Apple 2.0

Covering the business that Steve Jobs built

How data caps help RIM, hurt Apple

June 14, 2010: 11:01 AM ET

Plans that charge for high usage could scare people away from the iPhone, says an analyst

AT&T (T) did it first in the U.S., and then O2 followed suit in the U.K. last week -- lowering monthly charges for light data use and instituting tiered pricing for the bandwidth hogs.

That's good news for Research in Motion (RIMM), says Susquehanna Financial's Jeff Fidacaro in a note to clients issued Monday. He believes the lower entry-level pricing will encourage customers to trade old-fashioned feature phones for newer-model smartphones. The BlackBerry is particularly well-positioned to capture this new business, he says, because the devices are cheaper and geared toward low-bandwidth uses like e-mail and instant messaging.

Apple (AAPL) will capture some of that new business, says Fidacaro. But data caps create a disincentive for devices like the iPhone that come with sophisticated Web browsers and offer lots of apps for high-bandwidth uses, like streaming video. "In our view," writes Fidacaro, "tiered pricing could create adverse behavior by consumers as users will watch their data usage more closely and avoid overage fees (similar to when we used to wait until 9pm to place a wireless call so as not to use up minutes)."

In support of his thesis Fidacaro cites a recent study by the bill-analysis company Validas that found a typical iPhone user consumes 273 MBs of data per month (note: above AT&T's 200 MB entry-level data limit) as compared with 54 MBs for Blackberry users and 150 MBs for Android and other users in the U.S.

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[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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