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We Don't Need Cellular Apple Watches

By Evan Niu, CFA - Apr 25, 2016 at 2:20PM

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A cellular Apple Watch might work in a shared data plan, but not everyone has those.

Image source: Apple.

Isn't your monthly cell phone bill big enough?

The Wall Street Journal reported this morning that Apple (AAPL -1.07%) is looking to add cellular connectivity to the next Apple Watch, alongside a faster processor. The underlying reason being that Apple Watch currently relies a little too heavily on being paired to an iPhone for data connectivity and location information.

That might be a tough sell.

Do you need a third data plan?
Even in the iPad, it's taking a long time for the market to warm up to the idea of cellular connectivity. Sure, having a connection is incredibly convenient, but most people don't really want to add another data package to pay for on their monthly bill, especially since you can tether to your phone's data plan pretty easily these days.

For instance, cellular tablets comprised just 12% of the U.S. market in 2013, according to NPD. Adoption has been rising, though, albeit slowly. NPD also found that affluent and educated consumers were far more likely to pay up for the option. But a lot of people still don't find the extra upfront cost combined with a higher monthly bill worth it, and Wi-Fi-only models are still the most popular option.

Carriers are helping cellular tablet adoption
Wireless carriers are doing the best they can to promote cellular tablet sales. T-Mobile introduced a free data plan a couple years ago where users can get 200 MB per month at no cost. That's not an awful lot of data, but it does encourage users to at least upgrade to a cellular model if they know they can get light cellular usage.

Customers can also often buy cellular tablets on installment plans, much like phones these days. That also spreads out the cost of the premium. Carriers also offer occasional promotions for cellular tablets. Of course, the goal is that every now and then, you'll decide to buy some more data, perhaps while traveling.

We don't know what we don't know
As with all Apple rumors, it's unclear how Apple may or may not implement the feature. Untethering the Apple Watch from the iPhone seems necessary in order to make the Watch a more viable stand-alone device. But requiring cellular connectivity might be too much to ask.

The best way to add cellular connectivity would be to include it at no additional cost (unlike the iPad, where cellular connectivity costs an extra $129). More important, the market might accept it if it's bundled in a shared data plan, as opposed to a separate data plan. While many carriers in the U.S. are aggressively transitioning to shared data plans, not all of them are. In which case, deploying cellular connectivity in Apple Watch becomes even more convoluted.

There's really no simple solution.

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