Why AT&T is evil to have multiple data plans

By Felix Salmon
June 3, 2010
Oyster card, you just tap in and tap out around the system, and it charges you whatever's cheapest. You only make one journey? You only get charged for one journey. The minute that your journeys in one day add up to more than the daily-pass rate, you get charged the daily-pass rate, and no more. Similarly for your journeys in one week, with the weekly pass. And so on. Really, there's only one plan, and there's no way to get inadvertently ripped off.

When AT&T decided to abolish unlimited data usage on its smartphones, that's the kind of of plan it should have implemented. Instead, it went the evil route, and it's forcing its current customers to make one of three different choices, based on limited information. Whatever they choose is quite likely to be the wrong choice, and AT&T will chortle as it collects all that extra money which its customers didn't need to pay.

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On the London Underground, you don’t need to decide whether it makes more sense to buy an individual ticket or to buy a daily or a weekly or a monthly pass. With the Oyster card, you just tap in and tap out around the system, and it charges you whatever’s cheapest. You only make one journey? You only get charged for one journey. The minute that your journeys in one day add up to more than the daily-pass rate, you get charged the daily-pass rate, and no more. Similarly for your journeys in one week, with the weekly pass. And so on. Really, there’s only one plan, and there’s no way to get inadvertently ripped off.

When AT&T decided to abolish unlimited data usage on its smartphones, that’s the kind of of plan it should have implemented. Instead, it went the evil route, and it’s forcing its current customers to make one of three different choices, based on limited information. Whatever they choose is quite likely to be the wrong choice, and AT&T will chortle as it collects all that extra money which its customers didn’t need to pay.

The first choice is known as Data Plus, and gives 200 MB of data for $15. If you go over the 200 MB cap, you pay another $15 for another 200 MB. If you go over that cap, it’s not clear what happens, but you’ve already paid $30 and will certainly be asked to pay more.

The second choice, Data Pro, gives you 2 GB of data for $25, and then $10 per GB thereafter.

And the third choice is to stay grandfathered in to the current plan, which is $30 per month for unlimited data usage.

You can switch as much as you like between Plus and Pro, but once you leave the unlimited plan, you’ve left forever; you can’t go back.

AT&T is good at disingenuous statements like this:

Currently, 65 percent of AT&T smartphone customers use less than 200 MB of data per month on average.

This is disingenuous on two levels. First, as John Gruber points out, it carefully talks about “smartphones” rather than iPhones: the number for iPhone users is surely significantly lower.

But second, just because you’re using less than 200 MB of data on average doesn’t mean that you should necessarily choose Data Plus. I’ve just had a look over my most recent iPhone bills, and here’s my monthly data usage over the past 8 months: 202, 120, 160, 143, 89, 39, 333, 287. On average, I’m using 172 MB of data per month, and even with the overage charges I would have been better off with Plus rather than Pro. But for the past couple of months I’ve been significantly over 200 MB, and would be better off with Pro rather than Plus. And then, if I get the new iPhone 4G, is that going to raise my data consumption? Who knows.

At least with the subway you’re in control of how much you use it. With data usage on a phone, it often comes down to questions consumers can’t be expected to understand: how much data does say Google Maps use? And, more generally, if the AT&T network is good, and doesn’t time out on a regular basis, you’re going to use it more. And consumers can’t reasonably predict how good the AT&T network is going to be next month.

AT&T could easily have saved consumers all the trouble of having to try to predict their next month’s data usage by having a single plan: $15 for the first 200 MB, say, and then $10 per GB thereafter. They didn’t, because they’re looking forward to getting $30 per month from people exceeding 200 MB of data but who use nowhere near the 2 GB that “Pro” users get for $25. That’s where AT&T is evil, even if you think (contra Jeff Jarvis) that it makes sense to abolish unlimited plans.

Comments
17 comments so far

I am trying to think about this..
A user spends $30 a month for unlimited data usage but most often to not exceed 200MB.
For $25 however they can get a plan that allows for 2GB of data of which they can feel comfortable they will not exceed.
To me that sounds like it benefits the customer in that they save $5 a month without sacrificing usage they have become familiar with. Sure they are going to use nowhere near 2GB, but they were not really making good use of “unlimited” either if you really think about it.
Also, why the huge variation in data usage offering? To go from 200MB to 2GB, a 1848MB difference, seems like a grand canyons leap worth of difference. If AT&T really wanted to be evil I think they could have tiered the plans more specifically, cutting each one off just at the point where a user may or may not cross. Say from 200 to 500 to 800, etc.

