Opinion

Felix Salmon

AT&T tries to defend its data pricing

By Felix Salmon
June 4, 2010

Mark Siegel, the executive director of media relations at AT&T, was upset that I didn’t phone him before posting my blog entry yesterday on his company’s new data plans. He phoned me this morning, and I told him that I assumed the official AT&T press release — which I linked to from my blog — had all the information that the company wanted to release, but that if he wanted to tell me anything else, he was more than welcome to.

And indeed, he did clear up one thing for me. If you’re on the Data Plus plan, that costs you $15 for 200 MB no matter how much data you use. If you use 201 MB in a month, that’s $30; if you use 401 MB, it’s $45, and so on. If you go up to say 1.9 GB in a month, that’s $150 — six times the $25 you would pay to consume the same amount of data on the Data Pro plan.

Is there any point, I asked Siegel, at which AT&T will help a brother out and automatically switch a heavy data user from Data Plus to Data Pro? No, he told me: “Our assumption is that people are intelligent enough to see that they’re going over. People are way smart enough to manage their own usage.”

This puts a large and unnecessary onus onto people with phones, especially phones with WiFi capability. If you only use data-heavy applications like YouTube or Pandora when you’re connected to a WiFi hotspot, you should be fine with the lower data plan — until that fateful day when your WiFi craps out without you noticing, and you rapidly rack up a huge amount of data usage inadvertently.

I also asked Siegel what plan I should use, in the light of my detailed list of how much data I’ve consumed over the past eight months. “In your case it might be a toss-up”, he said, unhelpfully. “It’s up to you to decide.”

Well, that’s one choice I don’t want. Siegel thinks — or at least he told me — that “people don’t want one plan”, and that something along the lines of the plan I proposed in my post ($15 for the first 200 MB, and then $10 per GB thereafter) would constitute trying to fit all of AT&T’s customers into one mold — something he says that, after “months and months of speaking to consumers”, AT&T has learned that they don’t want.

So I asked him who would lose out from that kind of plan. He said: “For somebody who is a relatively light user, a gigabyte would be a much much much higher level of usage than that person would ever engage in, and why would you charge that at all.”

Somehow he forgot that AT&T, with its new plans, is asking anybody who’s likely to go over 200 MB in one month to get charged for two gigabytes of data each month — or face paying more for 201 MB than they would otherwise have to pay for 1.9 GB.

Siegel’s message, which I’m happy to pass on, is this: “One of the things we found is that people don’t want one plan. They don’t want one size that fits all.” Well, I want one plan, and it’s clear to me that AT&T new pricing scheme is deliberately constructed to ensure that a lot of people end up making unnecessary payments — either for using more than 200 MB when they’re on the Data Plus plan, or for using less than 200 MB when they’re on the Data Pro plan.

Of course, if AT&T weren’t evil, it could fix all this at a stroke, and it wouldn’t even need to change the plan pricing. All it would need to do is charge people for data usage ex post, rather than ex ante: if you used less than 200 MB in one month, it would charge you on the Data Plus plan, and if you used more than 200 MB it would charge you on the Data Pro plan.

But that would be far too easy for AT&T’s customers, and it would deprive AT&T of all that extra revenue from people who guess their data-usage needs incorrectly. Obviously AT&T prefers to make life harder for its customers, if that’s going to give it a little bit more money.

Comments
22 comments so far | RSS Comments RSS

ATT learned from the amount of money they were able to extract from parents with texting teens.

Posted by ErnieD | Report as abusive
 

It’s a patently cyncially priced plan. It’s extremely easy to exceed 200MB if you use your phone to surf the web and use Google Maps on a fairly regular basis, but you’re unlikely to exceed 500MB unless you do data intensive stuff like downloading music and streaming video. So AT&T are basically capturing a lot of people who don’t think of themselves as heavy data users and charging them more than the heavy data plan, while not having to give them the capacity the heavy data plan would provide.

