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Summary:

AT&T has eliminated unlimited broadband for its smartphones, so I spoke with Mark Collins, SVP of data and voice products, mobility and consumer products, to get his explanation on why AT&T moved away from all-you-can-eat broadband and why it chose the plan structure it did.

AT&T, the nation’s second-largest carrier and the exclusive provider of the iPhone, today introduced new pricing that eliminates unlimited broadband for its smartphones. Some people responded with praise, while others declared AT&T evil. My colleague Kevin laid out the pricing changes in a morning post, and my analysis of the issue is here.

I spoke with AT&T’s Mark Collins, senior VP of data and voice products, mobility and consumer products to get his explanation as to why AT&T moved away from all-you-can-eat broadband and why it chose the plan structure it did. The result is this lightly edited Q&A:

GigaOM: Why move away from the all-you-can-eat model?

Collins: In the early days of wireless data there were few compelling use cases for wireless data. In the first few years there were two use cases: one was text and one was email. Only in the last 3-4 years do we have devices where you didn’t have to convince customers there was a reason to use data. There are still some customers that don’t see the need, and there’s still growth left, but with the proliferation of smartphone devices customers have now seen a reason to believe and are more than willing to pay, so the rationale now is you have scarce resources and you don’t have to offer an unlimited plan. And now you need to price it according to the value equation so the market can allocate the resources accordingly.

GigaOM: How did you come up with this plan?

Collins: We thought about this and worked on this for a long time. We wanted to go about this in the most customer-friendly way possible. No one likes a billing surprise, so we have industry-leading tools to tell people when they get close to their limit and proactive tools that show what people use so they can choose a plan. And customers can switch back and forth between plans.

We also know that…the laws of physics mean fixed broadband is more efficient than wireless. So we offer free Wi-Fi, which is available where 70 percent of usage takes place. We cut our top price by $5 and 98 percent of users don’t reach 2 GB per month, and 65 percent don’t use more than 200 MB.

GigaOM: Why go with tiers as opposed to congestion pricing and why only two tiers?

Collins: Simplicity. We wanted to make it as simple as possible and simple to execute. As for congestion pricing, that’s something that is difficult for a customer to get their arms around and understand. It gets really complicated, and certainly it’s an option and one that we could pursue at some point in time.

GigaOM: Why implement this plan now?

Collins: We’ve been contemplating it for quite some time. We’re quite a bit ahead of the rest of the market in penetration of wireless data plans as well as smartphones so we’re in a different league in terms of the megabytes phones on our network are actually producing. This time is as good as any, and we think we can take market share with the pricing we’ve introduced today.

GigaOM: What about the $20 tethering fee? It looks like a convenience charge.

Collins: That capability is enabling something you can’t do today. You can use one device and get multiple connections so it’s more useful to you. You’re going to use more data so the price is based on the value that will be delivered.

GigaOM: What about the idea that this will limit application usage or even innovation for mobile networks?

Collins: If there was not a cap or limit on spectrum maybe we’d have a different conversation, but this is not a cap on innovation. Overall this is a way to reallocate demand based on products and services that customers are willing to consume and pay for. It goes back to the phrase, what is something worth? It’s worth what someone is willing to pay you for it.

By Stacey Higginbotham
  1. There’s a bit of a contradiction between Collin’s statements and the GigaOM post this morning as it relates to tethering.

    Colins responds to your question about the $20 tethering charge being a “convenience fee” by saying “You’re going to use more data so the price is based on the value that will be delivered.”

    However, in the post this morning, Kevin explained …

    “Tethering — $20 per month for smartphones, on a DataPro plan. This option does not provide additional data — it uses the 2 GB provided for in the DataPro plan.”

    That information would seem to contradict Collin’s statement.

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    1. Collins was referring more to the fact that now you can use your iPhone connection to connect multiple devices as the “value being delivered.” You will also use more data, for which AT&T is happy to charge you for at $10 more for every GB over the original 2 GB.

