The second-largest wireless carrier said its "Mobile Share" plans, scheduled to be rolled out in late August, will give customers the option of subscribing to a common data pool to which as many as 10 data devices could be connected.
However, unlike Verizon, the carrier has decided to play safe and let new subscribers have the option of choosing from one of the current individual and family plans as well. Verizon, which kicked off its Share Everything plans on June 28, had decided to scrap its older plans in favor of data share plans for all new subscribers.
Also, in a surprising move, AT&T has decided not to follow Verizon in prohibiting unlimited users from using smartphone subsidies. AT&T has been a highly vocal critic of unlimited plans in the past and has even throttled its highest data users, so we thought that it would follow Verizon's lead in this regard as well.
However, the fact that a large percentage of its smartphone subscribers still subscribe to unlimited plans (about 33% by some estimates) may have caused AT&T to balk at the idea. (See our
complete analysiscomplete analysis for AT&T.)
Saturated Wireless Market
There is also the risk that following Verizon's decision on unlimited plans may cause some of its subscribers to shift to
, which of late is using its unlimited plans well as a weapon to lure iPhone buyers.
With new subscribers hard to find in an increasingly saturated wireless market, AT&T is trying to cling to its existing base and increase data usage by making it convenient for subscribers to add more connected devices through its shared data plans.
The U.S. wireless market has become increasingly saturated, with wireless connections having exceeded the population in mid-2011. This has made the acquisition of new subscribers, especially those that pay for higher-margin data plans, very tough for the wireless carriers.
For example, in the March quarter, AT&T added only about 187,000 postpaid subscribers, down by more than 40% over the same period last year. The story at Verizon was also similar with postpaid net adds declining from 1.3 million in the year ago quarter to only about 880,000 last quarter.
Connected Devices Show Promise
What is promising is that tablets accounted for almost all of the postpaid net adds for AT&T last quarter. As the wireless industry gets more saturated, AT&T is slowly shifting its focus from adding new subscribers through smartphone subsidies to increasing the demand for more data devices within its existing subscriber base.
The nascent market of connected devices is growing at a tremendous rate as demand for non-smartphone data devices such as tablets, e-readers, M2M devices, and telematics is on the rise. In fact, one of the major reasons why wireless penetration has exceeded 100% is because of the growing demand for these connected devices.
This bodes well for AT&T, which is currently the market leader in the connected device category, with more than 40% market share. However, these are early days and the equation could change in coming years, with Verizon also getting serious about this segment as evidenced by its acquisition of Hughes Telematics last quarter.
Data Share Plans
Therefore, AT&T will look to maintain its lead by fueling demand for these connected devices. The launch of AT&T's data share plans will make it more convenient for users to add more data devices to the carrier's wireless network. Being able to use multiple devices in the same data bucket can potentially decrease the per device costs for a family as well.
At the same time, AT&T will be able to make more out of each user who now has more than one data device. Moreover, since the data consumption of most of these connected devices is low, it will help shore up AT&T's service margins.
In fact, if data share plans see good uptake rates, it will give AT&T an opportunity to decrease the subsidies it offers on smartphones. This will give a positive boost to its margins which have taken a hit due to expensive subsidies offered on smartphones.
But AT&T needs to get the balance right. While the shared plans would reduce customer churn as well as allow more number of mobile devices to connect to the network, thereby earning the carrier more revenue than earlier, it may be passing up on the opportunity of charging more per device and increasing its ARPUs even further.
However, the idea here is that as 4G LTE becomes the new standard, subscribers will eventually need to jump to higher tiers as they increasingly use data intensive applications and connect more wireless devices to the Internet.
Further, since the shared data plans offer unlimited voice calling and texting, we expect AT&T's move to act as a hedge against the falling voice and SMS usage and to support the declining voice ARPUs in the long run.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.