Posted by iflydaplanes | Report as abusive

Felix:

I see your point, but maybe, possibly, “evil” is going a bit overboard. If you use this adjective to describe AT&T, what do you have left for BP?

Think of it this way. Does Google’s mantra sound better as “Don’t be AT&T” or “Don’t be BP.” Not only is the latter more catchy, it makes more sense.

Jon

Posted by jon_bonanno | Report as abusive

Felix,
I don’t think AT&T’s statement re: smartphones is disingenuous. The data rates are relevant for those customers who have smartphones, whether iphone or blackberry or whatever else. As far as I can tell, they’re not treating iphones as a special group of phones outside the smartphone category. If they did that, it would clearly be disingenuous.

Former iphoner, new HTCer

Posted by Beer_numbers | Report as abusive

Private Utilities everywhere in the world use their immense size compared to their customers to extract undue amount of revenues and profits. Its not just utilities,Banks,Credit Card Companies all are proactively looking for legal but unethical ways to milk their consumers.Every consumer will have a story about the intimidatory acts of powerful utilities
http://Greenworldinvestor.com

Posted by AGreenInvestor | Report as abusive

If you don’t like “evil”, try “customer unfriendly”. Wireless companies only pull this crap because options are limited, and it takes years for competitive pressures to make plans more sensible.

People in aggregate are rather predictable, and coping with uncertain usage is far easier for AT&T to do itself than for every end-user to do individually. Shoving this down the throats of consumers who will almost certainly make mistakes is obnoxious.

Posted by absinthe | Report as abusive

It seems to me that the best model, and the one we’ll get to eventually, is pricing bandwidth like a utility. You just pay based on how much you use. The digerati won’t like that very much (unlimited data for a flat fee is pretty awesome), but it’s hard to see how data is much different than water or electricity.

Posted by TWAndrews | Report as abusive

Felix: My understanding is that people can change their plan at any point up to the last day of their billing cycle. Although it’s not as user-friendly as the Oyster, it isn’t quite as bad as you say. In the late 1990s, AT&T’s “OneRate” plan had a similar provision — you could change your plan “size” (minutes of talk) at the end of the billing cycle to minimize your total bill.

I bet we see an iPhone app that looks at your usage, and figures out your optimum plan, with regular reminders to do so.

Posted by PrintDevil | Report as abusive

Felix,

Maybe I need to get my conspiracy-meter calibrated, or I give consumers too much credit, but I fail to see the evil.

AT&T has two goals:
1) maximize revenue (shareholders demand it)
2) maximize data service speed & availability to the majority of their customers (customers demand it)

I see your point, given your average data use. But the 200MB plan was not designed for you. It’s for folks like my mother who check their email 2x/day and may look up a restaurant listing once a month. The extra $15 for your second 200MB is to make sure you’re really like my mother and a genuine infrequent user. These people are irrelevant to network demand.

Since you’re not my mother, the 2GB plan is for you, so you never have to worry about exceeding your data allotment. The message is “you might as well get the 2GB plan unless you’re SURE you won’t go over” I admit it’s not ideal for you since 1) you will pay an extra $5/month and 2) you will probably never use more than 1/5th of your allotment. I’d suggest streaming some more videos. Check out TEDTalks on YouTube.

The $10/GB overage fees are for the punks who find ways to use their iphones to replace their home internet connection, or who spend hours per day watching videos and slow down the network for the rest of us.

The pure-utility model would make more sense for you and many other users, but it would dis-incent incremental data usage, which AT&T doesn’t want to do, since they make money from content and advertising deals.

(no I don’t work for AT&T or even like them. They have an abysmal network where I live, and the AT&T/Apple cabal infuriates me)

Hope I haven’t missed your point. Cheers.

Posted by michael8 | Report as abusive

TWAndrews has it just right… wireless bandwith will always be a limited resource in highly populated areas. The top 1% of network users are responsible for half of network traffic.