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      1. That’s not value delivered by AT&T, it’s delivered by Apple as implemented by the iPhone.

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      2. Stacey, it seems like you’re trying to spin Collins comment on tethering to make him look like less of a greedy corporate stooge. The bottom line is that AT&T is ripping off its customers because they can; because Apple has given them a monopoly on the iPhone. Twenty dollars?!? For the priviledge of consuming the data I’ve already paid for on a different device. Ridiculous.

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      3. Stacey, it seems like you’re trying to spin Collins comment on tethering to make him look like less of a greedy corporate stooge. The bottom line is that AT&T is ripping off its customers because they can; because Apple has given them a monopoly on the iPhone. Twenty dollars?!? For the priviledge of consuming the data I’ve already paid for. Ridiculous.

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    2. I was going to the same thing! Mr. Collins has a serious problem getting his facts straight. saying that “You’re going to use more data so the price is based on the value that will be delivered.” to justify the price while at the same time knowing that the $20 doesn’t come with extra data. Mr. Collins seems to be the kind of idiot that would represent an idiotic company like AT&T. Even with the ability to keep my unlimited data, you can be certain I will be looking for a new provider when it comes time for an upgrade.

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      1. Agreed with tim frank and bruce. iPhone tethering capability has always been there…before it was disabled or taken off of the AppStore. AT&T took away value before it gave it back. It’s basically, “We’ll charge you $20 to give you more ways you can run over your allotment…and when you do we will charge you again.”

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  2. One of the biggest piles of corporate BS, double-speak I’ve heard in ages. Goodbye AT&T, hello Sprint.

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  3. How retro.

    Now AT&T can charge a multitude of fees in the same way as does a bank or credit card company.

    While the rest of the world goes unlimited, AT&T imposes limits. You’d have to be a real sap to keep AT&T as your service provider.

    Here’s hoping Apple gets a clue that the iPhone’s dwindling lead over Android, resulting in part because AT&T aspires to be a monopoly but bungles it, is going to be further eroded by this BS on the part of its carrier partner.

    Imagine, I can buy a ‘Droid and have access to two or three competitive carriers, each of which offers unlimited service options. And AT&T wants me to do what?

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  4. I highly doubt it is for providing more value to their customers, they don’t even appreciate their customers

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  5. I’m split on the whole ordeal. From a broader standpoint this doesn’t seem like much of a value, but for me personally it WOULD cost less as 90% of the time I have access to wifi with my iPhone.

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  6. It is all about value. Who do you think AT&T’s primary stakeholder is? The customer? Not unless they happen to own stock.

    Btw, blastfax kudos all around for such an innovative model.

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  7. Andrew Norton Wednesday, June 2, 2010

    I think they need to leave the unlimited plan for tethering and phone data use and go with the tiered plans for people that only use data on the phone. This nonsense that you get something more with tethering is ridiculous as you don’t get any new bandwidth or services??

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  8. Given this usage based pricing, there will not be any restriction on running VoIP. If so, then with the Dataplan one can get 4000 mins. In other words, one can get “unlimited” voice for $15.

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  9. Michael Chaney Wednesday, June 2, 2010

    I’m pretty disappointed at the the softball questions lobbed at AT&T in this post. Why was Collins not pressed about the timing of this change and the coincidental upcoming release of iPhone OS 4? Why was Collins not made to explain why if a tethered phone dips out of the same bucket of data as an untethered phone, why the need for an additional charge? You might as well have just let Collins write a guest article for GigaOM.

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    1. The question about timing was asked (why now) and Collins wouldn’t name the iPhone as the reason (yes, I asked), however his reference to taking share with the new pricing could be seen as a reference to the upcoming iPhone. It does make the plans cheaper, which could lure new iPhone users. And he did explain why the tethering costs more. Bottom line is AT&T knows you’ll pay more for the convenience, so it will charge it. I think that’s pretty clear in his response, even if it isn’t an explanation that will sit well with many users.

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      1. “AT&T knows you’ll pay more for the convenience”

        You just said it yourself, it’s a convenience charge.

