Smartphones and Data Usage: A love story

Over the past decade, we've seen the continual evolution of smartphones. From their early days of being simple PDAs (personal digital assistants) that was dominated mostly by Windows Mobile and BlackBerry, through today where iPhones and Android devices are everywhere; it would seem like almost everyone is using a smartphone.

But in order to make the most of of using a smartphone, it must be connected to a data network of some kind. Enter the wireless providers.

The big four in the U.S. are AT&T, Verizon, Sprint, and T-Mobile. Up until recently, customers have enjoyed unlimited data and no speed throttling, while being charged a fair-market price. The downside was that smartphones were still using the slower 3G networks. Not only that, but with an ever-increasing number of new smartphones being activated every month, the wireless providers started to get overwhelmed by data usage that would slow things down even more - or even cause data outages.

So what's the solution? Most people think "Just build more towers". While that does help, it doesn't solve the problem on its own. It turns out it's much more complicated.

The initial step that carriers took were to first start to build-up a 4G network, such as LTE and WiMAX. This would allow 4G smartphones to have faster data downloads and free-up bandwidth on the wireless provider's 3G networks. But as you know, this is a work-in-progress, and 4G is usually only offered in major metropolitan areas.


Over the past year, according to Nielsen Ratings, the average smartphone user has gone from consuming 230MB to 435MB per month, an increase of 89%. Though the top 10% of users (90th percentile) has increased their data consumption by 109%, while the very-top 1% of users (99th percentile) have gone from using 1.8GB per month in Q1 2010 to over 4.6GB per month in the first quarter of this year.

Most of this increase in data has come from users of Apple's iPhone and Google's Android smartphones. The average iPhone user will consume 492MB per month, while the average Android user will consume 582MB per month. Even though this isn't very much for the average smartphone user, you still have those "top tier" users that consume Gigs of data, and are using more each month because of them being on unlimited data plans.

The way AT&T and Verizon have decided to solve this is by using Tiered Data plans. If you look at the first Nielsen chart above, you will see that most people are under the 2GB per month usage mark. Because of this, AT&T offers a basic 200MB/month plan for $15 and a standard 2GB/month plan for $25, which also has a $10 charge for each additional 1GB that a customer goes over. Verizon's new tiered data plans start at 2GB/month for $30 (which is what their Unlimited data plan use to cost), but there is also the option to choose 5GB/month for $50 and 10GB/month for $80; though all of them will charge you $10 for each 1GB extra that you use. Both AT&T and Verizon allowed their current customers with unlimited data on their smartphone to keep that plan, without requiring them to change to the tiered plans, though we have learned that AT&T is going to start throttling (slowing) the speeds for their top 5% of data users that were grandfathered in with their unlimited data plan. Some Verizon customers with unlimited smartphone data plans have also experienced throttling as well. There is no official amount given by Verizon to say at which GB usage point they throttle speeds, but we've heard that it can start around 6-9GB of monthly usage. Though it is hard to tell, as some customers say they've used over that amount and have not noticed any slower speeds.

T-Mobile's approach is a bit different, as they offer a total of four unlimited data plans. For $10/month you get the first 200MB at their fastest speeds, and after that the speeds are throttled down slower. The same thing goes for their $20/month plan with 2GB of fast speed, $30 for 5GB, and $60 for 10GB of fast speed. Once you go over that amount of fast speed usage, they simply slow your speed down, though it is still unlimited. Sprint still chargers a flat $30 for its unlimited data plan with no overages or speed throttling, though if you are a new customer looking to buy a smartphone with them, you have to go with their "Everything Data" plan, which starts at $69/month for 450 voice minutes, unlimited data and unlimited messaging, or the "Simply Everything" plan that is $99/month for unlimited voice, data and messaging.

As you can see, there are some clear differences between the four wireless providers in the way they charge for smartphone data, and each one wants you to think they are the "best", but the best thing for most consumers is to watch their data usage - especially if you are on a tiered plan. If you are paying for 2GB of data, try to use that amount or less. If you know you are going to use more data, then go with the higher tiered plan, or maybe think about changing to T-Mobile or Sprint, as both are unlimited. It is unclear what the future may bring in regards to data plans, but with the usage on the rise each year, and services like Netflix and Blockbuster offering movie streaming to smartphones, it may not take long at all until the average user is well over the current 2GB mark and paying even more for data each month.

source: Nielsen (data and images)