The Shift From Voice & Text to Data Usage on Mobile Phones

Julian: Thank you for responding to the questionnaire. I know it was late but it’s pretty handy and it gives us something to talk about. I think the plan for this is to, I’ll go through some slides that have some basic info, and then what we’ll do afterwards is talk about it as well as the outline I sent over which is pretty much what this is about. Thank you guys all for the invite.
We decided to make this topic about Voice and Text versus Data or how they cohabit so to say. Since we all know that everyone in this room owns a smartphone, but the official stat is 1 in 2 of people who own phones have smartphones. I think the curb is put. That’s pretty incredible given how long smartphones have been available.
iTunes app stores and Google Play have become lucrative digital marketplaces for randomly used companies like Instagram, Draw Something that are valued at hundreds of millions of dollars. Instagram is a popular application. I think that is pretty mind blowing. Of course different forms of media exist today then 5-10 years ago so. Facebook, Twitter is pretty lucrative. Everyone in this office, even if they don’t want to like David.

David: Yes.

Julian: Multimedia. A lot of video games. In fact, in the beginning video games were like Pacman. Then 10 years ago video games were like Mario. Well today, a lot of video games were born on the smart phone like Angry Birds and Temple Run, Cut the Rope, Words with Friends, have all originated from smartphones so that’s another thing that’s been interesting.
And media, as far as media goes, there are new ways to watch video and listen to music. So there’s file share, iTunes, you can download music from Amazon, iTunes, whatever. But new forms are like Spotify or Veo where you can have a subscription and stream it using your phone without having to download it from a website or from your computer. Same with Netflix. Netflix used to be about DVDs now it’s more about streaming onto your devices. Same as streaming radio. You can’t, does not necessarily mean you have a radio in your phone but you can use the internet and listen to radio. So obviously there’s more options for you to utilize and utilize data on their smartphones.
So that questionnaire I sent out for this roundtable, everyone here has a smartphone. And everyone here, I just want to emphasize, has listed either web browsing, social media, or some other forms of app usage, over phone calls, as one of the most commonly used features on the phone. Other features that require data were also used a lot. Music streaming, social media, messaging apps, etc. So of course, you guys being the one to use it aren’t the only ones who know this. Big companies, telecoms, etc., you know, Verizon, T-Mobile, Sprint, etc., they are smart people. They have people that look at what we do essentially and they’re seeing this. So there’s a massive growth in using your phone for data, using it as a computer pretty much.
So they also know, this was another question that I posed, is a smartphone a luxury or necessity? Those are very extreme options but everyone’s response was pretty much the same was that, of course in the end, it’s a luxury. In the end, everything’s a luxury besides food and water and some type of… What everyone said was that, while it is a luxury, what smartphones have enabled, allowed me to do in how much I use it, it’s probably one of the top luxuries you can have as far as items. It’s pretty tough to get away from that because we have all somehow become more dependent on it.
Going into more things that relate to this as far as telecommunications is that unlimited data is slowly becoming a thing of the past. Obviously there’s two sides of the coins. One of them is managing bandwidth. In the end, they’re a company that can’t just let everyone abuse their internet and have people downloading like terabytes of data somehow. So bandwidth management is a big thing. But on the other hand, as a business, they have to make profit and in the past they were able to get away with making a profit off of voice and data, I mean, voice and text which was very cheap. I forgot the exact stats but the amount it costs a carrier to send a text message is not even a penny or something really crazy like that. So what’s happening is that more of the revenue is going to come from the data. So here’s an example of a new plan structure. Not just for data but for a cell phone plan.
So Verizon is going to have a family share plan which comes with unlimited text and voice which it sounds great and it is pretty great. But what’s changing is that data will be shared amongst the people in the plan. So if you’re a two person plan, share with someone else and you both have an iPhone, you’re going to pay $80 and then you’ll also going to have to buy a plan. So realistically, you’re somewhat a data heavy user, you’re going to need 2GB per person. So that’s going to come up to being $80 plus $70 which is $150. And if you go over this, you going to have to pay an overage fee or you’re going to the maximum go up. Whichever is easier. But you can get free mobile hotspot. But potentially that’s where the biggest mobile provider is heading and you kind of expect the others to follow suit.
I have some questions here but let’s just start from question one. Why don’t we just start with thoughts because that’s what we all at the roundtable came prepared with then we can go on to these. So David, since you brought the outline, you can start with your thoughts as President of a prominent mobile accessory company. You can always provide it.