        When Collins says “That capability is enabling something you can’t do today” he seems to be referring to iPhone, to which Apple added tethering as a feature when OS 3 was released a year ago.

        AT&T is adding no value, just holding an preexisting feature for ransom. Extorsion in my book.

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  10. [...] Next AT&T Explains Its Pricing Change: It’s All About Value   GA_googleFillSlot("GigaOM_ATF_left_300x250");   10 Comments   Subscribe to comments Click here to cancel reply. Name [...]

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  11. What you should of asked was why does AT&T dumb down the bandwith. If the expect customers to pay more then they need to upgrade their system. Make sense?

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  12. Softball – those weren’t even underhand lobs:

    GigaOM: Why go with tiers as opposed to congestion pricing and why only two tiers? Collins: Simplicity. We wanted to make it as simple as possible and simple to execute.
    COMMENT: What in heaven’s name is so difficult about a per MB price? Because it wouldn’t disguise the true theft of their pricing model. $15 for 200MB is $75/GB; $25 for 2GB is $12.50. See a trend here?

    GigaOM: What about the $20 tethering fee? It looks like a convenience charge. Collins: That capability is enabling something you can’t do today. You can use one device and get multiple connections so it’s more useful to you. You’re going to use more data so the price is based on the value that will be delivered.
    COMMENT: This is so vacuous! The “capability” is there and has been in the OS for more than a year. You do not get any more data bits for the $20 – and in fact under the new model you pay for the additional data no matter HOW you connect the device.

    GigaOM: What about the idea that this will limit application usage or even innovation for mobile networks? Collins: If there was not a cap or limit on spectrum maybe we’d have a different conversation, but this is not a cap on innovation. Overall this is a way to reallocate demand based on products and services that customers are willing to consume and pay for. It goes back to the phrase, what is something worth? It’s worth what someone is willing to pay you for it.
    COMMENT: Spoken like a true monopolist in an unregulated utility. Yes, the spectrum is a utility, and so far only AT&T and Verizon have effective control. Thus, we charge $20 to tether “because we can” and change our data plan on the iPad only 30 days after release from $30 per month unlimited useable month to month without contract to $25/2GB OR stay on the $30 but you have to renew monthly to keep that plan (and we thought 2 year contracts were bad).

    GigaOM: How did you come up with this plan?…We also know that…the laws of physics mean fixed broadband is more efficient than wireless. So we offer free Wi-Fi, which is available where 70 percent of usage takes place.
    COMMENT: SO then why are the carriers the biggest opponents of community-wide subsidized free WiFi? Hmmmmmm…let me guess…that nasty “M” word again?

    I do not believe we should get a free lunch (unlimited forever), and in fact it never has been (there were always 5GB +/- caps on unlimited – strange way to define a word). What is required is a truly simple plan, priced by MB, regardless HOW you use it. Just the same way I pay for water, electricity, and natural gas. It makes no sense that a gallon of gasoline should cost you $2.75 in your Honda but $4.75 in your Explorer.

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    1. Dstrauss, I think you’ll find that most of your comments are addressed in the article I wrote analyzing the pricing changes here: http://gigaom.com/2010/06/02/the-good-the-bad-and-the-ugly-of-atts-new-pricing-plan/

      The goal of this Q&A was to give AT&T a chance to respond to the questions being asked by many about the timing, tethering, etc. I elected to publish it without my commentary because that could be found elsewhere and I wanted to give our readers AT&T’s actual response. I did not ask about per-bit pricing mostly because I think that congestion-based pricing is a better option for dealing with the capacity constraints on wireless networks. However, the best metering methods would make for a great discussion.

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      1. I did see your article and it is well done. My point is that journalists are not challenging the PR responses of the corporate reps here or in other sites on the web. There is no follow-up by the reporters to raise the very quesitons you did in your article and I did above. If it is fear that you will drive them away, then so be it. If they can’t stand the heat in the kitchen…

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  13. AT&T is out there.

