T-Mobile unleashed the next stage of its Un-Carrier strategy yesterday, expanding the focus from smartphones to address demand (or lack thereof) for cellular connected tablets. The timing of the move was ideal, coming just one day after Apple’s iPad launches, and Nokia’s launch of its 2520 Windows tablet. The beauty of T-Mobile’s move is based on a combination of factors including the data and the way you can buy new tablets.
Firstly, the carrier is offering 200MB of data for free to anyone with a cellular tablet that is compatible with their network. You don’t have to buy anything to get the 200MB per month. The first taste, as they say, is free. Interestingly, the free data has seen somewhat of a polarizing debate regarding its value. For many potential users, being offered some data for free is a clear bonus, but there are a considerable number of comments focused on the small amount of data that is offered (yes, for free remember).
It comes down to what you use the tablet for: if the main use case is video, the potential user scoffs at the 200MB which probably won’t get them through the opening credits of a movie. It’s a good point, but that’s not what T-Mobile is trying to provide with this solution. The point is provide enough data for those occasional moments when you are out of Wi-Fi reach – a quick email check, or to quickly pull (or upload) a photo to show to people. The vast majority of tablet use will continue to be via Wi-Fi.
However, there is one growing use scenario that will demand more data, and could help drive consumers to move beyond the free option and into the larger buckets: namely entertainment in the car. The car is one of the very few scenarios when a consumer is seated and ideally suited to using the tablet, but without a ubiquitous source of Wi-Fi (we’re talking about back-seat use before anyone asks, not the driver!). As such, a cellular solution for movie consumption is ideal and that has to be a strong option for T-Mobile and other carriers.
The second cunning component of T-Mobile’s announcement: allowing consumers to purchase tablets via a payment scheme. By doing this, T-Mobile is helping to overcome a barrier to entry for many consumers, especially when one considers the more expensive cellular versions. Take the iPad Mini, for example, which costs $299 for non-cellular and a whopping $429 for a cellular version. That’s a big jump in price and one that many consumers cannot justify. But with T-Mobile’s payment option, the tablet costs $25 per month. This should help drive demand (or at least interest) for cellular tablets at a time when we’ve seen sales of cellular tablets decline quarter-on-quarter.
While total household penetration of cellular-enabled tablets is roughly 20 percent of the total tablet base, more recent sales show a worse story, with cellular accounting for only about 11 percent of the quarterly sales. T-Mobile’s program could help boost that a little, as well as tapping into the incumbent base of cellular tablets that are not currently connected (we estimate that only 60 percent of cellular tablets are currently connected).
Of course, there is one more unproven component of the T-Mobile strategy: currently we do not see a lot of tablets being purchased at carrier stores. Rather, big box, online and OEMs drive the vast majority of the sales, with carriers accounting for just 4 percent. But regardless of how consumers buy devices, T-Mobile looks set to grow their market share of the tablet connection market rapidly. If you have an embedded cellular tablet without an active connection (which is roughly 5M tablets) why wouldn’t you connect for free (assuming you have a compatible GSM-based tablet)? According to the Connected Intelligence Broadband Market Share & Forecast Report, T-Mobile accounts for between 2 and 3 percent of the tablet connections. This latest Uncarrier move should help boost this significantly.