Apple's (NASDAQ:AAPL) new iPad is encouraging more consumers to consider mobile broadband than its predecessor, but it's unclear how loyal those users will be to wide-area wireless once the service bills start rolling in.
The iPad is setting the stage for additional mobile broadband adoption as more buyers opt for the LTE-equipped version of the device rather than the Wi-Fi-only one. In a research note, UBS analyst John Hodulik is predicting a nearly 50/50 split between new iPads with Wi-Fi only and versions loaded with LTE connectivity. "The new iPad is available with Wi-Fi only or with 4G connectivity (LTE and HSPA+). While roughly 60 percent of prior iPad sales were Wi-Fi only, we believe the mix for the new device is closer to 50/50. With an HD screen, faster processor and higher-resolution camera, we believe this device will drive demand for faster connectivity," said Hodulik.
AT&T said it set a new single-day record for iPad activations and UBS believes Verizon saw similar demand. Hodulik noted that Verizon Wireless' (NYSE:VZ) extensive LTE coverage--the company surpassed 200 markets this week--positions it nicely for LTE-equipped iPad sales vs. rival AT&T Mobility (NYSE:T), which has less than a third as much LTE coverage.
However, there is a question regarding whether those who buy tablets that can connect to wide-area wireless networks will actually sign up or maintain subscriptions on those networks. A new report from Chetan Sharma Consulting contends that 90 percent of tablet users are only using Wi-Fi, even if their tablets have cellular data capabilities.
That's not surprising, given how quickly tablet computer use can suck up a mobile data plan's megabytes. Verizon has said the viewing of high-definition videos on an LTE connection can use 2GB of data in an hour.
The Wall Street Journal interviewed several users who were shocked at how much data they have consumed since getting their new iPads last Friday. One AT&T customer, who had found a local café's Wi-Fi data stream too slow for viewing videos and other clips on his new iPad, relied instead upon AT&T's macro cellular network and consequently used up two-thirds of his monthly allotment of 3GB in only five days of iPad ownership.
Owners of the new iPad who do not want to pay more to get larger data buckets with their wide-area wireless service plans may shift their data consumption partially or entirely to Wi-Fi, if they can get satisfactory service. Alternatively, they might just cut their iPad video consumption.
Operators are adjusting their data plans slightly with an eye toward affordability. For example, Verizon has said it will unveil this summer account-based billing for data, which is sort of like a device family plan that will enable customers to use a bucket of data gigabytes across devices. "We believe this will spur usage, driving higher ARPU. We expect AT&T to announce a similar data plan as well," wrote Hodulik.
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