    Hi

    Thanks for your article.  I am a bit concerned here because the smart phones (iPhone) have been ushered into the mainstream lifestyle.  From Internet access, email, and apps for all walks of life.  Now the primary carrier is changing the service plan after we have become “hooked on the the glass”.

    Another option would be for AT&T to invest more money into the data packet infrastructure.  This industry is in it’s infancy.   I don’t see how AT&T can’t acknowledge that.  I assume they probably don’t want the costs in their profit margin.  Go figure…

    Furthermore, I can’t follow the math.  The way I interpret this change is the system can only handle so much traffic…  Only a small percentage of users are clogging the system according to the service provider. So whether one has an an unlimited plan that is underused, or many users using average use, it will not change the fact the the system has not grown with demand.

    My opinion is that ATT has not forecasted growth.  Apple has outdone itself in growth and distribution.

    The two have formed relationship that forced a monopolization atmosphere.

    Now the market is opening up to the other carriers…  Apple will leave us on the tree to rot like fruit since they can.  We own the hardware already.   They have bigger fish to fry now.

    AT&T is plucking the fruit as fast as they can since it will be a more competitive market.

    Does not seem ethical.  Then again “great place, America…”

    A huge swarm of fruit flies would be a good call about now.

    Regards,

    Adam

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  14. Not that I agree with the tethering fee AT ALL, but I am surprised that in this article (or any others I have read on the topic to date) no one mentions the two real underlying reason for the the $10 tethering fee.

    One, just because you pay for 2G doesn’t mean that ATT expects you to use it all and they (nor any other carrier for that matter) don’t build the network to support everything they sell. Do you know what would happen if all the people tried to use all their voice minutes up in a given month? A crippled network thats what. So in this case, ATT has set a margin of actual use that they believe the average user will use and the average user with tethering will use and to cover the cost of the extra tethering data used they are charging you for that.

    But secondly (and I think the way more important reason the tethering fee is there) is that ATT is trying to recoup the money they will be losing via the cannibalization of dedicated data cards and portable hotspots. Think of how many people will now drop those cards they had for the occasional times they need data on their laptop for the cheaper tethering of their mobile device.

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    1. A logical defense, Chris, thanks for posing it. It is true, that many, many people have been paying $30/month to effectively subsidize a small number of power users who use a boatload of bandwidth. That is still true now: if everyone maxed out their 200MB and 2G plans they wouldn’t be able to offer them at the price points they are.

      That said, I still think that a better approach from a customer relations point of view would have addressed this perception that the tethering charge is a money grab. Why not have three tiers—say, 200MB (actually, do 250MB to equalize with the iPad), 2GB, and 4GB, with tethering included only in the 4GB plan? Mess with the price points if you have to in order to make the economics work.

      But as it stands now, a lot of the power users who would normally want a legit tethering solution are going to be heading to jailbreak land, IMO.

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      1. Oh don’t get me wrong I am not trying to defend it, I think the tethering tax is dumb and unwarranted but ATT is not alone in the US in charging for it either. Sprint is charging I believe $10 for the “hotspot” option on the EVO. Why they don’t just do like you say and build it into a higher tier plan i don’t know.

        What I do know is I overall am happy with this new plan as I will save $60 a year and keep using MyWi on my JB’d iPhone as I always have.

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  15. The tethering fee is just a money grab. Bits are bits. It doesn’t matter if they come from usage of the iPhone or your laptop computer. You’re paying AT&T a penalty to be able to use the bits on your iPhone from a different source. It doesn’t add value to anyone but AT&T. The only reason it’s more useful now is because AT&T dragged its feet on implementing tethering when it was introduced. They should pay us for that lack of convenience.

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    1. The crazy thing is the bits still come from the phone. Apple did all the hard work here. AT&T still just feeds data to the phone and the phone points it where it needs to go. Really lame.

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  16. “That capability is enabling something you can’t do today. You can use one device and get multiple connections so it’s more useful to you. You’re going to use more data so the price is based on the value that will be delivered.”