David: My thoughts on paying more for data?

Julian: Why don’t you just start your thoughts on mobile usage? How at least you see it? And your thoughts on the whole changes.

David: Obviously mobile usage is going up and I don’t think anyone can dispute mobile usage going down. Take for example DVDs. Companies who used to duplicate DVDs, they’re going out of business because videos and medias are getting delivered over online and Netflix for example. I remember when I first opened Netflix. I think it was more than 10 years ago and back then it was $17.99 or something and you get to hold two DVDS or three DVDs and they send you a DVD when you return a DVD and you get another one in queue. Now for $7, I believe it’s $7 flat now, you get a whole bunch of downloadable. Plus you get a one DVD rental. However, I don’t use that DVD rental privilege. I just stream everything online and before I signed up for Netflix my data usage was less than 500MB per month. After Netflix, my data usage is about 4GB a month and that’s from watching all these different things. But at the same time you know, what technology so far, over the years, it improved what when we would put a limit. For example, when carriers started, when they start putting a limit on GB and limit on bandwidth or limit on whatever, technology will follow to stream for smaller packet size, stream with smaller data size and whatnot. And these type of constrains, I see it as a big, big motivation to improve technology. And without motivation we’re not going to improve ourselves so I see this as a positive direction in developing better compression and better streamline the data packaging and data usage. So I see this as a positive as long as Verizon or AT&T doesn’t break our banks.

Julian: On the point of breaking the bank, as a medium to higher, is there ever a certain point for you to drop mobile data?

David: I don’t think I could ever drop mobile data however you mentioned hotspots. So when I went, I’ve gone to overseas a couple times a year and especially in Korea. You get a data plan and you get a voice plan but there’s hotspots everywhere. Every other block, actually every block, they have the free wifi. So mobile usage, at least through a traditional 3G, 4G LTE type of delivery, they go through your phone, in those countries it’s really minimal due to expanded availability of hotspots which I think is coming next to the US. Again, if you think about Korea, Korea is smaller than California.

Julian: Okay, now to Mr. Jay. Any thoughts? If not you can go to one of us.

Jay: I mean, overall, it was kind of inevitable prospect thereof for them to change the plans to more data. One of the concerns that I had, and I experienced this when AT&T were throttling their GBs to two, because I was reaching that 5% of users and they starting throttling my data speeds. But it’s the transparency of how we can check, like how much data we’re using, it’s, it was basically no way to check how much data you were using at any given point in time for AT&T and you would just receive this text message, “You’re approaching this amount” and then like a few days later they would start cutting you off. You couldn’t even be able to watch a Youtube clip on the normal speed because it was so slow. I mean it’s pretty minor in the grand scheme of things, just being able to monitor you know, your data, like having an accurate estimate of, you know if you’re slightly going over 2GB and that’s the plan that you’re on then we should be able to know how much we’re spending on any given point in time. We were able to do that with phone calls. We used to be able to monitor how many minutes we were using but as far as the data goes, it’s like AT&T were doing some shady practices where like there would be ghost data that they were just charging people for so there were all these tests done. When people had their AT&T phone on airplane mode for an entire month and there was just some billing there that was happening. So those types of concerns in going over to more primary data usage, I wish that was a little more clear with the companies. I mean, as I said, it was an unexpected because I hardly use my phone just as a phone. It’s like 95% just straight, I don’t use, I limit my text messages. Like the actual texts, I just use WhatsApp or whatever other data messaging there is.

David: What is the proper term for those messaging services? You call them internet messaging or?

Julian: You call them messaging apps.

David: Messaging apps? Okay.

Julian: Okay now Sean.

Sean: So, for the first question, potentially paying more later, I’m not going to pay more than that. I think that the carrier knows that too. You know our data plan is around $20-$30 why’re we paying more than $30 for the mobile data plan but I think I personally believe that they’re going to eventually drop, well not drop it, but increase the data speed and capacity we can use in the future because obviously there’s going to be more service providers with a better plan. And now the phone connection quality and those family plan voice quality kind of thing was a big standard for the customers that they’re going to choose. But for the close future, data plan would be one of the primary so it would be one of the most comparative part that the carrier needs to develop. It means the prices dropping and higher service. So I think it will stay within that $20-$20 data plan and that’s what I thought.