Incidentally, do AT&T warn users when they reach the cut-off points? I’m pretty staggered by the fees they’re charging, especially if they don’t. I pay £10 a month for my data package, which gives me 1GB (and some other perks, like 80 hours of streaming TV via a Slingbox. If I get close to the limit, I get a warning text, and then I get another when I hit the limit.

Posted by GingerYellow | Report as abusive
 

Don’t complain. Change carriers. That gets the message across way better.

Posted by remonl | Report as abusive
 

This commenting system sucks…as it will not let me see any comments when i click the “See All Comments” link.

With that mini-rant completed, I think there was an earlier comment making the point that this plan mimics there outrageous pricing for SMS/text msg, which on a per bit basis is absurd.

While ATT makes the case that they are attempting to ration a scarce resource (EMF spectrum), that’s just a convenient excuse. If there were plans to expand available spectrum, you can bet they would either do their best to block it, or use their monopoly rents to pay far more than anyone else to absorb it and protect their duopoly/tacit monopoly.

The US regulatory regime for communications is the biggest obstacle to better communications options, and is only getting worse under Obamachowski.

Posted by NoRisk-NoReward | Report as abusive
 

to be fair on one point though – it’s my understanding (and I take this back if I’m wrong) that you will receive some sort of notification/alert when you’re nearing your “cap”. At which point (or actually at any point during the month) you can “switch” to the pro plan retroactively for the month (I’m assuming you’d stay on the pro plan unless you then actively chose to switch back to the basic plan, which is a bit annoying).

But, assuming there’s a notification system, there’s not a whole lot of active monitoring that you have to do in order to actually keep track of your usage.

Posted by very-simple | Report as abusive
 

Ok I still don’t get it. Let me say first I do not have a smartphone nor is my service provider AT&T. I don’t think that has anything to do with my confusion though since I am working off the numbers of this, and the previous AT&T blog. I will take it step by step:
AT&T currently offers a plan at the rate of $30/month that includes unlimited data usage.
They want to introduce two plans. The Data Plus plan that is $15/month which offers 200MB data usage and the Data Plus plan that is $25/month and offers 2GB data usage.
I, as the customer, now have to look at my monthly data usage and evaluate which plan might be better for me. If I occasionally go over 200MB a month I will get charged a tiered fee based one how much over 200MB I go. If I stay under 2GB a month I will pay a flat $25 and not have to worry about overage fees.
I, being a reasonably intelligent custumer, realizes that if I get the Data Pro plan not only will I SAVE $5/month but I can be confident I will not exceed 2GB data usage therefor I will not have to worry about overage fees.

Where then is the argument?

I find, Mr. Salmon, that you argue AT&T should be the ones to monitor the usage of the customer and adust the pricing for them. The example given is Mark Siegel states; “Our assumption is that people are intelligent enough to see that they’re going over. People are way smart enough to manage their own usage.”
Your remarks to that statement is; “This puts a large and unnecessary onus onto people with phones, especially phones with WiFi capability.”
That is a very weak argument Mr. Salmon. How “large and unnecessary” an onus is it for a customer to keep track of what is ulimately their responsibility? How hard is if for a customer to pop online and check their usage? Or maybe, as GingerYellow points out, AT&T will be kind enough to sent you an alert when you get close to your limits.
So to me all it sounds like you are saying is you want the device, want to pay as little for it as possible, want no responsibility of how you use it, want AT&T to monitor how you use it, and have them adjust pricing accordingly so you don’t have to bother.
In my mind that is synonymous with lazyness. Or maybe ignorance really is bliss. Maybe that’s the whole point I am missing.

Posted by iflydaplanes | Report as abusive
 

Dear AT&T: It’s not your new data pricing so much as what appears to be intentional baiting & switching to hook customers. Your iPad Plan lasted less than 40 days and promised the ability to turn the service on and off monthly without penalty. It appears you clearly knew you were not going to live up to that promise for more than one month. Whether that violates federal law ultimately will be up to the Department of Justice and the federal courts. But you’re creeps either way.