    He’s flat-out misdirecting here; it IS a convenience charge, since you’re still using the same 2GB data bucket as the $25/month data plan.

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  17. Why did you not follow up to his ridiculous answer on the tethering charge?

    “You’re going to use more data so the price is based on the value that will be delivered.”

    But you can’t use more data, because it’s the same 2GB cap. There is literally no other explanation for this than pure greed. They are charging $20/mo, not a one time fee, to turn on a software switch. A customer without the tethering add-on who taxes AT&T’s network 2GB of data per month solely on their phone will pay less than a customer with the tethering option who uses 1GB with both their phone and laptop. Tethering will not affect their network at all. I think it’s BS, but I’ve always understood the fake ‘unlimited’ language carriers use. Once you put a cap on the data – and a low one at that – you better be prepared to serve that data to all your customers, or at least a much higher percentage of them. This is a very abusive charge only a company in a monopoly position would implement.

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    1. Tethering will affect their network because it will drive up usage. Yes, you are paying twice for the ability to tether. I think Collins was clear on why they are charging the fee — because people will pay more for the ability to tether. Is it a convenience fee? Yes. Do I like that? No. Is it gouging the customer? Yes. But AT&T can charge it and if folks don’t like it they can give up their iPhone and go to another operator.

      AT&T does have a monopoly on the iPhone for now. I have a hard time arguing that AT&T shouldn’t have exclusive access to the device is Apple and AT&T are cool with the arrangement even if consumers have to pay $20 more for tethering on the iPhone. If every carrier implemented these fees for all phones, I’d call it anti-competitive, but you can get tethering for nothing on other networks and devices. There is choice.

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      1. Maybe it will drive up usage, maybe it won’t. The issue is that they are telling me how I can use the data after it gets to my phone. As other commenters have pointed out, they can’t tell the difference between phone data and tethered data, because it all comes through the phone. The real question is whether we as customers have the right to actually use the entire 2GB our contracts allow. My point is that this is a completely arbitrary decision to double-charge for a portion of the data we already paid for. It would be the exact same as if they one day decided to block access to email unless we pay an additional fee for it. After all, email functionality on smartphones drives up usage.

        Also, this functionality has been available on the iPhone for a year so, in effect, they have been artificially blocking hardware/software functionality – the only real work they’ve done in this regard is to stop my phone from working as it should. Apple created the software to make this work; AT&T are not enabling anything.

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      2. Your last sentence is the fallacy. There is no choice, because Apple and AT&T have chosen to create an exclusive relationship to the exclusion of other carriers selling the iPhone. What you are saying there is “choice” if you want an inferior device (my decision – not saying they are inferior to other folks). If the real issue is pressure on the network, then just ban tethering, including using packet sniffers to cancel the account of jail-breakers. But AT&T shouldn’t be allowed to tell me the steaming pile of doodoo on the serving platter is a gold brick.

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      3. “But AT&T can charge it and if folks don’t like it they can give up their iPhone and go to another operator.”

        AT&T isn’t the only private entity here that can do what they want to. Private citizens — customers — can complain loudly and often about the tethering charge, as they should. I don’t really WANT to ditch my iPhone. I will leave AT&T and my iPhone eventually if AT&T doesn’t budge, but I’d be happier if enough people yelled about this to get AT&T to change it’s usurious mind before I feel the need to switch.

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  18. In Toronto, OUR evil empire is Rogers, and, miraculously, they’ve decided to not charge for tethering. It’s still the same data stream being used, and it’s Apple that is making it so, with a tiny bit of software Rogers has to impliment or turn on (I’m guessing…I’m also assuming they have computers, which, I’m also guessing, can make doing stuff really easy, like allowing tethering to happen). Cellular is the last great profit frontier and they’re all scrambling to grab the dough now. I await what happened to long distance charges in the 90s for the cell market. Texting of course, as we all know, just SLAMS the carriers with undue data burdens, so that needs to still be expensive.