Steve Jobs himself said as much when he stated that verizon or any other carrier would face the same problems AT&T does within 1 month of an iPhone rollout.

Felix, you said that in the last 2 months you use roughly 300 mega bites of data. Put that in prospective… the ONLY people getting adversly effected by AT&T’s move are using 7 times as much data as the internet’s best blogger. Think about that.

A friend of mine working in IT says that some users (the top 1/10 of 1% are pulling down terabites of data/month… that’s 1 million megabites compared to your 300. No network can allow that and still have room for everyone.

I would make the argument that AT&T was much more evil prior to the change because they forced everyone to pay for the top 1/10th of 1% of users with dropped calls and slower connection speeds.

Keep up the great writing!

Posted by y2kurtus | Report as abusive

Seems that AT&T has been reading your thoughts on congestion pricing

Posted by Sensei | Report as abusive

sensei for the win!!! well done, sir.

i don’t get the hubbabaloo – all AT&T is doing is giving you the opportunity to save money by not paying extra for data which you don’t need.

Posted by KidDynamite | Report as abusive

For the guy that was talking about changing the contract late in the billing period, watch out! For calling plans at least, AT&T usually pro-rates, which means you’d need to watch for overages in *both* segments after switching. In some screwy cases, switching to a higher plan will make your bill even worse (for that month, anyway).

Posted by absinthe | Report as abusive

I started using another of ATT’s newer services right now and they are absolutely diabolical, possibly to the point of fraud. The push it right to the limit. Embedded in the system are 10+ ways to charge you for things you shouldn’t be charged for. They even give you a credit of $50 when you sign up, to get you used to the idea of money flying out the window. “Well, I’m not really paying for it, so what does it matter.” But then you’re in, and probably don’t have the patience to fight their games and you just let the money trickle away. Also, their computers seem to be set up to pad extra time onto transactions, but in a deniable way.

Posted by Uncle_Billy | Report as abusive

How about a smartphone app that calculates that time to the end of the month and makes sure the subscriber exactly fills up his or her data usage to the data volume he or she has already paid for ? If need be, this would be done by accessing random web pages in the very last hours of the month.
Hopefully, then, data-plan sellers would think twice before continuing with discontinuous pricing.

Posted by ggeorgan | Report as abusive

Why does the Oyster Card even exist? When a company offers a lower unit rate in exchange for an advance commitment to purchase a certain number of units, I assume it’s a effectively a subsidy from customers who can’t correctly estimate their future wants to those who can. By contrast, the Oyster Card lets frequent users pay a lower rate without making any advance commitment. Isn’t that just a subsidy from infrequent users to frequent users? And if so, why is that a fair model?

Posted by Paul_M | Report as abusive

@Paul_M – Oyster actually only optimizes for the day pass rate. Weekly and monthly travelcards (which are on Oyster cards themselves, but on registered ones, rather than anonymous pre-pay ones) are still cheaper if you travel a lot.

What the Oyster is good for is efficiency (it’s faster to move more people through, and probably 95% or more of people using TfL services use the cards), security (many buses don’t even accept money, having a ticket machine at the bus stop if you don’t have a card), monitoring the public (especially with registered cards), and of course it lets them charge absolutely criminal rates to the tourists who aren’t informed well enough to get their own card.

And of course TfL (as a whole) is not a private corporation, though it sub-contracts to some private companies (e.g. elbg.com runs most of the buses in east London).

Posted by BarryKelly | Report as abusive

Assume I have a jailbroken iPhone and a grandfathered account. I’d previously been scared of using up too much data because AT&T might slap a hefty data surcharge on me.

There was a soft limit of 5GB that people generally understood they must stay under. Additionally, even though I *could* go up to 5GB, I couldn’t really, because the network was so slow.

Their 3G network has improved in NYC over the past few months. Now that it’s created 200MB and 2GB hard limit plans, doesn’t this soft limit go away? Can’t all us grandfathers throw away our WiFi Cablevision/RCN/FiOS Internet connections and just start relying on our iPhone?

Sounds like a good deal for me.

Posted by manubhardwaj | Report as abusive
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