AT&T has been hinting at introducing tiered or metered smartphone data pricing, and today it’s cemented its plans, announcing new buckets-of-megabyte plans that replace its one-size-fits-all unlimited data offerings. In its press releases, AT&T listed three category of plans that could be used for smartphone data and tethering, taking particular care to give examples of how much content could be downloaded or uploaded under each cap:
• DataPlus. Provides 200 megabytes of data — for example, enough to send/receive 1000 e-mails (no attachments), plus send/receive 150 e-mails with attachments, plus view 400 Web pages, plus post 50 photos on social media sites, plus watch 20 minutes of streaming video — for just $15 per month. This plan, which can save customers up to 50% off their wireless data charges, is designed for people who primarily like to surf the Web, send e-mail and use social networking apps. If customers exceed 200 MB in a monthly billing cycle, they will receive an additional 200 MB of data usage for $15 for use in the cycle. Currently, 65% of AT&T smartphone customers use less than 200 MB of data per month on average.
• DataPro. Provides 2 gigabytes of data — for example, enough to send/receive 10,000 e-mails (no attachments), plus send/receive 1500 e-mails with attachments, plus view 4,000 Web pages, plus post 500 photos to social media sites, plus watch 200 minutes of streaming video — for $25 per month. Should a customer exceed 2 GB during a billing cycle, they will receive an additional 1 GB of data for $10 for use in the cycle. Currently, 98% of AT&T smartphone customers use less than 2 GB of data a month on average.
• Tethering. Smartphone customers — including iPhone customers — who choose the DataPro plan have the option to add tethering for an additional $20 per month. Tethering lets customers use their smartphones as a modem to provide a broadband connection for laptop computers, netbooks or other computing devices. Tethering for iPhones will be available when Apple releases iPhone OS 4 this summer.
The announcement immediately set off waves of commentary across the Web, much of it lamenting the loss of unlimited data use on the iPhone and iPad. Media watchdog The Free Press accused AT&T of gouging its customers, saying the operator should have invested in a more robust 3G footprint rather than choosing to “manage scarcity and ration its network”. It pointed out the huge discrepancy between the amount of data included in the two tiers — a 2 GB customer gets 10 times the data for less than half the cost. “This pricing system is clearly divorced from the actual underlying cost of service,” said Free Press policy counsel M. Chris Riley in a statement.
Some blogs and news reports were more charitable to AT&T, pointing out that the tiered system was ultimately more equitable to the majority of users, as few consume more than 2 GB a month. Compared to the $30 data plan required for all iPhones, the majority of customers come out ahead, cutting their bills in half in many cases. Those who consume boatloads of data each month surely won’t be happy, but the majority of smartphone users consuming small amounts of capacity each month will no longer have to subsidize the data-crazed minority. Computer World’s Sharon Machlis, though, warned that by punishing its most ardent users, AT&T may be biting the hand that feeds it:
I can understand why AT&T doesn’t want to make billions in network improvements if all that would do is service a tiny slice of highly unprofitable customers. However, what I think they’re missing here is that those customers are often not only early adopters, but tech influencers among their circle of family and friends. Maybe AT&T is betting that they don’t need those influencers anymore, that iPhones and iPads have moved from the cutting edge to the mainstream.
At the other end of the spectrum, industry analysts were generally supportive of, if not ecstatic over, AT&T’s new policies, predicting that all the other operators would soon follow. According to Bernstein Research senior analyst Craig Moffett, AT&T is initially diluting its data revenue stream by collecting less revenue from its low-impact users, but by moving high-impact customers further up the price ladder the plans will improve network utilization and ensure those using it the most will pay the most. Dropping the price of all of the plans, though, Moffett said, was probably more a public relations move:
The price changes offer a lower entry point for light users, a critical and necessary step for public relations. The low end price reduction for light users will reduce (but not eliminate) the inevitable firestorm of criticism from heavy users, who are certain to be the most vocal commentators. Notably, the failure to lower entry level prices was a key PR shortcoming of Time Warner Cable’s abortive attempt to introduce [usage-based pricing] in its terrestrial broadband business in early 2009.
