Commentary

AT&T To Lead Tiered-Pricing Shift?

by Mark Walsh , December 10, 2009

Ralph de la Vega

AT&T CEO Ralph de la Vega's a remarks yesterday suggesting the carrier may adopt usage-based pricing to limit heavy bandwidth use isn't likely to endear the company to already frustrated iPhone customers.

De la Vega said the company wants to give the 3% of smartphone (read iPhone) users that account for 40% of data traffic an "incentive" to change their habits involving extensive video and audio streaming. That could ultimately lead to higher charges for greater bandwidth consumption.

The move would fly in the face of the broader industry trend toward flat-rate pricing and unlimited voice and "all-you-can eat" service plans. AT&T has been a victim of the success of that model as its network hasn't been able to keep up with surging demand from iPhone users. (De la Vega also outlined steps AT&T is taking to improve service in the iPhone capitals of New York and San Francisco.)

Shifting to metered-billing would also seem to provide an opening to arch rival Verizon Wireless, which could tout its lack of such a pricing scheme as a competitive advantage over AT&T, in addition to having a more reliable network. But experts say tiered-pricing is the future for mobile data.

"Carriers' spectrum resources are limited and if these users hog up the capacity, this means less access for others," noted Bill Ho, research director of wireless services at Current Analysis. "This presents a problem with user experience, increases dissatisfaction and ultimately forces a carrier to increase expenses to meet this need."

a GigaOm also cites a study earlier this year by Bytemobile showing that 60% of those in the mobile services industry expect carrier's to adopt variable data pricing as more devices and fatter pipes increase and accelerate consumption.

But the idea of additional charges to reduce bandwidth demand is already riling iPhone users, whom AT&T requires to have data plans to begin with. "AT&T forces every iPhone user on their network to have a data plan. And now they are complaining that users are using the data plan. Unbelieveable" read one post on the a iLounge site, a sentiment echoed by other commenters.

mobile, net neutrality, telecom

4 comments about "AT&T To Lead Tiered-Pricing Shift?".

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James Briggs from Briabe Media, December 10, 2009 at 4:21 p.m.
AT&T will have a lot of explaining to do if the company ultimately decides that it will need to alter the contracts of the millions of iPhone users already on the network. The company lured these folks into a multiyear contract with the promise of a powerful smartphone and unlimited data access on the country's best 3G network.
It might be time for the FCC to intervene to allow people that want to go elsewhere to do so without having to pay a hefty contract termination fee. This also should give Apple additional incentive to make its future devices more broadly available to avoid dealing with all of the headaches associated with dedication to a single carrier's network.
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David Pavlicko from AVISPL, December 10, 2009 at 8:53 p.m.

Ooooo...this ticks me off. AT&t needs to suck it up and get their crap together.

How does this sound, AT&T?

I'll pay you more money to use my phone when you stop charging me ridiculous amounts of money to send a text message.

I'm typing this on a stupid iPhone right now ( which I do like, btw ) but my contract is up and I think I'll be checking out the droid now. Smooth move le Vega.

Nelson Yuen from Stereotypical Mid Sized Services Corp., December 11, 2009 at 2:51 p.m.

I've decided to switch to Verizon. Smooth Vega... you even look like an overweight pot bellied corporate incumbent trying to squeeze every last penny out of everyday consumers. OK OK, jokes and stabs aside.

Seriously, I was going to resign with AT&T because the IPhone was starting to become reasonable at 199.00. But how do you proliferate smart phone use by capping data consumption? If you pay for unlimited you should GET unlimited. It's really that simple. It has to pinch a nerve with consumers. You want them to pay for a service but not use it... I mean... WOW... I'm not even all that mad anymore - just stumped at how idiotic the move is... logistically, how would you cap the 30.00 IPhone users pay? Because if AT&T says they'll credit consumers back 15 dollars if they don't consumer over 2.5 Gigs of data, then that makes sense right? Because the SHADY little disclaimer caps "unlimited" at 5 Gigs.

That's not what I think AT&T wants to do. I think AT&T wants to CURB the 5 gig limit and charge MORE for less. EX. They'll probably charge 20 dollars for 1 Gig, and then 10 dollars for every gig after that.

David Houle from David Houle & Associates, December 13, 2009 at 3:09 p.m.

If AT&T does this it will end up being one of the most bone headed ideas insular corporate execs have ever made. Anyone remember 'new coke'.

this decision is going in the exact opposite direction of all the long term trends of telephony and technology. It will Jobs all he needs to open up the iPhone to every carrier in the world. The only way this makes sense is if Jobs persuaded AT&T to do this as they would then be in contract violation allowing Apple to go global.