Wireless data adoption stagnating from price worries

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More than one-third of wireless customers have some sort of data plan as part of their wireless subscription, according to research by The NPD Group. However, the retail and consumer information company concluded that “consumer adoption of most data services has remained steady through (second-quarter) 2006, despite the best efforts of carriers to drive adoption of, and spend on, these services.”

Surprisingly, Cingular Wireless L.L.C. ranked first among carriers in data plan adoption, with 43 percent of its subscribers on some sort of data plan-despite the fact that Sprint Nextel Corp. has the highest percentage of data revenue among the national carriers. Part of that discrepancy is likely explained by the fact that overall, about 4.6 percent of customers had unlimited data plans-while among Sprint Nextel customers, the figure was 8 percent.

Text messaging remains the most commonly used data service, particularly with the youth market; SMS subscription rates were at 59 percent among 13- to 17-year-olds, and 63 percent for 18-to-24-year-olds. However, relatively new services such as music and video downloads showed little growth in adoption and The NPD Group found that the same held true for downloaded ringtones and games.

“People just aren’t as in tune with data yet on a really wide scale,” said Neil Strother, The NPD Group’s research director for wireless devices. “I think the difficulty is multifaceted, because it’s not only them competing against voice minutes of use, but also against data that people can get elsewhere.”

Strother opined that in order for widespread consumer adoption to kick in, the price points “have to feel kind of painless,” which he estimated would be between $3 and $10 per month instead of the $15 charged for consumer multimedia services from Sprint Nextel and Verizon Wireless.

“I don’t think people are enticed by any of these services at price points of $15,” Strother said. “On the other hand, free doesn’t work in any business model-but it does work in an advertising model.”

Data adoption might be helped along, he said, if consumers can get data services for free but have to agree to watch advertising to do it. And one of the biggest barriers to adoption, Strother added, is that most people quite simply haven’t tried things out.

“I just think that sometimes one of the most difficult things is to change behavior if you’ve never done it,” Strother said.

The survey results were derived from more than 15,000 online consumer research surveys the NPD Group conducts each month, and are “based on a nationally balanced and demographically balanced representative sample of consumers,” according to The NPD Group. However, a data plan was defined loosely in the survey-and a user whose account allows them to access data services a la carte, but who had not agreed to a monthly recurring charge for access, could still be considered among those with a plan if they had used it, because they were charged according to use. The most popular plans among survey participants were those that charged based on use (11 percent), or that had a flat fee and limited the amount of data that users could download (10 percent).

The NPD Group study included some business customers in its overall mix. When it comes to data adoption on the business side, “I think that the data service price is still too high,” said analyst Kathryn Weldon of Current Analysis.

For businesses, she added, data plans will have to hit a price between $30 and $40 “to really at least be seen as competitive with wireline broadband.” Weldon noted that when Sprint Nextel announced its plans for a mobile WiMAX network, company executives implied that they would be able to set prices comparable to DSL.

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