New iPad highlights need for flexible data plans

NEW YORK Thu Mar 8, 2012 1:20pm EST

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NEW YORK (Reuters) - The new iPad's faster data speeds will likely impress consumers, right up until they get a nasty surprise in the form of increased wireless service fees.

To counter the shock, analysts say AT&T Inc and Verizon Wireless need to get creative with their data pricing.

Apple Inc's U.S. iPad partners AT&T and Verizon Wireless base their mobile Web access fees on customer usage, unlike Sprint Nextel, which does not sell the iPad but still offers unlimited data use for a flat fee.

Buyers of the new iPad who use it a lot on the go may end up paying more than the typical monthly fees, which start at $15 at AT&T and $20 at Verizon Wireless.

Some may opt for a Wi-Fi only iPad in order to avoid service provider fees entirely.

But if operators adjust their data plans, they could avoid upsetting existing subscribers and maybe even attract new ones who might have been leaning toward Wi-Fi only, according to analysts.

"In our view, current tablet data plans offered by AT&T and Verizon seem ill-matched for the new LTE iPad, which has the potential to consume a lot of data," Guggenheim Partners analyst Sing Yin said in a research note. "However, a multi-device data plan could make the LTE option more attractive."

Telecom executives have realized for some time that their pricing models for tablets are unattractive. A vast majority of consumers have voted with their wallets by opting for Wi-Fi only versions of previous iPad models over the tablets with connections to the carriers' networks.

As early as May 2011, Verizon Wireless told Reuters it was looking at data service plan changes.

Verizon Communications Inc Chief Financial Officer Fran Shammo told an investor conference last month that his company would come out with some form of account-based billing by the middle of this year: People in family plans or corporate accounts would be able to share a single bucket of minutes.

This would not eliminate usage-based billing but would give customers with multiple devices more flexibility.

"You have enterprise customers. You have family (customers) who have a number of devices in their portfolio where they would just want to pay a price and share the data instead of buying an individual data plan for each phone," Shammo said.

Such changes could go a long way toward encouraging use of the iPad on the cellular network, UBS analyst John Hodulik said in an interview ahead of Wednesday's launch of the new iPad.

"That will promote people to buy more devices that are connected to the cellular network," Hodulik said. "People are very focused on how much data they use."

Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.

(Reporting By Sinead Carew; editing by John Wallace)

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