David: I think Verizon took the first step of eliminating the talk minutes and just charging straight up data transfer rate because if you think about those, the messaging apps, they do more than messaging. They do videos, they do voice recording, they do pictures, they do calls too. And call quality, sound quality over those are better than actually what AT&T and Verizon can deliver. And there’s that two way Facetime thing is native in that. I really see data becoming the, they’re going to start charging you for the data only. You know how MetroPCS and BoostMobile give unlimited time and hour or whatever, it’s becoming less and less meaningful. It’s all about the data. I mean, I’m on a family plan with 1,400 minutes between four people. We use about 700 minutes.

KC: To answer your questions, I personally would, I checked my data usage and my phone usage before I came in here and since I’ve gotten my phone I’ve made 5 days and 22 hours worth of calls but I’ve reached my data max like every single, I was like Jay like, they were constantly texting me and telling me that I was in the 5% that was reaching the highest point of data usage. So, I started using wifi a lot more but still, it’s like not enough. But I think I would be willing to pay money at like, the chart, off the chart usage is like 10GB for a $100, I would have to pay that. And I’m on a family plan so that’s just me by myself paying a $100 for data but I can’t not do it. I use my phone constantly for everything especially social media and texting or messaging apps. So…

Julian: How much do you pay a month?

KC: I give my mom $65 a month.

David: But that’s not what she gives to the AT&T.

KC: I don’t think so. She gives more than that. So for me, living with that data now is just not an option especially since everyone is using Kakao or whatever, there’s no way I can’t not.

David: You know that brings me to a good point because when I go travel in China, I am forced, I’m forced to not use mobile data because, first of all, I’m only using those basic phones for emergency calls. So when I’m there 3-4 days, I’m without mobile data. So first 2 weeks, first couple days I would go through this withdrawal period like a heroin junkie going through that withdrawal. I keep looking at this basic phone to see if I have something else to do or if there’s not I would play snake or you know those basic basic games.
Julian: Now me. I think the telling point is for everyone here, me included, we’re almost used to it. Especially the younger generation, even my sister who only got an iPhone, well she got an iPhone when she was in high school, but kids are going to start getting even a basic smartphone in middle school so eventually they’re going to be raised with it. It’s only been ten years since this has been happening and maybe 5 years since the iPhone’s been out and other types of advanced smartphones. So you’re basically looking at a situation where most people, even me included, might be using a phone or some kind of iPad or tablet more than a personal computer and a laptop or whatever. Granted, of course, it depends on your occupation and majority of people who may work based on that more. So, of course, that’s why they’re doing the whole data package increases and charging user space for data itself. And as we’ve said, there’s going to be more technological advances, voice over LTE, something that’s going to change things significantly but at the same time I don’t think there’s going to be a decrease. What that means is that in ten years, say that the inflation rate is roughly every year about 3% and nothing goes crazy and everything is practically normal but data rates versus what I’m paying today might double or may even triple relative to inflation. So it wouldn’t be like a regular good in this sense. Let’s say a Hershey bar costs ten times more than it did ten years ago you’d be outraged and go crazy and wouldn’t eat Hershey bars. You’d eat Mars bars, Snickers bars. This is more of a thing, since everyone is using it so much, there is no telling point in terms of how much I’m willing to pay because I’ll have to pay that because by then I’ll have this crazy phone that’ll be implanted in my brain that won’t function without it.

David: I told you.

Julian: So that’s the thing. And the other problem is, this may be more of an economical thing, Verizon and AT&T are the biggest players and AT&T was going to buy T-Mobile and effectively form what is called a duopoly and that’s a very dangerous proposition for consumers because they will have 1 of 2 carriers who can effectively mix and match in terms of price. What that means is that they set a price and it doesn’t really matter about market forces or consumer sentiment, they will only have those options. When you only have these options, you have to go with it so there’s risk there in terms of fast evolving technology and a rising “force” and control what these pricing schemes are. This is why they can do this, this is why they can be the first ones. Essentially what I’m saying is in ten years we’re going to be paying a lot more than what we did. There’s no way around it but that’s just how it is. it’s almost like gas prices. You can’t really, gas used to be $1.20 back in the day but now. Anyways, thank you all for coming. I value everyone’s input. It was actually really really good and I’m not surprised because we are all smart but I’m just glad we had that talk. We’re going to be trying to do these monthly.