Posted by NerdUno | Report as abusive
 

very-simple: you can switch plans at any time, but you can NOT switch plans retroactively.

Posted by FelixSalmon | Report as abusive
 

I’m tired of companies like AT&T and Facebook telling me how I should use their products. I know very well how I am going to use my iPhone or what security options I want to set within Facebook. Enough of telling me what to do with my stuff. Why don’t companies listen to their customers and their needs and build a product around that.

For example, back in the late 1990′s, there is a prime example on how this affected two large networking companies. 3Com vs Cisco. 3Com was headed up by an engineer that told their customers how to use their products and how they should do networking. However, Cisco, headed by a salesman, got it. They listened to their customers and designed products that their customer wanted/needed. Look at what happened. Cisco become the dominate company and 3Com, well they are now owned by HP.

Posted by farmdwg | Report as abusive
 

Felix –

There may be a lot to gripe about with bandwidth providers, but I think you are missing the gigantic issue, and in fact one of the major crises of our era:

Bandwidth providers are freeloading on the demand created by content providers. Bandwidth providers are doing just great financially, earning a ton of money. Meanwhile, content providers are fighting a losing battle just to get paid and not go out of business. Much of the media world has been going through an endless depression for the last decade or more. The decline most in media is a great loss for society.

Posted by DanHess | Report as abusive
 

“People are way smart enough to manage their own usage.” Haha. You are absolutely right, Felix, this company is evil – it has turned this way as it knows it is living on borrowed time. Wireless voice is the only cash cow left (the business and residential fixed markets have gone VoIP long ago and decimated margins). When they added the A-list feature, they conveniently “forgot” to inform me, leaving me with a huge overage bill. This is the same tactic, hope your customers don’t notice until it is too late. Treating customers this way is a certain path to demise.

Posted by calx | Report as abusive
 

It is an effective way to draw people from the promised “grandfather plans” and then soon after, hit them with higher fees.

It worked on me… we all get lofty ideas at times that another deal is right for us that actually costs less. That dang greener grass syndrome!!

Posted by hsvkitty | Report as abusive
 

There is another option, using Mifi. It’s $60 per month, but you get 5mb and it works for all wifi devices. And, you get Verizon or Sprint networks, not AT&T (especially significant in NY and SF).

But can anyone tell me how many mb they are using per month on their iPad (not iPhone — even though the technology is the same, the iPad is clearly better designed for video than the iPhone)? I’d especially appreciate it if you would indicate for how many hours a day you typically use the iPad (i.e., just for your hour commute in each direction, non-stop, etc.)

Thanks.

Posted by Snyderico | Report as abusive
 

Felix:

I’m sorry – I got my information here: http://www.macrumors.com/2010/06/02/more -details-on-atandts-data-plan-changes-fo r-iphone-and-ipad/

It has an extensive q&a by TUAW and an AT&T spokesperson, and this was specifically mentioned:

“iPhone users can bump up from the $15 200 MB data plan to the $25 2 GB plan without penalty AS LONG AS THEY INITIATE THE CHANGE BEFORE THE END OF THE DESIRED BILLING CYCLE. This will allow users on the lower tier to simply bump up to the $25 plan as needed rather than having to pay $15 per additional 200 MB over the initial 200 MB limit. Users can then bump themselves back down for their next billing cycle. It is unclear at this time whether users on the higher tier will be able to drop down to the lower tier mid-cycle if they see that their data usage will be low for that period.”

Perhaps TUAW was given misinformation, but this answer pretty clearly says (to me at least) that you can retroactively change your plan during the current billing cycle. This, combined with (my hope of, at least) notifications when approaching the cap should make this pretty easy, even if not as easy as your suggestion, which I would also infinitely prefer.

