In addition to the subsidies carriers have tacked on to upgrades, the wireless carriers are hoping that the faster 4G LTE, which many expect the iPhone to run on, will make them more money, too. Not only have two iPhone carriers Verizon and AT&T introduced data-share plans, which will be a worse deal for most customers, but, as The Wall Street Journal's Anton Troianovski and Spencer E. Ante explain, people with 4G LTE phones tend to use over twice as much data as those with poky ol' 3G. A survey of 275,000 smartphone owners found phones without LTE averaged 500 megabytes of data per month compared with 1.2 gigabytes for LTE owners, they report. In theory: More data use equals more money from the customer in either overage charges or more expensive plans. However, looking at the offerings of our three current iPhone carriers, Verizon, Sprint, and AT&T, only with the data share plans does this data use difference matter.
Here is how the carriers could make money: Though these networks are more efficient, it costs the same amount for an allotment of data with which a user burns through quicker. 1 GB of data costs the same no matter the network, but a faster 4G LTE network requires more data. From a buyer's perspective that could cost more, suggested GigaOm's Kevin C. Tofel explained following the iPad with 4G LTE release. "Looking at this situation from a 4G device owner standpoint: By transitioning from a 3G device to a 4G device, you’re getting much faster service for the same price as a 3G users," he wrote. "That’s true, but adds another problem to the mix: Overages that can cost up to $10 per extra gigabyte. With a 4G device running ten times faster on the network, you can use up your monthly data allowance much faster," he continued. That makes sense, but considering actual user habits, it doesn't always work out like that.
Here's the breakdown. We have three carriers who offer various types of plans. Verizon and AT&T have both standard data allotment plans, as well as data-share plans. Sprint just has the standard plan. The studies say 4G LTE people use 1.2 GB on average, whereas other smartphone owners less than half of that at 500 megabytes. Here how the cost differences for each iPhone offerer shakes out:
500 Megabytes: $79.99/month. Sprint requires smartphone owners to have the unlimited data plan, which costs around $80/month.*
1.2 Gigabytes: $79.99/month. More data usage won't affect Sprint iPhone owners.
500 Megabytes: $30/month or $40/month. AT&T offers a share everything plan as well as a standard data plan. It does offer a 300 MB option for $20/month, but that wouldn't cover the 4G LTE phones. The next option is 3GB for $30/month. As for the share anything plan, the lowest offering is $40/month for 1GB.
1.2 Gigabytes: $30/month or $70/month or $55/month. The $30 3GB plan still covers this data overage. The share-everything plan, however, does not and would require bumping up to the 4GB $70/month plan. The other option is to pay the overage fee, which is $15 per gig charge, putting the price tag up to $55 per month.
500 Megabytes: $30/month or $50/month. The lowest data amount Verizon has is a 2GB for $30 situation. Or, we can get a data share plan, which has 1 GB for $50.
1.2 Gigabytes: $30/month or $60/month or $65/month. Again, on the standard plan, 2GB will cover this behavior change. However, the shared plan only gives us 1 GB, so the next option is the 2GB, which costs $60. Or, one could pay the $15 per gigabyte overage charge each month for those extra .2 GB and pay $65 per month.
So, now we see the nefarious doings of these data-share plans. Carriers have seen the way most people use data on the 4G LTE network, these new plans make that much more data a lot more expensive, whereas the old plans didn't.
As behaviors have changed from less talking, which happens over separately charged voice networks, to more data-things, such as emailing and Facebooking, the wireless companies have changed their money-making tactics. Over the years, they have seen losses on iPhone sales because of phone subsidies, which makes the device more affordable to us. These companies suffered those $400 per iPhone checks not out of the kindness of their hearts, but in hopes that the voice and data plans would pay off over time. It hasn't, yet, but the 4G LTE upgrade along with these data share plans is their moment.
*This post originally stated Sprint owners would pay $34.99 for 3GB of data.
This article is from the archive of our partner The Wire.