iPhone Popularity and Data Usage

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iPhone power users may need to keep tabs on AT&T, as the company is considering plans to encourage users to cut down on wireless usage. At the company analyst meeting this week, Ralph de la Vega, who runs the wireless and consumer arms of the company, noted that growing use of data is requiring more bandwidth and expensive network equipment, and as a result is considering taking action. That action could take the form of a tiered pricing structure that would charge based on usage, including possibly instigating usage caps.

At the investor conference in New York, de la Vega noted that just 3 percent of iPhone customers account for about 40 percent of the traffic on the company’s wireless data network. His hope is that incentives would be enough to curb the data use. Early responses from power users were not favorable, as the news spread across the Internet.

It is not surprising that AT&T has bandwidth concerns, as the iPhone market shows no signs of stopping. San Francisco-based Flurry Analytics, which monitors mobile applications, reports: “life-to-date, more than 34 million iPhone and iPod Touch devices have been sold in the U.S. through the end of September 2009. This equates to roughly 10 percent of the U.S. population.”

Clearly, the popularity of the iPhone shows no signs of slowing and it is impacting other markets. The iPhone App Store Games category of the iPhone App Store drew the most new content each month from the store’s launch in July 2008 through August of this year — taking a bite into the business of Nintendo DS. Similarly threatened is Kindle, as iPhone is taking a big bite into the book category of Media & Entertainment with more books than games being introduced in October.

Last month, however, saw the launch of Droid, as Google, Verizon and Motorola attempt to cash in on the iPhone craze. Flurry believes that, “while the Android platform is the most legitimate challenger to iPhone smartphone dominance, it’s important to remember that the iPhone’s flank is protected by an often overlooked, powerful fighting brand: iPod Touch.”

In an interesting analogy, Flurry compares iPod Touch marketing to teens as being a kin to McDonald’s Happy Meal marketing strategy, stating: “When today’s young iPod Touch users age by five years, they will already have iTunes accounts, saved personal contacts to their iPod Touch devices, purchased hundreds of apps and songs, and mastered the iPhone OS user interface. This translates into loyalty and switching costs, allowing Apple to seamlessly ‘graduate’ young users from the iPod Touch to the iPhone.”

Droid’s debut, while launched only in the U.S., did well. Flurry estimates that in the “first week showing, the Droid is the fastest-selling Android phone to date. Compared to the myTouch 3G on T-Mobile, Droid outsold it by more than four times.” Flurry does point to the fact that Verizon has nearly 90 million subscribers to T-Mobile’s 34 million, and that, “Verizon has shown a willingness to outspend previous carriers with its $100 million campaign.”

With this strong start by Droid, the competition is increasing with more devices on par with the iPhone than in the past. It will be interesting to see how the competition uses the ammunition of AT&T’s sometimes-slow network, and the company’s potential threat of a new data usage structure to its advantage. According to de la Vega, there is no timeline or finalized action plan to address the usage issue.

Eye on Messaging is written by Stephanie Jordan, editor in chief of Messaging News. If you have story ideas or news to share, email her: sjordan [at] messagingnews [dot] com

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