App Makers Worry as Data Plans Are Capped
For the last two years, unlimited data plans have given app-hungry smartphone users an all-you-can-eat buffet. But will customers react to AT&T’s new, limited menu by simply eating less?
Some software developers fear they will, and if that happens, the caps on data use that AT&T has imposed could also make consumers lose their appetite for the latest innovations. Some developers worry that customers will be reluctant to download and use the most bandwidth-intensive apps and that developers will cut back on innovative new features that would push customers over the new limits.
“What created this lively app world we are in was the iPhone on one hand, and unlimited data plans on the other,” said Noam Bardin, chief executive of Waze, which offers turn-by-turn driving directions. “If people start thinking about how big a file is, or how fast an application is refreshing, that will be a huge inhibitor.”
New features on phones encourage more data use and vice versa. The next version of the iPhone, set to debut on Monday at Apple’s Worldwide Developers Conference in San Francisco, will include a second, front-facing video camera, according to leaked reports. That could conceivably allow developers like Skype to offer face-to-face video calls from phones — a service that is much more data-intensive.
AT&T , the second-largest carrier in the United States after Verizon Wireless, will move to tiered pricing on Monday and will no longer offer new smartphone buyers a simple $30 plan for unlimited data use. Customers will have to estimate how much data they are likely to use on their phone, buy an appropriate plan and then make sure not to exceed their limits.
AT&T and some developers say that the new data plans could have the opposite effect and increase data usage by making it more affordable for most people.
For example, the new $25-a-month DataPro plan, $5 less than the existing unlimited plan, offers two gigabytes of data, which amounts to 10,000 e-mail messages without attachments, 4,000 Web pages, 500 photos and 200 minutes of video. It still sounds like a bountiful meal.
At the same time, however, new features of the iPhone and iPad, which run on the AT&T network, seemed designed to consume more data. They will allow multitasking so a person could play music while reading e-mail. And it won’t take much to hit the limits with video. Download an hour-long TV show to a smartphone or tablet and you’ve used 550 megabytes, or well over a quarter of your monthly allotment. Streaming a two-hour movie from Netflix consumes 300 megabytes.
Morgan Stanley estimated last year that mobile data use would be doubling each year for the next three years.
AT&T says that just 2 percent of its customers use more than two gigabytes a month and that the new data caps have been set comfortably high and will actually lower charges for most smartphone users.
“This might bring more people to mobile, because it’s going to be less expensive for the vast majority,” said Tim Westergren, founder and chief strategy officer of Pandora, the Internet radio service.
Pandora has 54 million users who listen an average 13 hours a month, but fewer than 270,000 of its customers would be constrained by the two-gigabyte plan, Mr. Westergren said.
Improved technology will drive down the cost to the carrier of delivering more data — as much as 50 percent as they move to the so-called fourth generation, called LTE. Presumably, carriers could afford to charge less as customers consume more.
Still, applications that stream high-bandwidth video and route phone calls and face-to-face video chats over the Internet could be seriously affected. Applications that constantly send a phone owner’s location — continually uploading and downloading data from the network — could also face challenges.
Bob Bowman, chief executive of MLB.com, which offers live streaming of baseball games to devices like iPhones and iPads, said he did not think his customers would rack up huge new charges, since they watch on average only seven minutes of live video at a time on the iPhone. Still, he wondered how Americans would take to the very idea of limits.
“Forcing people to become clock-watchers has never worked in America,” Mr. Bowman said. “The cable industry is living proof that people would rather pay for 300 channels they never watch rather than get metered.”
Some developers worry that people will begin to monitor and worry about their data use, taking the iPhone from their children’s hands during a car ride instead of playing another YouTube video, for example, or delaying an impulse purchase of a data-intensive app.
“That psychological component is a big question mark,” Mr. Bardin said.
One of the biggest problems, app developers say, is that people are not sure how much bandwidth they are consuming with an app. AT&T customers will be able to track their data use on the company’s Web site and receive alerts when they near their quotas, but many customers are in the dark about how much data a particular app or video uses.
“They’re going to be reluctant now because they’re going to be thinking in the back of their mind that there’s a clock ticking about how long they can play this game,” said Brad Foxhoven, chief marketing officer and a founder of Ogmento, which makes augmented-reality games for the iPhone.
Who takes the biggest hit?
Game developers have been trying to add more robust features to games to take full advantage of the iPhone, but they might scale back now, he said. “It’s going to make them second-guess how deep and intricate and involved their game is,” he said. Ogmento plans to introduce an action game this fall that it had hoped people would play for several hours or days at a time, and is now trying to figure out how to change it so it consumes less bandwidth.
Ge Wang, a founder of Smule, which makes popular musical instrument apps like Magic Piano, said developers could alert users with messages about how much bandwidth an app uses. “It’s definitely new territory thinking about this,” he said.
Video services for phones could take the largest hit in the new metered phone world, and executives at these firms are addressing the changes cautiously.
Sugar Inc., the blog network for women, has an app with videos featuring celebrity gossip and interviews. “Video for us is growing extremely fast — and it’s going to cost us and the consumer a bunch of money, because of the data going over the wire,” said Brian Sugar, chief executive and a founder of the company.
His company is already considering how to offer people lower-bandwidth video. “Back in the olden days on the Internet, you’d always have the high-bandwidth and the low-bandwidth version of your Web site,” he said. Sugar might ask users whether they want to view a high-quality video or a lower-bandwidth, more pixilated one.
Internet calling services like Skype, which route voice and video calls over the cellular data network, could also be affected. Skype executives say users of the Skype application should be able to make plenty of voice calls on the service each day without having to worry about extra fees or data overages.
Russ Shaw, a vice president at Skype, hopes that people will simply find ways around the new restrictions. “Over time, we could see consumers gravitating to the carriers that have better data capacity, and we might also see even more usage over Wi-Fi, as consumers feel pressure to keep within data constraints.”