The number of mobile devices is projected to surpass the world’s population in the next five years, and many wireless carriers are cashing in on the skyrocketing demand for mobile data.
Verizon Wireless and AT&T, the nation’s top two wireless carriers, have phased out their unlimited data plans in favor of new shared-data plans that charge for a monthly data allotment that can be used by up to 10 devices.
“Unlimited data plans are not a sustainable business model for the future,” said Laura Merritt, a Verizon Wireless spokeswoman.
With the new shared-data plans, customers don’t have to purchase a separate data allowance for every device they want to connect. However, consumer advocates claim that data limits will discourage use of the mobile Internet and the innovative applications that it spawns.
“As people do more and more things online, they are going to start running into those data caps,” said Michael Weinberg, vice president of Public Knowledge, a Washington D.C.-based nonprofit group that works to preserve the openness of the Internet.
Worldwide mobile data traffic will increase 18-fold over the next five years, according to a February study by the networking company Cisco. There will be more than 10 billion mobile Internet-connected devices by 2016, surpassing the world’s projected population at that time of 7.3 billion people, the report said.
“This impressive growth in mobile traffic will be driven by more powerful devices, notably smartphones and tablets, using faster networks, such as 4G and Wi-Fi, to access more applications, particularly data-intensive video,” said Suraj Shetty, Cisco’s vice president of product and solutions marketing.
Mobile video will comprise 71 percent of all mobile data traffic by 2016, the Cisco report said.
Consumers who exceed their data limits may face unexpected charges, but tracking data use isn’t as simple as counting voice minutes or text messages. Few smartphone owners polled by the Dayton Daily News knew how many megabytes of data it takes to stream a Netflix movie or Pandora song.
“I don’t have a clue how many megabytes I use,” said Nick Jolani, an iPhone user from Dayton.
Under a 2 gigabyte data cap, a consumer can watch two high-definition movies or three hours of television on their device before they incur an overage charge, according to Public Knowledge.
The average Verizon Wireless smartphone user in 2011 consumed about 500MB per month per device, according to a study by the wireless analysis firm Validas.
Popular, data-intensive iPhone features such as Facetime video chat can consume 3MB per minute, easily increasing data usage to more than 1 gigabyte — or 1,024 megabytes — per month, said Dylan Breslin-Barnhart, a Validas spokesman.
“The typical well-connected family we think has a good chance of using around 11GB per month,” he said.
The new shared plans are primarily data-based, with less emphasis on calling and text messaging. Voice minutes in the U.S. have been decreasing for the last four years, and text messaging growth is slowing, according to a May study by Chetan Sharma, an independent mobile analyst.
Verizon Wireless posted $6.9 billion in data revenues for the second quarter of 2012, up $1.1 billion, or 18.5 percent, from the same period last year. Similarly, AT&T reported 18.8 percent growth in wireless data revenues to $6.4 billion for the same period, up $1 billion versus the second quarter last year.
“Data is their only frontier in the future,” said Matt Mirandi, a personal finance expert for the cost-cutting website BillShrink.com.
However, smaller cellphone companies are using data plans with no caps to compete with Verizon and AT&T.
T-Mobile USA, the nation’s fourth largest wireless carrier, brought back its unlimited-data plan starting Sept. 5 because of customer demand, officials said. No. 3 carrier Sprint Nextel Corp. also maintains an unlimited-data plan.
Verizon and AT&T’s shared-data plans both include unlimited talk and text messaging, with monthly charges for the customer’s data allowance and each device on their account.
Verizon’s plan starts at $40 per smartphone and $50 for 1 gigabyte of data; AT&T’s plan starts at $45 per smartphone and $40 for 1 gigabyte of data. The maximums are 10 gigabytes for $100 for Verizon, and 20 gigabytes for $200 for AT&T.
The shared-data plans encourage customers to use more devices on the carriers’ networks, and ultimately buy larger and more expensive data packages, Mirandi said.
“Their business model is to traffic in data and to get as many devices synced up as possible,” he said.
Mirandi said the plans actually can help many consumers save money if they are smart about their data usage.
A Consumer Reports survey last year found that while the average amount of data consumed each month by smartphone owners appears to be on the rise, many data users consumed fewer megabytes than they were paying for under their unlimited or tiered data plans.
“Shared data plans help both customers and companies manage their wireless lives by allowing them choice — they pay for what they use,” said Verizon’s Merritt.
Verizon customers can upgrade their shared data allowance at any time during their billing cycle, even after exceeding their original allowance, with no penalty or contract extension, she said.
AT&T sends customers alerts as they near their data allowance for the month, company officials said.
“High data demand is built into this. As you buy more it gets much less expensive,” Breslin-Barnhart said.
Both Verizon Wireless and AT&T allow customers to stay on their existing plans. However, Verizon customers who keep their unlimited data plan will have to pay full retail price — about $600 or more — to purchase a new smartphone.
Mirandi suggested that smartphone users sync their devices to Wi-Fi networks at home, work or school when possible to avoid “devouring so much data,” particularly for activities such as playing games or streaming music, videos or movies. “That is really where people can save a lot of money,” he said.