AT&T's new data plan: Bait-and-switch?

AT&T unveiled new data plans this week that should result in savings for many wireless customers -- although new usage habits, driven by new technology, could wipe out those savings.

And some people are angry and accusing AT&T of a bait-and-switch.

AT&T on Wednesday introduced new wireless data rates. Effective Monday, new customers will no longer be able to sign up for its $30 per month all-you-can-eat plan. Instead, they'll have a choce of a $15 per month DataPlus plan for up to 200 MB of data, or a $25 plan DataPro plan for up to 2 GB of data.

Customers who go over their quota can get extra bandwidth: on the 200-MB plan, additional bandwidth is $15 for each additional 200 MB. On the 2 GB plan, additional bandwidth is $10 per gigabyte.

The 200 MB plan, at half the cost of AT&T's current all-you-can-eat plan, should be sufficient for most customers, AT&T said in its announcement. "Currently, 65 percent of AT&T smartphone customers use less than 200 MB of data per month on average."

AT&T Data Plan

Mitch Wagner:

AT&T's new data plan: Bait-and-switch?

Sharon Machlis:

No more unlimited data with AT&T

Jonny Evans:

WWDC: AT&T axes unlimited deal as iPhone upgrade looms

And, in a nice touch, AT&T will allow customers to configure tools to automatically monitor their data usage, through text message warnings and downloadable apps.

Cut costs

The price change was motivated by a desire to cut costs for wireless data and attract new customers, AT&T spokesman Seth Bloom told The Unofficial Apple Weblog's Erica Sadun. "We're introducing a $15/month plan that will make smartphones available to whole new sets of consumers. It's much more affordable to them," he said. Fully 98% of AT&T smartphone customers use less than 2 GB per month, Bloom told TUAW -- meaning 98% of smartphone customers can expect to see savings of at least $5 per month on their cell phone bill.

That's sweet, right?

Well, it is for many people. I checked my own wireless usage on the AT&T Web site (using the easy-to-follow instructions posted by the Mac Observer's Jeff Gamet), and found my data usage for the past seven months was under 200 MB per month. My peak month was November, where I racked up 182 MB in data charges, next highest is 161 MB and many months I'm comfortably around 100 MB. Other Apple bloggers also report themselves to be part of the 98% that use less than 2 GB per month; Daring Fireball's John Gruber and Shawn Blanc of ShawnBlanc.net, for example.

Gruber lays out the good and the bad of the new plan. The good, he says: "Almost all current iPhone users should save some money, even if just $5 per month." Overage charges on the 2 GB plan are reasonable, at $10 per gigabyte, compared with about $50 per gigabyte for Verizon and Sprint. "If you use more than 2 GB per month, you deserve to pay more than the rest of us who do not," he says.

The bad, says Gruber: Overage charges for the 200-MB/mo. plan are outrageous, at $15 for a "measly" additional 200 MB. "That’s usurious. For $15, they should get an entire extra gigabyte," Gruber says.

Tethering at last

And tethering is finally going to be supported on the iPhone by AT&T, but a year after it's available in the rest of the world. AT&T will charge an extra $20 per month, without delivering any extra data. "If you don’t get extra bandwidth, what are you paying for? It’s one thing to charge extra for tethering on an 'unlimited' data plan, but it’s outrageous to charge $20 when the bandwidth is already capped," Gruber says.

Indeed, the AT&T prices might not seem so low as new technology drives new usage habits for customers. The iPhone will support multitasking this summer, meaning users will be able to run streaming audio apps like Pandora in the background, driving up data usage, Gruber notes.

And support for tethering will drive even more data usage, as customers use tethered smartphones to send data to their notebooks and iPads. That's especially likely to be a problem for people watching streaming video, which you can now do on an iPhone but are more likely to do on an iPhone tethered to a bigger-screen device.

The new data rates are a big change for iPad Wi-Fi+3G users. A major selling point for that product was the $30 per month, all-you-can-eat data plan. That was a great plan -- and, even better, you could activate it month-by-month, without a contract. If you needed it for a month, you switched it on, and if you didn't need it the next month, you switched it off again.

As of Monday, iPad users will be charged at the new rates, although they can still use the service month-to-month, and switch off service in months they don't need it, AT&T told me in e-mail.

iPad customers with the $30/mo. unlimited plan can keep it, but if they cancel service for a month, then re-activate, they'll have to use one of the two new plans, AT&T said

Spitting mad

The change has technology journalist and blogger Jeff Jarvis spitting mad. "That's cynical. It's evil," Jarvis says.

"Let’s note that AT&T’s action in relation to the iPad is nothing short of bait-and-switch as it was sold as using the magic of unlimited data with plenty of data-rich applications and now the price of that gadget only soars if you actually use it as it was designed: to consume media constantly," he says.

One thing that concerns me about the new data plan is that it's one more thing to worry about. Previously, I paid my monthly AT&T bill and forgot about it. Now, I have to decide on a monthly basis how much data I think I'll need, and monitor my data usage to be sure I'm not going over the quota. Sure, it's just a tiny chore -- but these kinds of tiny chores add up to more hassle in life.

My colleague Sharon Machlis is disappointed in the new AT&T plans, and Gregg Keizer has a few choice analyst reactions.

Update: Just prior to posting this blog, I received the following statement from AT&T in e-mail:

By creating these affordable new data plans, we'll enable more people to enjoy the benefits of the mobile Internet, and give them more choices and control over their wireless data plan. In doing so, they'll be even better equipped to mobilize everything in their lives. To provide more people with the opportunity to experience the benefits of wireless data, we're breaking free from the traditional "one-size-fits-all" pricing model. With the new DataPlus plan, people can save up to 20 percent off their wireless voice and data bill, and up to 50 percent off their wireless data plan, making smartphones affordable for new segments of consumers.

On average, 65 percent of AT&T smartphone customers use less than 200 MB per month and 98 percent use less than 2 GB a month -- these customers could save money on the new plans if their usage is below 2 GB a month.

An important point here is that no existing smartphone or iPad customer will be required to change to the new plans -- they can keep their existing unlimited plan, even if they renew their contract or switch to another smartphone.

Update 2: Customers can switch in mid-month between the 200-MB and 2-GB plan, AT&T told me. That should be a big help in saving money -- if you find yourself going over the 200-MB quota (and, remember, AT&T sends out alerts), you can switch to the 2-GB plan on the fly, and then back again.

On the whole, I think the new plans will be a benefit for AT&T customers and AT&T itself. The vast majority of customers will save money, and AT&T will be able to throttle usage for its most heavy data users. However, I can also see Jarvis's point: the change coming a few weeks after shipping the 3G iPad is jarring.

Mitch Wagner is a freelance technology journalist and social media strategist. Follow him on Twitter: @MitchWagner.

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