SEATTLE--The majority of customers who buy tablets from AT&T Mobility (NYSE:T) purchase tablets with 3G connectivity and activate and use that connectivity. Speaking at the Mobile Future Forward conference here, AT&T Mobility's Glenn Lurie, president of emerging devices, wholesale and partnerships, said that most customers purchase 3G-enabled tablets in conjunction with a prepaid data plan.
Lurie's comments are noteworthy, particularly considering research firm ABI reported in June that only one-fourth of Apple (NASDAQ:AAPL) iPad tablets shipped in the first quarter of 2011 supported 3G cellular networks. At the time, ABI noted that the first quarter figure was significantly lower from previous quarters and just below the industry average of around 35 percent.
But Lurie said in AT&T's experience most customers buy devices such as the iPad with 3G connectivity because they want to have the option to connect with cellular if they need it. And once they use the cellular connection, they don't want to stop. "This is about education. Customers tell us that they buy a device with 3G just in case they need it. But once they need it, they never want to go without it again," Lurie said.
When it comes to the business model for connected devices, Lurie admitted that many tablets today are structured similar to smartphones, meaning that operators are offering tablets with a subsidy in exchange for a two-year service contract. However, he noted that AT&T also provides prepaid data plans for tablets that appeal to customers who don't want subsidies or a two-year commitment.
But subsidies are a concern for Danny Bowman, president of the integrated solutions group at Sprint Nextel (NYSE:S). Bowman said carriers should not subsidize embedded wireless devices like they do smartphones because doing so will result in lower average revenues per user. "We need to make sure applications--whether they are consumer, industrial or enterprise--must have compelling ROI before you consider a subsidy."
Lurie agreed with Bowman, saying that he believes subsidies will only exist in the tablet area. But he also said that everyone in the ecosystem must be aligned--whether it's the software module makers, carriers or software developers--if they want to break away from the subsidy model and make sure everyone prospers.
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