IHS Global Insight Perspective | |
Significance | AT&T has long suffered from capacity constraints as smartphones have burgeoned and some users utilise excessive amounts of data on unlimited tariffs. |
Implications | Current tariff agreements will be maintained, but the new tariffs offer fairly low monthly limits—although backed up by the AT&T Wi-Fi network. |
Outlook | Verizon is likely to follow suit, but Sprint in particular will use unlimited data tariffs to attempt to regain some lost ground. It risks attracting very heavy users, however, which could strain even its underutilised networks. |
After long-term indications that the main carriers would be reining in the unlimited data plans that have helped to boost the market for mobile data services, AT&T has bitten the bullet and announced new pricing plans with 2 GB monthly limits (see Canada – United States: 22 April 2008: Bell Responds to Wholesale Traffic-Shaping Allegations as AT&T VP Predicts Network Overload, United States: 20 May 2009: AT&T Sees Gradual Recovery, Considers Lower Cost Data Plans, and United States: 10 December 2009: AT&T Targets Mobile Data Hogs, Boosts U-Verse to 24Mbps). Although AT&T already offered low-use data tariffs, the new tariffs will replace rather than be available in addition to existing unlimited tariffs (see United States: 24 November 2009: AT&T Unveils Flexible Data Tariff Options).
AT&T has positioned the move as part of a lowering of the cost of data services, with two new tiered price plans, the "DataPlus" entry plan providing 200 MB of data a month at US$15 per month or the "DataPro" plan of US$25 per month for 2 GB of data. If users on the lower plan exceed 200 MB in a month they will get an additional 200 MB for US$15. Users on the DataPro tariff exceeding their monthly limit will get an additional 1 GB for US$10 per month. Customers on the DataPro plan can also opt to add the long-awaited tethering capability to their plan for an additional US$20 per month. These prices will replace the US$30 unlimited data plans for smartphones and the iPad from 7 June, although existing customers will not have to move to the new tariffs.
AT&T notes that 65% of smartphone customers use under 200 MB per month, while 98% of customers use under 2 GB. Existing customers can access a data calculator that will help them decide which plan is right for them. The plans will also include unlimited access at AT&T hotspots, which number some 20,000 in the United States, and they note that customers will also be able to use other accessible hotspots at home elsewhere.
Outlook and Implications
Customers will also have access to online tools and smartphone applications showing their use, and receive notifications by text and e-mail when they reach different levels of usage—at 65%, 90%, and 100% of their data plan cap (see United States: 27 May 2010: U.S. FCC Considers Mandating Excessive Bill Warnings). However, AT&T says: "Customers will see their usage reflected in their tools generally within 15 hours or less of actual data usage." This leaves a large window of time for users to rack up large data bills unnoticed—at 1 Mbps (0.125 MB per second) a customer could theoretically use 200 MB in just 27 minutes. Although such use is unlikely without tethering, it is the potential for such issues that made unlimited data services so popular—and necessary—to stimulate what was initially sluggish demand for data services. Unlike minutes of use in the voice world, data use by handsets is more ethereal, leaving users uncertain of the state of the account.
AT&T has been spurred to do this by excessive use of the network by the boom in iPhone customers, leading to significant stresses on the network in key urban areas. Verizon is likely to follow suit, having indicated that such a move is likely since the start of the year (see United States: 15 January 2010: Verizon Wireless Envisions End to Flat-Rate Data Charges). Verizon could leverage a window of opportunity to pick up some disgruntled AT&T smartphone users, but may view the high data users who would be pulled in by the difference as not worth attracting because of the strain they could put on the network and move to level the differences more quickly. Verizon, however, lacks the AT&T Wi-Fi network, which will placate many users, although a deal with Boingo was struck with Verizon in 2009 that covered only the Verizon fixed-line business (see United States: 30 July 2009: Verizon Signs Up Boingo for Hotspot Access). Dow Jones reports that Sprint, which is set to launch the Evo 4G WiMAX handset this month, has no intention to introduce such tiered plans, and given the poor state of its subscriber trends will likely leverage this as a major marketing tool. However, conversely, the maintenance of existing unlimited plans could also act as a significant lock-in effecter for customers already on the AT&T iPhone for some customers.
This highlights the capacity constraints on wireless networks but comes a day after FCC Chairman Julius Genachowski positioned mobile broadband as a major alternative to deliver competition to fixed-line networks, noting that although the AT&T network has faced overload: "There's no doubt in my mind that the biggest opportunity to drive competition to [fixed] broadband is to take advantage of mobile broadband." That will in part require opening up new spectrum and bandwidth, but both wireless and wireline industries are being targeted by net neutrality measures, which if the FCC has its way could prohibit alternative network management measures to capping, such as banning specific services (see United States: 22 September 2009: FCC Proposes Increasing and Codifying U.S. Net Neutrality Principles).