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    1. I should note that free tethering is available to those with the 6 gig plan ($30/month) and I think the 2 gig. Lower than that, no soup.

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    2. I don’t think it’s even a software switch by the carrier. If I understand correctly, its a matter of having the profile set ON THE iPHONE that tells the network to permit access. There was a software app that briefly hit the Store years ago that can still do that if you managed to snag it and have not upgraded your iPhone OS (which is where it is enabled/disabled).

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  19. “You’re going to use more data so the price is based on the value that will be delivered.”

    Bullshit.
    I’m basically paying to move MY data (2GB paid) from MY phone to MY laptop via MY cable using technology already built into the phone and has been available since last year. I can already do this for free via jailbreak, it’s basically gonna cost $20 A MONTH for AT&T’s blessings. Your only justification is pure greed.

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  20. re: Tethering

    It’s back to the old days of the regulated Ma Bells where you would pay for each actual phone, not line, in the house. Want an extra phone in the bedroom – extra charge. You paid to enable a capability you didn’t currently have, so to speak. Round and round, nothing new under the sun, etc….

    Another thing I wonder. Now that we have usage plans, and their current pricing is based on what current customers have historically used, how is that pricing going to be impacted by the new iphone. To wit:

    -Higher resolution display and rumors of a front facing display. Video conferencing on your cell phone – bandwidth usage goes up.
    -Slingbox, netflix, et. al. are all now being allowed to stream via 3G which was previously restricted. Bandwidth usage goes up.

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  21. I think AT&T should consider the following compromise: keep the tethering price at $20, but include an extra 2GB of data into the mix. In effect, create a third tier of service with a 4GB base, and include tethering only on the third tier. I’d be more than happy to go for that.

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    1. Yes, I could go for that as well, particularly if I could tether my wifi iPad. More money for AT&T, more service and convenience for me. Since this isn’t on offer, I’ll cling to my “unlimited” (not really) data plan for as long as I can.

      The other odd bit from my perspective: the only time I went over 2GB/month was when I bought a lot of music on the iTunes mobile store. If I feel that I need to watch the meter, I will use this convenient feature a lot less.

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      1. jindofox, if you’ve only gone over 2GB once, then I’m not sure I see the merit in keeping your unlimited plan, unless you foresee your data usage going way up in the reasonably near future. Perhaps you intend to use a jailbreak app to enable tethering?

        I say “near future” because, in my view, I think that in the longer term there is going to be consumer pressure to see these caps shifted upwards as more people use bandwidth-intensive apps.

        So what’s your reasoning on that? I’m not being snarky here, if you have a good reason, I’d like to hear it before I decide to give up my unlimited plan :)

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      2. @mcg (not sure if this will be threaded properly, since I can’t reply to your reply)

        I’m not being snarky either. $5 a month isn’t enough to make me want to give up the peace of mind that comes with not watching the clock. I’m already only paying $25 with my employer’s discount plan.

        I don’t consider myself a big bandwidth hog, but since I’ve hit it before, I think I could hit it again. 2GB doesn’t seem like quite enough.

        I don’t intend to misuse my current plan. Tethering is against the current terms of service, I’m not particularly interested in the hassle of jailbreaking. There’s probably not going to be a way to tether a wifi iPad. I’d just like the freedom to listen to Pandora, Last.fm, or streamed podcasts in the car without worrying about stupid surcharges. I’m a big App Store buyer and upload pics and movies of my child to blogs and social media sites all the time.

        To me, the $20 tethering fee is a simple disincentive. It’s not tied to the true cost of anything, and functions as pure profit, like hotel minibars, SMS charges, and extra baggage charges on airlines. Pure greed? Maybe, but it’s working on me — I don’t want to pay it unless I get something other than turning on a software switch on my iPhone.

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      3. Thanks for the clarification. I hear you, and indeed it helps clarify my thinking, too.

        Tethering is clearly a luxury; there are only a few times that I really wished I had it. I can hold off until AT&T makes its pricing more sensible. Heck, maybe it is possible to add and remove it on a month-by-month basis, which means I can select it only when I know I’m traveling somewhere with 3G but no WiFi.

