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AT&T Scraps Unlimited Data

The New York Times report on AT&T’s decision yesterday to scrap unlimited data plans had a couple of choice quotes showing just how the company is spinning this decision.  They’ve replaced their unlimited plan with a choice of a $15/mo 200m or a $25/mo 2g plan.  AT&T also introduced a new charge for tethering — $10/mo for the right to connect your phone iPhone to a data device like a PC. 

Analysts are blaming a small group of “data pigs”, primarily iPhone users, for the changes.

“The free lunch for the ultra-heavy data user has been taken off the menu,” said Roger Entner, a telecommunications industry analyst with the Nielsen Company. “The new generation of heavy users is going to pay according to what they use.”

When wireless customers take “unlimited” literally, analysts say, those plans rapidly become money losers for the companies.

The problem is not unique to AT&T, but it has suffered more than its competitors because of the data demands of iPhone users. They use on average a third more data than the typical smartphone owner, Mr. Entner noted.

“The biggest data pigs in the world are the iPhone guys,” said Edward Snyder, an analyst with Charter Equity Research.

I don’t think this is about capturing “data pigs”.

  1. Anecdotally, most of the people I know who own iPhone use in the range of 500 to 600m of data.  200m would be too small, and 2g would be too much.  AT&T’s own research backs this up – 98% of their customers use less than 2g per month, and 65% less than 200m.  For most customers, AT&T’s decision is going to mean cost savings of between $5/mo and $15/mo, not additional costs. 
  2. Although tethering has been available at no cost for some time here in Canada, I don’t know very many people who use it.  Performance, compared to a dedicated (and cheap) cellular modem is poor, battery life on the tethered device is terrible, and the whole process is inconvenient.  AT&T’s tethering option is pure profit – money in the pocket to capture a category of casual data users who will likely never impact the company’s network materially.
  3. I stream audio and video all the time on Rogers, which has had tiered wireless data since day one, and I’ve never hit any of the limits.  Ever.  Why?  There’s a lot of WiFi around, and iPhone picks it automatically when it’s available.  My actual usage of 3G data is pretty low.  For most people, even those who make phone calls using Skype on 3G, tiered data plans aren’t going to matter.

It seems pretty clear that the philosophical war inside AT&T over pricing models has been won by the bean counters.  AT&T’s MBA’s are pining for the ability to tinker with plans and pricing to “optimize” revenue and profits.  The only way they can do that is to get back to tiered pricing models and they’re willing to take a short term revenue hit, since 98% of their customers never exceed 2G of data per month, in order to regain the control that they crave.

{ 5 comments… add one }

  • Tony Palik June 3, 2010, 4:11 am

    Alec, I agree with your reasoning but question AT&T's timing with this announcement. If I was one of those 2% of heavy iPhone users (rather than simply an iPhone user) then I would be signing up for unlimited data now. I don't think there will be many people rushing out to get the iPhone 4G who aren't already with AT&T AND would be within that 2%. As such, the impact to the network will be negligible for some time to come.

    With the availability of WiFi, I have not gone over about 400MB in a month. I do wonder who some people could ever hit 5GB as they would be bounded by the iPhone battery life :-)

  • David Megginson June 3, 2010, 4:49 am

    I USB-tether my Android Nexus One in Ottawa all the time. Phone battery life isn't an issue, because the phone is actually charging over USB while it's tethered, and 3G speeds (on Rogers) are pretty respectable — as good as what my relatives see with a dedicated 3G stick. Of course, it means more drain on your computer battery, but I get 3+ hours out of mine, and can often plug in anyway.

  • Craig Fitzpatrick June 3, 2010, 4:55 am

    Gotta love it when a big company calls a segment of its customers 'pigs'. Speaks volumes to their attitude.

    • Alec June 3, 2010, 4:57 am

      To be fair, those were the words of the independent analyst.

  • Neal Gilbert June 4, 2010, 4:27 am

    AT&T's plan to scrap unlimited data plan will have a negative effect on VoIP usage on mobile devices. The question is, how will the other carriers respond and what will Apple do?

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