Not trying to be an AT&T defender by any means – I’ve had enough dropped calls to ever allow for that – just trying to make sure people have information.

Posted by very-simple | Report as abusive
 

Felix, how different is the AT&T situation to the congestion pricing situation? Both have a problem with traffic and both want to reduce usage or at least get people to pay on a sliding scale based on demand. Of course, the current AT&T pricing plan is silly, but your points seem to assume that capacity is limitless on the AT&T network. I think that the assumption that you make is that the AT&T network is the equivalent of public transport which is not the case. It is the equivalent of using a private car – if you want to get into the CBD then you have to pay. AT&T should use the same system. And if you are prepared to work out how much you pay on the congestion system, why not the same with AT&T? And, like congestion charging, you can use alternatives – public transport, or in AT&Ts case, their competitors, or wifi.

Posted by Pluton | Report as abusive
 

Rolfe Winkler makes an excellent argument in favor of AT&T’s new scheme:

“Free ride ending for U.S. wireless bandwidth hogs”
http://blogs.reuters.com/columns/2010/06  /02/free-ride-ending-for-u-s-wireless-b andwidth-hogs/

Posted by DanHess | Report as abusive
 

You shouldn’t need to monitor your usage. Do you monitor how much electricity you use at home? How much water you use? I doubt it. How many megs of data do use use when you watch a 4-1/2 minute YouTube video? How would any normal person know this? You should pay for what you use, just like with other utilities. Maybe the cost/meg changes at some point, like with electricity and water. These usage “plans” serve no purpose other that to increase the revenue to AT&T. Companies that treat their customers like this deserve to go under.

Posted by RGC | Report as abusive
 

In response to RGC, of course you should monitor your electricity usage. In many developing countries, that is precisely what is expected of you, especially as more countries move to a prepaid model. If you don’t monitor your usage you soon find out when the electricity is cut and you have to walk to the nearest store to top up. In the USA, one of the environmental issues that too many people assume that electricity is an unlimited good and there are severe consequences to that – not only environmental. So that is not a good analogy. In any case, the problem is not monitoring usage, per se. The problem is that AT&T currently has too much traffic and needs to reinvest heavily in additional capacity. They need to find a mechanism to control that – the current AT&T pricing scheme clearly is wrong, but so is Felix’s solution which is pretty much unlimited usage.

Posted by Pluton | Report as abusive
 

For decades, AT&T’s business has revolved around charging customers for services they don’t or can’t access on networks that AT&T managed to get the public to subsidize to begin with. What makes you think they’ll change now?

Posted by HBC | Report as abusive
 

I love my iPhone, but I hate AT&T and can’t wait until my contract runs out (13 months and counting!) so I can cancel it and go with one of the new smart phones.

I mostly hate them because I have to load pages twice so frequently, and I suspect this is by design to limit data usage.

Another reason I hate them is because they charged me deposit fee to get this phone, but then six months later, when I wanted to add a line for my spouse after paying on time for six full months, they upped the deposit on that phone to 7 times the cost of the original deposit. They can suck it forever for that, and we got my spouse a T-Mobile plan as a result, which is where I will go when my contract is up.

This new move just adds fuel to my fire. I hope they go out of business in this economy, and will cheer if and when they do.

Posted by ChaoticGeorge | Report as abusive
 

let’s face it, with the iPhone rumored to be available on Verizon this year they know that thousands of users will switch. Why else would they be doing this and don’t forget they just increased the cost to break the contract to the highest in the industry.

It will be interesting to see the subscriber numbers 2yrs from now when everyone who could move without penalty has that option. I predict ATT will suffer greatly for their arrogance and greed.

Posted by WiredToTheMax | Report as abusive
 

AT&T doesn’t have a leg to stand on, but they charge you as though they gave you at least a pair.

http://www.newnetworks.com/netneutrality fcc.htm

Posted by HBC | Report as abusive
 

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