Friday, June 4, 2010

AT&T's Wireless Pricing - Why Complicate Matters?

Simplicity and convenience is what iPhones and smartphones are all about.

Unfortunately, AT&T now wants to complicate matters by charging wireless subscribers on data use.

Instead of being able to pay $30 a month for unlimited data use, new AT&T customers will be given the option of paying $15 a month for up to 200 megabytes or $25 for 2 gigabytes, with added charges if they exceed those ceilings. AT&T says 98% of its smartphone customers consume less than 2 gigabytes a month.

The problem is the options are 200 MB (for people who have a smartphone but probably shouldn’t) and 2 GB (which will work for most, but certainly not high end users streaming video and/or tethering).

How about these options: for most BlackBerry users and people who have a smartphone and don’t know what to do with it), $20/month for 1 GB/month (good for most), and $30 for 5/GB (for the high end data hog).

If you are going to nickle and dime us on data charges (and text messages, don’t think we forgot about that), how about some roll over megabytes?

AT&T will stop selling unlimited Internet data plans. As the # 2 U.S. wireless carrier by subscribers, AT&T is trying to market as offering "lower prices for most users of mobile devices".

The risk for consumers, say some analysts, is that while the thresholds that AT&T has set look high for the moment, the introduction of faster wireless networks and more-advanced devices could make it easier for subscribers to exceed them in the near future.

But developers of mobile-device software worry that the monthly usage limits in AT&T's new plans could prompt consumers to fret about exceeding their data allotments each time they consider downloading a new game or firing up an application. Such hesitance could dim the growth prospects of the wireless-application market just as it is getting off the ground.

Bart Decrem, CEO of Tapulous, maker of the popular Tap Tap games for Apple Inc.'s iPhone, says that if consumers perceive limits on their data consumption, it "could dampen people's appetite for downloading apps and engaging with them over the cellular network."

"It has pretty profound implications," says Kevin Talbot, co-managing partner of the BlackBerry Partners Fund, a $150 million venture-capital fund that invests in wireless applications. "We will see a new paradigm play out around efficiency."

How consumers will react to the change will affect not only their bills, but a key area of growth for wireless carriers, which are betting that revenue from selling data services will rise fast enough to outpace the decline in their revenue from ordinary cellphone calls.

Carriers also want the power variable pricing gives them to charge for or discourage demand for their network capacity.
Some developers of apps for devices like the iPhone worry AT&T's pricing shift could discourage downloads. AT&T views its move in part as a trial of how consumers react to price signals.

Justin Esgar, who runs Virtua Computers Inc., a consulting firm that advises businesses that use Apple computers and phones, worries that the new pricing system ties customers' costs to measurements they don't really understand. "No one really knows how much data they're downloading to their phone," he says.

Some mobile-device users say they will limit their consumption of data. Alayne Gyetvai, chief information officer for Tessera Inc., which licenses and delivers miniaturization technologies for components found in electronic devices, says she will have to monitor her employees' usage to ensure they don't go over the 2-gigabyte limit.

Stuart Carlaw, an analyst at ABI Research, says AT&T's tiered pricing model will quickly look outdated. "There's only one direction you can go with data usage," Mr. Carlaw says. Sprint Nextel Corp. recently released the HTC Evo, a new phone that works on its fourth-generation wireless network, and which allows consumers to conduct two-way video chats. New applications like this place heavy demands on wireless networks. Pressure to conserve bandwidth could help some smartphone manufacturers, like BlackBerry maker Research In Motion Ltd., which has put a premium on efficient use of networks.

A study released by Consumer Reports in February found that consumers using iPhones eat up an average of 273 megabytes of data a month, compared with 54 megabytes for BlackBerry users and 150 megabytes for consumers of other smartphones. "Consumers will start to ask carriers which handsets are the most efficient," predicts Mr. Talbot of the BlackBerry Partners Fund, whose investors include RIM. "Handset makers will start to push those advantages."

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