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AT&T tiered-pricing model creates marketing opportunities, challenges: Strategy Analytics

AT&T?s decision to use tiered pricing for mobile data plans will create fresh opportunities and challenges for mobile marketers, according to a Strategy Analytics report.

Tiered pricing will increase the number of consumers on data plans and help marketers by providing clearer analytics, per Strategy Analytics. However, analysts also caution that limitations built into the plans represent a missed opportunity.

?Strategy Analytics projections indicate that if AT&T added unlimited messaging and video content for all pricing tiers, it could expand the smartphone market dramatically ? by 3.2 million more subscribers,? said Sue Rudd, director of tariff and revenue strategies for Strategy Analytics, Newton Center, MA. ?[We] project that the current plan will add only 500 thousand additional new subscribers.

?High end heavy users would also probably pay significantly more for uncapped messaging and content if premium tiers were added to AT&T?s plan,? she said.

Strategy Analytics provides market research and intelligence in the realms of multimedia and fixed and mobile communication.

Details of the report
The report, titled ?AT&T?s New Tiered Mobile Data Pricing: Revenue Neutral or Market Expander?,? explores the implications of the carrier?s decision to drop its unlimited mobile data plan in favor of a two-tiered pricing structure.

AT&T made the decision after noticing the strain iPhone users with unlimited data plans put on its mobile network.

The new system includes tiers of pricing with monthly caps of 200 megabytes and 2 gigabytes of total usage ? costing subscribers $15 a month and $25 a month, respectively.

If customers exceed the allotted data usage limits, they pay an additional $10-$15 for additional streaming.

There has been some speculation that the new plan would threaten mobile content consumption (see story).

Strategy Analytics used its ?Tariffs Response Model? to map out several scenarios detailing how the decision might pan out in the market for mobile devices.

The results of that research, detailed in the new report, indicate that the decision is not likely to hurt AT&T, and actually could become the industry standard.

The report also suggests that additional high-end price tiers for heavy mobile users represent future opportunities for carriers and marketers.

Implications for mobile marketers
Overall, Strategy Analytics believes that the introduction of a tiered system will increase the number of users on data plans and help marketers to engage a larger audience in the mobile space.

?[Tiered pricing] boosts the number of users on data plans and should provide a corresponding boost to mobile advertising and marketing, since that industry's metrics are all about eyeballs,? said David MacQueen, director of wireless media strategies for Strategy Analytics.

And, the creation of different tiers in itself represents a new frontier for mobile marketers.

?As a result of this segmentation, mobile marketers will have more clarity to understand and target consumers according to their mobile-usage patterns and needs,? said Neil Shah, research analyst for wireless device strategies at Strategy Analytics.

The intelligence firm also predicts that more elaborate and data-rich advertising will begin to flood the mobile space.

Because of the new data restrictions, rich-media advertising could drain valuable allotments for data usage.

?Current mobile advertising banners generally require very little data consumption ? that is, not graphics-intense and don't demand much bandwidth,? said Josh Martin, senior analyst for wireless media strategies at Strategy Analytics. ?Things are about to change with iAds.

?[We could see more mobile campaigns] that are not resident on the device or need to be downloaded to unlock their full potential - just look at that Toy Story app/game and its bandwidth requirements,? he said. ?Today users cannot see how much bandwidth an ad ate up, but if the tools became available to expose this information, there could be problems.

?One alternative would be for iADs ? and comparable applications for other smartphones ? to only display basic ads over 3G and more robust ads over WiFi.?

Because of the 200 MB data cap on the lower tier of AT&T?s price structure, some analysts believe that new lower-end phones will start hitting the market to cater to a less data-dependent crowd, and marketers should prepare accordingly.

?The type of entry-tier pricing will also stimulate the adoption of feature-rich quick messaging devices that are equipped with more limited applications and Web browsing capabilities and fall into lower data-consumption buckets,? Mr. Shah said. ?So QMD devices should be considered in the media portfolio.?