Roger Entner, Senior Vice President, Research and Insights, Telecom Practice

AT&T's shift away from unlimited data pricing has led us to examine the issue of data consumption in the United States. The Nielsen Company collects phone bills from more than 60,000 mobile customers every month and analyzes every line item on the bill. These bills show how much data each customer has consumed in the previous month, regardless of whether the customer is on a metered or unlimited data plan, in order to give customers the opportunity to understand their data consumption habits.

When we look at smartphone data consumption distribution and year-over-year change, we see a large disparity of usage among smartphone users and are struck by the staggering amounts of data used by the heaviest users.

Average data consumption increased from about 90MB per month during the first quarter of 2009 to 298MB per month during the first quarter of 2010. This represents a year-over-year increase of approximately 230 percent. While this increase is substantial, in the first quarter of 2009 more than a third of smart phone subscribers used less than 1MB of data per month; this number has dropped to a quarter in the first quarter of 2010 as the number of applications and the utility of smart devices has increased substantially. That means about 20 million current smartphone users are hardly using data.

Other conclusions:

1. Usage-based pricing may be more fair. The top 6 percent of smart phone users are consuming half of all data. The vast majority of customers, 99 percent according to the 60,000 phone bills that Nielsen collects and analyzes every month as part of their Customer Value Metrics product, are better off with a pricing scheme like AT&T's new data pricing model than under flat-rate pricing where they are paying for much more than they ever use.
2. There is a growing need to educate smartphone users. With about 23 percent smartphone penetration in the United States, we are still in the early adopter phase. A quarter of these early adopters are not using their device for data services at all. They use exactly zero MB per month. For some reason these customers have purchased a miracle in engineering and technology that has more computing power than what was used to get men safely to the moon and back and yet they only use their smartphone for phone calls and text messaging. Operators have to do a much better job in conveying the value and utility of these powerful devices--and to marrying the right device to the right customer. The more suitable the device is to the usage and spending pattern of the customer the more satisfied the customer will be.
3. More than a third of smartphone users have not yet signed up for a data plan. Most of these smart phone users were among the first to get these devices, before operators required a data plan be added to the device subscription. Over time, these device owners will get converted into paying customers for data, but it is critical for the long term success of the industry to not only collect revenue but to also provide and convey value.

The industry has its work cut out for itself as it undergoes its most revolutionary shift to a post-voice-centric world. The priorities of large swaths of customers are shifting. Some operators have been better than others in adapting to the changing industry landscape and have been able to capitalize on it. As this trend continues, voice calls are increasingly commoditized and the average revenue per user on voice has been falling. Operators with the right cost structure will still be able to operate efficiently, effectively and profitably in this increasingly challenging voice segment, but most operators are condemned to sink or swim in the new data-centric world.