Future-Proof Your Phone's Data Plan

Following AT&T's lead, both Verizon Wireless (NYSE: VZ - News) and T-Mobile are expected to unveil new cell phone data plans this week, offering lower prices for customers willing to give up their unlimited data plans. But the $15 savings might not be worth it -- and if you switch, there could be no going back.

The cell phone companies are using these cheaper, limited data buckets to attract buyers turned off by smartphones' typical $30 monthly data charges, says Ross Rubin, the executive director of industry analysis for NPD Group. In exchange for the lower price, users agree to pay extra if they exceed their limit, which earns more money for the providers. This may not be a problem today, but as customers increasingly use their phones for data-intensive activities like watching videos and getting driving directions, going over the limit becomes more likely. And it's not cheap. After hitting T-Mobile's 200 megabyte limit, users would pay more than $10 in extra data charges for every half-hour TV show or every 6.5 hours of a streaming music service.

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But for smartphone owners -- at 55.7 million and growing, according to comScore -- the lower prices have already been a draw. An estimated 2.6 million new customers flocked to AT&T (NYSE: T - News) during the third quarter, drawn in both by the iPhone 4 and by the company's new, cheaper data plans. The provider eliminated its $30 unlimited option, instead offering 200MB per month for $15 or 2GB for $25. Old customers could keep their unlimited plan -- a grandfathering of sorts -- but if they switch, the option is no longer available. (AT&T won't say how many customers switched, but an estimated 35% of smartphone owners use more than 200MB per month, according to the most recent data available.)

So before you ditch your unlimited data plan, here's what you need to know -- plus a few tricks to offset your usage:

It takes just two half-hour sitcoms to blow through 200 megabytes -- typically the limit on the cheapest tier. If you're streaming music or video for more than four hours a day, you'll exhaust the higher, 2GB limit. And that's not even counting simple tasks like texting, web browsing and e-mail. Even if you're not a power multimedia user yet, you may be one soon. Video is likely to become a bigger part of regular cell phone use in the near future, as streaming full-length TV shows and movies becomes easier, and new features enable easy video conferencing. "That's going to suck up your data plan big time," says Mark Beccue, a senior analyst covering mobile technology for ABI Research. Manufacturers are also toying with high-definition and 3D displays for smartphones that could make it more enticing to watch video on a small cell phone screen.

Music and games, on the other hand, aren't as data-intensive, provided you're downloading rather than streaming, Goldfayn says. Streaming music, with an app such as Pandora, will use more data because it requires a constant, speedy connection. If this is what sends you over the data-use cliff, consider saving your streaming for a home or work computer, and listen to downloaded tunes on your phone.

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Smartphone users who primarily access the web and their e-mail have the least to worry about. Those tasks don't use much data, which makes it unlikely you'd reach even the smaller cap, Goldfayn says. There is a catch: Android owners tend to be heavy Google Tools users, using more data by repeatedly synching calendars, documents and other content. A recent study from comparison site Validas found that users with Verizon (where the Droid reigns) used 421 MB per month, while those on iPhone-heavy AT&T used 338MB. Android phones also tend to have larger screens, which makes video a bigger draw, he says.

One saving grace for consumers: More handsets support wireless connections and switch to WiFi automatically when it's available [in say, Starbucks (Nasdaq: SBUX - News)], Rubin says. That free connection provides a bit of respite for people who want to use their phone for video or other intensive features -- without depleting a limited data plan. Look for a WiFi icon in your phone's connection status bar, next to the bars indicating your cell phone signal strength.

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