Moving to family data plans simply makes sense

Last week at the AllThingsD D9 conference AT&T Mobility and Consumer Markets (NYSE:T) CEO Ralph de la Vega said the company is "working on" shared data plans. His comments echoed those made last month by Verizon Communications (NYSE:VZ) CFO Fran Shammo, who said it was a logical progression to assume that Verizon Wireless will move to shared family plans for data.

It's still unclear what these plans will entail.  Will a family data plan mean that individuals with multiple devices will have one bucket of data to spread between their smartphone, tablet and other wireless gadgets? Or will it mean that families will have one bucket of data to share among families regardless of the number of devices?  Perhaps it will be a combination of both.

The prevailing dynamic right now is pretty straightforward: virtually all subscribers pay separate data plans for smartphones, tablets and other wireless devices. For operators, this means lots of incremental revenue for every device a user activates. Ken Hyers, an analyst at Technology Business Research, told me that carriers have not moved away from this model because they have calculated that the current system nets the most revenue.

However, as more and more people adopt smartphones--almost 30 percent of Americans now have one, according to comScore--and add tablets, USB modems and other gadgets, the numbers are shifting. Carriers are now seeing if they can make more money by moving to buckets for data without cannibalizing their current offerings. It's the same calculations they were making when they decided to move to family plans for voice.

This shift is inevitable. Imagine a family of four, with two teenage children, and all four have a smartphone. The parents each have a tablet. One parent might commute for work and therefore also have a USB modem so they can work during their commute. "You simply cannot have a family of four with eight or nine data subscriptions," Hyers said.

Technically there is no reason operators can't move to this type of billing structure. "There's nothing technical really to stop this," said Akil Chomoko, who is Volubill's product marketing, strategy and commercialization manager. "It's probably more of a marketing thing."

In my opinion, the marketing campaign writes itself: multiple devices plus one rate plan equals simplicity. Simplicity sells, or so Sprint Nextel (NYSE:S) CEO Dan Hesse likes to say every time he's asked about rate plans. Incidentally, Hesse has also indicated that he thinks moving to shared data plans is the next step.

What are the benefits of such a move, especially for family plans? For one, it creates simplicity in billing for operators. It also creates simplicity in the minds of the consumer. Additionally, it will likely lead to increased customer satisfaction. All of that should translate to reduced churn. Finally, with multiple devices under one plan, carrier data plans will be become "stickier," in industry parlance, just as triple-play packages are sticky. Even if carriers lose out in the short term by moving away from individualized data subscriptions, they'll make it up through all of the other benefits.

Hyers said that what's driving the move toward shared data plans is the combination of LTE deployments and multiple new device categories. The more data usage and more devices should entice carriers to simplify offerings rather than create additional complexity. Hyers said he thinks shared data plans might be introduced as soon as the fourth quarter, depending upon how many tablets and other connected devices are released.

There are some drawbacks to family data plans, as Chomko points out. Each family member has different priorities, and the data in the bucket could get drained quickly if one family member splurges on a data session at the expense of others. That, however, could be solved by potentially setting caps on individuals within the larger plan, or at least sending out alerts to all family members when certain thresholds are reached. Additionally, carriers are likely to move to more personalized data plans, based upon speed and application use. But there's no reason those kinds of plans and family data plans have to be mutually exclusive.

At the end of the day, the shift to family data plans is a no-brainer. It makes sense for carriers. It makes even more sense for consumers. Let's make it happen.--Phil