        But it’s also a luxury to not have to worry about breaking 2GB—a luxury I’ve enjoyed so far, but a luxury nevertheless. The way I see it, that $5/month savings will pay for itself as long as I don’t anticipate breaking 2GB more than 50% of the time. Given my current usage level, that’s pretty darn likely, even without watching the meter. That said, whose to say I won’t develop a taste for streaming content over 3G?

        I have been holding off on buying an iPad (another luxury :)) until WWDC, when I would know more about the future OS updates and the status of tethering. The thinking was that if tethering were attractive I could save the $130 on the 3G radio. That still seems like the right way to go no matter how this shakes out.

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  22. Thx for getting AT&T to explain their thoughts, Stacey.

    This is a welcome change that took AT&T too long to figure out. And as everyone is pointing out, the tethering fee is usurious.

    Having said that, Mark Collins isn’t stupid, just annoying. The new data plan tiers & strategy seem to compare favorably with their carrier competitors, so oligopoly pricing works! ;)

    My guess is this will cause more millions of iPhone/iPad users to install the very useful Opera Mini browser to save 90% on their 3G/Edge network browsing. (Love the auto-sync of Speed Dial, bookmarks and search engines with desktop Opera.)

    And given AT&T’s annual profits of only a few BILLION dollars every quarter, they didn’t want to leave money on the table with free tethering, which should help their earnings-per-share, but stick it to their high-value customers.

    Hopefully we’ll see shared data plans, like voice minutes soon — and rollover data. AT&T loves the profit from unused minutes and now unused data (akin to per-minute billing, a nice ~40% gouging of customers every month).

    Btw, given all the very usable 3-yr-old iPhone 2Gs still out there, notice the EDGE/GPRS data plan users that are still getting gouged for $20/month using old-tech cell towers with slow speeds.

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  23. Here’s what I want AT&T to explain about charging for tethering: since when is it appropriate for AT&T to charge for features offered by the PHONE rather than the network? Tethering is a feature that is completely done on and by the device, not the network. From the perspective of AT&T’s network, a gig of data downloaded solely to the phone looks exactly the same as a gig of data that’s downloaded to the phone and then passed to a laptop. It would be a different story if AT&T were offering additional bandwidth for tethering but since it isn’t, it’s basically charging customers money for a hardware feature of the phone, not the AT&T network. It’s akin to AT&T charging a separate fee because my phone has email. Since when is this appropriate? And why is Apple allowing it?

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  24. at&t missed a great opportunity for a somewhat win-win situation. What if they would have announced this?

    $15 – for 500Mb
    $20 – For 2Gb
    $20 – To “tether” while adding another 2Gb

    I would have been extremely happy with that, and would have actually paid for tethering. instead i will resort to jailbreak instead of getting screwed so badly by at&t

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    1. Great minds think alike, Brian—and so do ours :)

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      1. wow your right. i just read your post. it’s almost exactly the same! :)

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  25. [...] Stacey Higginbotham gave what could reasonably be described as a softball interview with AT&T’s "senior VP of data and voice products, mobility and consumer [...]

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  26. [...] Mark Collins, AT&T's comparison VP of data as well as voice products, mobility as well as consumer products, thinks that it's utterly simple: [...]

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  27. In re: Tethering
    Colins response to your questions about tethering are misleading. He refuses to answer the question. Frankly an extra $20 IS a convenience fee unless the “value that will be delivered” is going to include more data than the standard cap. I would not mind an implementation of that fee that offers as little as an extra Gig of data which then would-in-fact be offering me some extra value in addition to what I’m already paying. The iPhone already has the capacity to tether so allow me to swipe that bad boy on is not offering me that has anything to do with AT&T. The mi-fi/Evo is starting to look more and more appealing.