Connected Planet’s take,
Kevin Fitchard:
A lot of people are calling these new plans “caps,” which I don’t think is entirely fair. Caps imply AT&T is trying to prevent customers from consuming more data by imposing penalties for going over the monthly limit. This is the opposite: AT&T seems to be actively encouraging customers to use as much data as they like, so long as they pay for what they use. In the case of the DataPro plan, the third gigabyte of data actually costs less than the first two. That’s a complete about-face from the standard industry policy, which charged you dearly for even a few megabytes over the cap.
Admittedly, there’s a big discrepancy in data allotted between the low-end and high-end plans. Part of that can be explained by the costs of delivering data services vs. the cost of pushing individual packets. It’s a mistake to assume that AT&T is just delivering packages and its costs correlate only to the amount of megabytes its delivers to each user. These smartphones have always-on Internet connections, and the HSPA network is constantly monitoring their locations so that the Internet knows where to direct their content. There’s a tremendous amount of signaling overhead between device and network, even if no or very little data is actually transmitted. The DataPlus plan may have a 10-times-smaller ration of bytes, but a lot of the $15 monthly cost probably goes to paying the costs of maintaining a mobile Internet connection, not delivering the 200 MB included with it. Of course, by charging another $15 for the next 200 MB, that argument goes out the window. If AT&T wanted to shield itself from criticism, it should probably just offer a single plan: $15 for a connection and 200 MB allotment and then a $5 charge for each 500 MB of usage per month beyond it.
They may not be perfect, but these smartphone plans (the tethering plan excluded) are by far the fairest attempt I’ve ever seen by any operator of distributing the costs of running a mobile data network among customers. It accomplishes multiple goals: It doesn’t force 95% of its customers to subsidize the mobile Internet habits of the remaining 5%, it lowers the barriers of entry to mobile data by halving the cost of data plans to many customers, and it curtails the need for draconian usage caps by allowing customers to eat as much as they like without incurring punitive fees. I’m sure those 5 GB-per-month smartphone users will still consider a $10-per-gigabyte charge punitive, but they must have been really disillusioned if they thought that gravy train was going to continue indefinitely.
I didn’t include the tethering plan in my assessment of the fairness of AT&T’s new policies because not only is the tethering plan unfair, it’s just plain stupid. What is AT&T thinking? By introducing tiered pricing plans for smartphones, AT&T is taking an important — you could even say courageous — first step toward an industry where what customers pay is determined directly by the impact they have on the data network. Charging $20 a month to tether without providing any additional data allotment is a complete contradiction of that philosophy. It’s an arbitrary charge, implemented at a time AT&T is trying to make the case that it’s taking arbitrariness out of its data billing policies. With the new plans customers are already being billed for the amount of data to consume — whether those bytes flow to an on-deck app or through a Bluetooth link to a laptop makes absolutely no difference. What’s next? Implement separate data plans for blue phones versus red ones?
That’s our take on this. Let us know what you think in the comments section below:
Courageous or not, tiered pricing is inevitable. For too long — and this goes back much further than the Internet — we’ve been conditioned to “all you can eat” telecom services that are invariably subsidized somewhere else down the line. Should pay-as-you-go be the rule for all services? The greater issue is whether the industry and regulators will ever relinquish the concept of “just, reasonable and fair” rates, i.e., Universal Service that levels local monthly bills whether you’re Joe Suburb living two steps from a CO, Aunt Minnie on a fixed income or Farmer Brown in the remote vastness of the Dakotas.
In general I highly agree, the tiered plan is a step forward.
One area you might consider is how phone subsidies affect the \"fairness\" of the chosen rate plan. I think that about $10 a month is there just to pay for your subsidized phone (plus about $3.50 a month from the voice plan). After all they subsidize a smart phone to the tune of $325, over two years, that is $13.50 a month.
The result is that the plan is pretty close to a linear charge of $10/Gigabyte. The $25 plan then is really $15 ($25-$10) for 2 Gigabytes, a little less than $10/gigabyte. The overage is really very progressive, with no real \"penalty\", at the straight $10/gigabyte. The entry level plan, is then $5 a month (after subsidy), at a linear rate that would be 500 Megabytes, and you get 200. But keep your point about wireless infrastructure. An unused but working phone does cost the vendor money to support. So if you allocate about $2.50 a month to network support, then you only pay $2.50 for 200 megabytes, not quite linear, but close.
