While Verizon Wireless following AT&T?s lead to announce plans to phase out unlimited data plans has many marketers alarmed, others say it is not the end of the world.

There is no question that unlimited data plans are ideal for advertisers and mobile content providers, as increased data consumption leads to more interaction with ads and content. However, as long as the limits are not too restrictive, tiered pricing may not have a catastrophic effect on mobile marketing and media.

?The move to demand-based or tiered pricing by Verizon won?t be an inhibitor to the continued expansion of consumers? interest in having a wireless connected life,? said Paul Kultgen, director of mobile media and marketing at The Nielsen Co., Chicago. ?This assumes for the average user their monthly costs don?t skyrocket, and they believe the change in data pricing truly was about having the super-heavy data user pay their fair share.  

?Down the road, as things like video use goes mainstream, it may require individuals to change their behavior, where they start looking at which activities need to be done when connected to Wi-Fi versus on the network given the potential data costs,? he said.

?This is where the carriers really are going to have to educate, so there are no surprises for the consumer when they open the bill.?

The second domino falls
AT&T was the first U.S. carrier to announce that it was phasing out unlimited data plans in favor of tiered pricing (see story).

That was in response to complaints from iPhone users about the spottiness of AT&T?s network coverage, especially in urban areas such as New York and San Francisco that have a prevalence of Apple partisans.

Verizon and AT&T, the top two carriers in the U.S., have been locked in a heated television advertising battle, with the rivals going back and forth about which networks has the best coverage.

After AT&T announced its move to a tiered pricing model, that opened the door for Verizon to follow suit, and now other carriers may do the same.

?Verizon?s current ?unlimited? plan is actually capped at 5 gigabytes per month, so the notion of unlimited is a bit illusory, but probably for 90 percent of Verizon subscribers, that?s more than sufficient, said Noah Elkin, senior analyst at eMarketer, New York. ?That?s what AT&T determined when it released its upper tier with 2 gigabytes per month.?

At the time AT&T claimed that 98 percent of its subscribers did not go over that 2-gig threshold each month.

Verizon has not given any specific guidance about how its data plans will be priced or what they will include in terms of allotted data usage per month.

Whatever the caps end up being, marketers and content providers must hope that they do not serve to significantly rein in the heaviest data users.

?That upper one or two percent, that segment is not particularly price-sensitive, so they will continue using their phone as they always have, because their mobile phone is an indispensible tool,? Mr. Elkin said. ?For the majority of consumers, [tiered pricing] will not have a huge effect on what they feel they are able to do each month.

?If Verizon follows AT&T?s lead and offers a lower price point, assuming that it is within the means of the lower segments of the market, it could actually bring more people onto a data plan, and actually increase mobile data usage, which would actually help Web browsing, app consumption, etcetera,? he said.

?For most subscribers, including most smartphone subscribers, even these lower monthly allotments are more than sufficient, unless you?re watching video for long periods of time, and most people don?t use it for watching full-length movies."
 
4G to the rescue?
Verizon has made its LTE roll-out plans explicit, and with a 4G network providing more bandwidth, the carrier can tier it in a way that subscribers pay for a certain amount of bandwidth or data usage per month.

Some consumers could pay more to have faster speeds, much like land-line Internet service providers have done.

There would be different price points, different network speeds and different tiers of data allotment per month that consumers could choose from based on their data needs.

Many believe the carriers have to move in that direction, given the bad publicity and consumer backlash that results from dropped calls and slow mobile Internet speeds.

?[Verizon?s decision] is not a huge surprise?data caps seem to be the trend that most of the carriers are moving toward,? said Josh Martin, New York-based senior analyst at Strategy Analytics.

?One challenge is that there?s not an understandable correlation for consumers between what activities they?re engaged with and the amount of bandwidth it consumes, so that creates confusion and apprehension,? he said.

Many fear that the end of unlimited data plans could threaten mobile content consumption.

But some analysts believe those fears are overblown.

?When AT&T had data caps and Verizon didn?t, AT&T was modestly vilified when this thing started, but it clearly had the best understanding of the impact of smartphones on its network,? Mr. Martin said.

?A lot of people gave AT&T an unfair shaft thinking they were trying to game the system, but other carriers are realizing this is a legitimate concern they need to address quickly or they will have a problem,? he said.

Will tiered pricing impact the amount of mobile content consumers consume on the go?

One possible solution to ease the burden on carriers is off-loading to Wi-Fi from 3G networks. Mr. Martin said he believes that AT&T has more Wi-Fi hotspots than any other U.S. carrier.

The good news is that whether it is via a carrier network or Wi-Fi, mobile users are not going to stop consuming data any times soon. In fact, data consumption is rising at a steady pace.

?Carriers won?t create a scenario where users can?t do anything, but they have to protect their networks,? Mr. Martin said. ?Consumers won?t be happy about the restrictions, carriers will face a challenge when more media-rich apps are available and consumed, especially video.?

Hulu, Netflix, Primetime-To-Go and Bitbop are all examples of mobile video applications that consume a lot of data.

The popularity of those types of applications are growing quickly, as is the amount of mobile Web browsing, so the carriers better be ready.

?Browsing is actually responsible for most traffic on mobile networks currently, and it is already taxing the networks,? Mr. Martin said. ?As more multimedia content becomes available could become more of a problem.?

Final Take
Dan Butcher, associate editor, Mobile Marketer

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