with Glenn Lurie, president of emerging devices, wholesale and partnerships at AT&T Mobility
AT&T Mobility (NYSE:T) is known for its emphasis on wireless connected devices. The company was one of the first operators to create an entire business unit devoted to this area and is considered a leader in the number of consumer connected devices (i.e. tablets, navigation devices and more) it has on its network. FierceWireless Editor in Chief Sue Marek recently sat down with Glenn Lurie, president of emerging devices, wholesale and partnerships at AT&T Mobility to talk about whether consumers are really using 3G to connect their tablets (vs. Wi-Fi), whether multi-device rate plans are on the horizon and when we will see more affordable LTE-enabled tablets.
FierceBroadbandWireless: Glenn, you've talked before about multi-device, or family plans for devices for quite some time. When do you think this type of rate plan will be a reality?
Lurie: I think at some point they are going to be a reality but I don't know when. I think the concept is good but it depends on how you structure it. Also for the carriers it's a complex one because today you have to look at your base and understand where and how you want to deliver that. And you have to deliver something that is simple to customers. I've told you this before, we are looking at it and evaluating it but nothing to announce today. But at some point I do think the industry will go there.
FierceBroadbandWireless: One thing that prompted me to ask you this is that research firm ABI recently said that a lot of tablets are purchased but the 3G connectivity is not activated, or rarely used. Instead tablet buyers use Wi-Fi to connect and the reason is price. Is that true?
Lurie: I disagree with that. We have more tablets on our network than anyone else. We've been very successful with the iPad and others. But what we are seeing is that if you are fair with your rates customers are not only willing to buy but also to activate. With our prepaid rates, or session-based rates, we let people buy a day, a week or a month. They can turn it on or off and if they want to use Wi-Fi that's fine with us. The goal here is to deliver a terrific customer experience.
We actually just got some research that I was reading and the iPad is still the highest ranked device from our customer perspective of any device that we have ever sold. Obviously, it's a great device. But it's also the experience that they have their relationship with us--being simplistic, being on the screen, the activation. We think that all plays a role in the customers liking and using this device.
FierceBroadbandWireless: You don't agree that most people are buying 3G tablets but not activating them?
Lurie: I agree that the majority of the devices sold are 3G. The price of modules has dropped dramatically which has allowed manufacturers and OEMs to incorporate 3G into these devices. That's great. What I don't agree with is that people aren't activating the 3G. We are seeing a high percentage of those being activated. We are pleased with the metrics we are seeing on the tablets.
We do sell a two-year plan with these tablets but we are seeing more people buy the session-based plans because it's fair and very easy to understand. And it's very easy to use.
On a side note, we did some focus groups and people were saying that they bought a 3G device even though they didn't think they needed it. But then they immediately noted that once they did need 3G, they found that they couldn't live without it. This is one of those things where once someone buys it and tries it, and it becomes a part of their daily activities we will see more and more 3G units purchased, more than are activated and more that are using data.
FierceBroadbandWireless: We've been hearing a lot about the high cost of LTE chips because LTE is so fragmented. What does this mean for the future of embedded LTE devices?
Lurie: Right now LTE chips are significantly more expensive than HSPA or HSPA+. HSPA+ chips are very similar in cost to HSPA and it is significantly less than it was. This is an advantage for AT&T. Many devices I'm connecting that won't need LTE. But some like tablets or computing devices will need LTE. Right now, today our customers have choices. They can put in HSPA+ and get 4 Mbps to 6 Mbps speeds and I can get a reasonable priced module and they feel good about that.
Obviously we are building out our LTE network and we will have that. But our HSPA+ modules will fall back, so will our HSPA modules. If we have an LTE tablet, those customers can fall back to HSPA+ and we have them covered.
FierceBroadbandWireless: What about globally?
Lurie: That module will work with all our roaming partners too. But some of our roaming partners will have LTE in different bands. It depends on where you are. But our customers want to know if they are covered and the answer is yes because of HSPA.
FierceBroadbandWireless: Is there still a gold rush going on among the various operators to get OEMs to put their technology in their devices?
Lurie: Yes, it's very competitive. It's like the smartphone business. Four years ago you didn't have an iPhone. Once the iPhone launched you had an unbelievable amount of innovation around smartphones. Now you want into any store in America and 80 percent of the phones sitting around are smartphones.
The tablet business, I believe, will have a similar maturation. Right now Apple is dominating the space with the iPad. Consumers are looking for choice and yes, we are working with all the OEMs and I want my chips in their devices. But I also expect that they will do deals with my competitors too. That's what OEMs do.
What I'm trying to deliver is the easy activation on the screen, the great rate plans, so that we end up winning the market share game.
FierceBroadbandWireless: Back to the LTE chip price--AT&T recently announced a new LTE tablet from HTC, the JetStream, that is priced at $700. That's a lot. Is it because LTE is more expensive to embed in devices?
Lurie: You have to ask HTC that question. But the bottom line is that with new technology there is a higher price. I get asked all the time about when the price of smartphones is going to come down. Now they are, but some of the higher end devices have quad-core and more memory and nicer cameras.
I think you will see a good, better, best scenario with tablets that you have with smartphones. The Acer tablet we just launched you can get in the low-$300 range with a two-year contract. You will see this and a mid-tier and high-tier.
FierceBroadbandWireless: I guess what I'm really asking is will LTE embedded devices be a lot more expensive?
Lurie: LTE is more expensive because the modules are more expensive. Will it drive the price up hundreds of dollars more? No. But there are people that are willing to pay for the speed of LTE. Have you played with that tablet yet? It's great. It's very, very fast.
People are walking into our stores now and will see all our tablets and other devices. You will see choice. That's going to give customers what they deserve--choice when they walk into their stores.
FierceBroadbandWireless: You have been putting more of your embedded devices in your retail stores and I know that was a big part of the redesign of your stores. Are you seeing that strategy pay off?
Lurie: You have Best Buys and RadioShack and Wal-Marts and they are all our partners and they sell these devices. But we want to show our customers when they walk into our store all the things we are doing. AT&T's market share lead in consumer embedded devices is significant.
FierceBroadbandWireless: Do you think your lead in market share is based upon that retail strategy?
Lurie: I wouldn't say it's that. We were early and we had a great head start in this area. Our relationships with our partners are very strong.
FierceBroadbandWireless: What about 2G? Are you still deploying 2G embedded devices? Are you thinking of sunseting the 2G network?
Lurie: We have made no statements about that. We are still deploying some 2G devices. But in many cases the cost between the 2G module and the 3G module has become so small in terms of cost that it makes more sense for most of our partners to go to 3G. Most of our partners are seeing the benefits of 3G and want to future-proof their products with 3G.
A lot of the price issues with 3G modules have gone away. 3G modules were running in the $70 range and now are down in the $20 range. 2G modules are in the high teens. So that's such a small difference in cost that partners are seeing the benefits of going to 3G.
I will say this, I have some competitors that are driving people to LTE as fast as they can and I would just say that may not be in the best interest of the OEM or the customer because they have to foot the bill for something they may or may not need in terms of speed.