When you look at it from this angle (because phone subsidies are so effective for average users), the entry level data plan is a breakthrough. It allows people like me who won\’t pay $30 a month for a data plan they don\’t want (just to get a smart phone), to get that smartphone, and use it occasionally (away from WIFI). In other words it empowers a huge number of people to move up to smart phones for a very reasonable $5 a month for data service. That is hugely progressive in my opinion.
The part that is not progressive (IHMO) is the over-age fee for the entry plan. Here they clearly are doing the penalty thing to discourage you from buying that plan if you will come anywhere close to its limit. It is the same old tired plan of getting people to sign up for much more than they need to avoid going over. It lets the company claim much lower costs/minute (or megabyte as this case is), than the consumer actually gets based on actual use.
Same for Tethered plan, they are playing the odds. For lots of people, who buy the $25 plan, they will actually only use 250-500 Megabytes of service. But if they have tethering the use is likely to be the full 2 Gigabytes. So average use of the $25 plan is much higher with tethering. So they charge you a high fixed fee for the \"extra\" utility. They can get away with it, because it is in fact a highly valued extra service. One way to look at this though is: If you have an Ipad, then $20 a month to tether it to your phone with 2Gigabyte service is probably less or the same you would pay to separately provide data service to the Ipad. And you don\’t need to buy the 3G version.
All in all, very progressive and not progressive at the same time.
Given the abuse of US telecoms in overage charges with no proactive notification to customers, I say \\"drop dead AT&T!\\" I would like to see tiered usage made illegal until the telecom carriers provide proactive notification of plan overage.
These tiers are too restrictive and will result in consumers reducing wireless internet use. AT&T has becoming more anti-customer with each passing year. I dropped them last year after 11 years, the past three being mainly abuse.
The new AT&T data pricing plan includes proactive customer notification of their usage via text/e-mail once they approach 65% – 75% – 90% of their usage. An important point not noted: they are also notified that they can use any of the 20,000 AT&T Wireless Hotspots (hotels, airports, McDonalds, etc.), which is provided free and not charged against their usage allowed by their data plan.
The question of whether or not this is a good idea is too simplistic. The better question is, will this still be a good idea 2-3 years from now. And the answer is probably not, unless there is a cap on AT&T\’s ability to increase prices or, unless there is some provision which increases the GB allotment as the appetite for data-intensive applications increases. Video is just now beginning to spread into common use and it\’s growing on wireless platforms. Video is a data hog. So while 2GB may sound unreachable today, in a few months I think many of us will be wishing they had set the cap – and that is what it is – higher, say 4 or even 10GB or more.
I do understand AT&T’s step – if this helps allevaiting a network that in areas is plagued with performacne issues due to “too high” (?) data consumption.
But, as a user who does not fit in the DataPlus plan (I do consume more than 200MB/month on the macro network), but someone that is far away from ever consuming 2G/month, the price difference ($5 less per month) is just not substantial enough for me to drop down from the current “unlimited plan”.
And I think here’s AT&T’s plan. They WANT to keep users on a very steady $30/month data revenue, while appeasing consumer groups and regulators that have asked for some type tiered pricing. Like they stated all over, most user never get even close to the 2GB/month, but their revenue is handy to have.
Only tme will tell how this impacts future iPad users. I can easily see how one can eat up more than 2GB on an iPad since the device is so “portable” and fits nicely in a moving car – an environment no WiFi ever will be able to serve.
So, let me get this straight…the problems mainly are due to power users/bandwidth hogs who account for 2% of users; what are the odds they’re going to drop their unlimited data plans?
Plus, AT&T is claiming the introduction of cheaper iPhones and an entry level data pricing tier will attract MORE mobile data users to its network.
In other words, tiered pricing currently won’t get rid of the power users, plus it will load even more lower level users onto a network that’s apparently unable to handle the current load. What could go wrong?
We see the new plans as a way for corporate users to cut their data costs an additional 30%. For the individual power user the new plans will cost more; however, for our corporate clients, average smartphone data usage is well below 200 Mb per month. What is not addressed is the incremental cost for Blackberry Enterprise Server use (BES).
Even if there is a BES premium of $15 per month on top of the plan most of our clients have the opportunity to lower their data costs by 30% Fortunately, we have the tools to easily identify which users will require a plan change. Without the tools, many of those responsible for corporate smart phone use will be at a disadvantage.