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Why AT&T Dropped Unlimited Data Plans

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OK, tethering isn't that important. Does a tiered pricing plan make any sense?

Well, it looks like AT&T is offering average consumers an affordable entry point while getting customers to switch from basic feature phones to smart phones. This plan will also allow AT&T to charge the 3% of customers who they claim use 40% of bandwidth fees commensurate with the amount of bandwidth they use.

BillShrink's CEO, Schwark Satyavolu, said, "While AT&T's new data package will give the third of smartphone users who average under 200MB of data some short-term relief, about $15/month, most of these customers are the non-iPhone users (based on average iPhone usage numbers). The majority of moderate iPhone customers are going to see small savings – $5 month, but get significantly less flexibility accessing the web from their phones (usage that is growing, especially as more streaming apps get approved by Apple as they have been recently). The biggest immediate impact and long-term harm will be on heavier iPhone users and people who tether, who typically have the highest data usage and will be paying overage fees each month."

Here are the factoids:

  • 65% of AT&T customers use less than 200MB/mo.
  • 98% of smart phone customers use on average less than 2GB of data/mo
  • The company plans to send text messages to users as they reach 65 percent, 90 percent, and 100 percent of their monthly cap.

"The primary motivation for making the switch to tiered pricing is that the one-size-fits-all approach to smart phones doesn't make sense anymore," said Mark Siegel, a spokesman for AT&T. "We wanted to give people a choice. People will use these devices differently, and we needed to give them different options."

How does the US marketplace look in Q1 2010?

  • 36% — RIM
  • 28% — Android
  • 21% — iPhone

Of course if you're really unhappy with AT&T's new financial model, there's lots of room at the bottom of the market. Prepaid wireless operators, such as Boost Mobile, Virgin Mobile USA, MetroPCS and Leap Wireless, are also starting to offer low-cost smart phone plans. Virgin Mobile offers a prepaid smart phone plan for as low as $35 a month. It includes 300 voice minutes and unlimited data and text messaging.

Finally, it might be instructive to understand the stress that Apple iPhones and iPads are putting on AT&T's network.

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iPhone users use 5-7x more data/month that average wireless subscribers – Sanford Bernstein

AT&T has also tried to make it easier for smart phone customers to offload Web activity on Wi-Fi hotspots. The company now offers free access to its more than 20,000 public Wi-Fi hotspots around the country to all smart phone subscribers. Adding such a low-cost plan could potentially put even more strain on AT&T's network? Some experts say no. Others disagree.

Ultimately, consumers will vote with their checkbooks. The future for carriers and the telecom industry is data. So, whether we like it or not, one way or the other, we (that's you and me) are going to be made to pay for it.

About the Author: Shelly Palmer is the host of "Digital Life with Shelly Palmer," a weekly half-hour television show about living and working in a digital world which can be seen on WNBC-TV's NY Nonstop Tuesdays at 10p Eastern and online, and the host of "MediaBytes," a daily news show that features insightful commentary and a unique insiders take on the biggest stories in technology, media, and entertainment. He is Managing Director of Advanced Media Ventures Group, LLC an industry-leading advisory and business development firm and the President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). Mr. Palmer is the author of Television Disrupted: The Transition from Network to Networked TV (2008, York House Press) and the upcoming, Get Digital: Reinventing Yourself and Your Career for the 21st Century Economy (2009, Lake House Press). You can join the MediaBytes mailing list here. Shelly can be reached at shelly@palmer.net For information visit www.shellypalmer.com

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