited plans previously.

“Most people buy more data than they need. They don’t use all that data,” said Steve Baker, vice president of industry analysis at NPD Group, a market research company.

At some point, they might.

Shared data pricing essentially puts a meter on using wireless data. Naturally, the companies are looking for ways wireless customers can consume more data.

Verizon eyes home thermostats, security cameras and medical monitoring bracelets that could one day connect to its wireless network. AT&T sees connected cars in the future.

Bill me

It comes as no surprise to cellphone customers that monthly bills have been getting bigger over the years.

Most of the time, consumers have been paying more because they’re buying more, and not because prices have been going up.

Consumers, for example, agreed to pay more when they bought more minutes to talk, or added phones for the kids to the family’s monthly bill – and more room for teens to text message.

The advent of smartphones bumped up the bill again.

Phone companies heavily discount the upfront price that consumers pay for a new device, say an iPhone5. The phone companies make that money back by collecting a higher monthly bill under the two-year contract required to get a cheap price on the new phone.

Data looks like the next source of higher cellphone bills.

Sprint Nextel, for example, already adds a $10 a month data surcharge for smartphones but not traditional “feature” phones.

Smartphones use more data. And data are what strain companies’ network capacity.

Weighing data

Under shared data pricing plans, companies are starting to charge not by the minute but by the gigabyte. That’s a big chunk of data.

Verizon estimates that one gig of data on its network would allow a customer to enjoy 250 emails, three hours of listening to music online and two hours of standard video (high-definition video uses more data).

How much data do you need?

“More” was Buck Sommerkamp’s answer to that question, even though he had an unlimited data plan from AT&T.

Twice, the Lee’s Summit resident said, he used enough data during a month that AT&T “throttled” his data usage. He could still get data, but only at much slower speeds.

Reluctantly, Sommerkamp switched to a shared data plan and bought 6 gigabytes of data for each month. It’s about twice as much data as he estimates had triggered the throttling under his old plan. But it costs him only $10 to $15 more a month.

For that, he gets peace of mind. No throttling because he’s paid for more data.

“With a little more data to play with, I feel less guilty about listening to podcasts that I’m streaming on the way home as I drive,” Sommerkamp said. “I feel less guilty about downloading a big giant app.”

One shopping strategy would be to buy as much data as you have been using each month. Your wireless carrier, or even your phone, can help you track this information.

Shared data plans charge a penalty for going over the amount you buy, but they also allow you to buy more data during the month without penalty.

Of course, that means monitoring use, which not everyone wants to do.

Verizon, which was the first carrier to offer shared data pricing, said its average device used 2 gigabytes of data a month. T-Mobile USA, which sells unlimited data plans, said its average smartphone user consumes less than 1 gigabyte, but customers with the new Samsung Galaxy S III use 1.8 gig.

Verizon customer Paul Winter works with Sommerkamp and similarly switched to a shared data plan. Instead of his unlimited data plan and his son’s 2 gigabyte data plan, four of the family’s phones now share 4 gigabytes.

Winter is paying a bit extra, too, though so far it is hard to tell how much more.

One feature of shared data pricing will save him money. Winter’s wife is locked into a different plan until December. She’s paying $50 a month but can be added to the shared plan for only $30.

Winter admitted to one other reason for signing up for Verizon’s Share Everything Plan.

“I wanted to get the iPhone5, and I wanted to make sure I was eligible for the five when it came out,” he said.

It is his first Apple Inc. phone. The earlier models always seemed to be missing something, he said.

Not the iPhone5. It uses Long Term Evolution, or LTE, technology. And that is the key to data’s future.

Tech check

It is no accident that the bigger carriers have turned first to shared data plans. These companies have the lead in rolling out LTE networks.

LTE provides the fastest wireless connections and makes it easier, or at least more tempting, to wirelessly use high-data features such as video. Verizon’s LTE network covers more than 400 markets, and AT&T’s covers 77.

Sprint has launched LTE in 32 markets, and T-Mobile USA will start LTE next year.

Last week, Sprint chief executive Dan Hesse said Verizon’s LTE coverage gave it a big advantage recently in attracting new subscribers. Verizon said it added 1.5 million customers under contract in the third quarter this year. AT&T added 155,000, and Sprint lost 423,000.

Sprint has tried to counter Verizon’s broader LTE coverage with its unlimited data pitch. Hesse said consumers can get unlimited LTE data plans from Sprint but will have to wait in many markets for coverage to catch up.

Sprint isn’t planning to switch to shared data pricing, Hesse said, because he sees no evidence it is attracting customers.

Verizon and AT&T, however, see LTE as the path to more data use by wireless consumers because they’ll be able to do more.

“We’re talking about connecting your car with all kinds of infotainment services,” AT&T’s head of mobility, Ralph de la Vega, recently told analysts.

And the more data customers use, the more their phone bills will be going up under shared data plans.

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