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  28. In re: Tethering
    Colins response to your questions about tethering are misleading. He refuses to answer the question. Frankly an extra $20 IS a convenience fee unless the “value that will be delivered” is going to include more data than the standard cap. I would not mind an implementation of that fee that offers as little as an extra Gig of data which then would-in-fact be offering me some extra value in addition to what I’m already paying. The iPhone already has the capacity to tether so allow me to swipe that bad boy on is not offering me that has anything to do with AT&T. The mi-fi/Evo is starting to look more and more appealing. Rumor has it that I won’t be able to tether my iPad to my iPhone anyway, which makes very little business since for either Apple, or AT&T, because while some people will not want to tether an iPhone and will still buy a 3G iPad; others like myself will refuse to pay twice for the same exact data service for two devices while still paying for data on 3 other iPhones in the household. This is inconvenient. I can buy a mi-fi and cover traveling wi-fi for this iPad and the 3 others that I will be buying.

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  29. High Demand = Out of proportion pricing

    As long as there are idiots willing to stay with the network just to get their hands on an iPhone, you will get more of this

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  30. The last sentence: “It’s worth what someone is willing to pay you for it.” should read “It’s worth what we can make you pay for it.”

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  31. [...] why you are going to charge $20 a month just to set a tethering flag on the phone. I have read your GigaOM interview about it. But it doesn’t make any sense to me. I’d already be paying for the [...]

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  32. [...] I make my points, let me quote one of your Senior Vice Pres­i­dents, Mark Collins, from his inter­view with GigaOm on the day the new plans were announced. That capa­bil­ity is enabling some­thing you can’t do [...]

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  33. [...] First of all, to get tethering when it launches this summer you have to abandon your unlimited plan on your current device and switch to a tiered data plan. Then, you’ll have to pay AT&T’s $20 monthly tethering fee, which doesn’t even come with any extra data. You are literally paying for the right to tether and nothing more. In other words, AT&T’s tethering fee is simply a convenience charge. [...]

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  34. “You’re going to use more data so the price is based on the value that will be delivered.”

    That, Mr. Collins, is patent nonsense. You know what will happen under the new pricing scheme if I gain “added value” by using more data? I’ll be charged more for my data usage!

    If you wanted people to buy that bullshit line, you should’ve introduced the tethering fee a couple of months in advance of the tiered data plans. A tethering fee doesn’t make a bit of goddamn sense when you’re being charged for every byte you use, regardless of which device you’re on.

    But the cat’s out of the bag now. It’s a cash grab, plain and simple, and you will not be able to sustain it once the other carriers start nailing you on it in their advertising.

    And congratulations. I’ll be jumping AT&T’s sinking ship as soon as my contract is up.

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  35. [...] data would make AT&T’s argument that the new plans are about value—not simply strangling the most hardcore data users taxing the network—way more convincing, [...]

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  36. “That capability is enabling something you can’t do today. You can use one device and get multiple connections so it’s more useful to you. You’re going to use more data so the price is based on the value that will be delivered.”

    Just so I am clear: I’m expected to pay 20 dollars PER MONTH to use a feature of the device with no additional data allowance, something that feature relies on?

    I’ve been an ATT customer for a long time, well before the iPhone was out. My contract is up in August. This extraneous fee? It is why I plan to switch.

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  37. [...] data would make AT&T’s argument that the new plans are about value – not simply strangling the most hardcore data users taxing the network – way more [...]

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  38. All this charge per “value” looks like rewinding the tape from a decade ago in europe when greedy and un-innovative operators though introducing dumb 3G with silly apps that none likes would make them billions.
    Point is that none wants to pay for such “value” as the value is provided by Apple , not AT&T nor any operators. These guys have the network, the money for centuries but do not just understand the higher levels apps …and only an external provider (apple and the like) came with mobile apps and platforms that people really want. Whether they like it or not, Operators are just dumb pipe.

    Another example : Riding the AT&T network from your iPhone 4.0 is just riding the the highway network from your brand new BMW X6-Hybrid . Would you pay the highway network a higher fee because of your nice car ? Did the highway network get involved in any possible way at BMW R&D ? No. AT&T as well did not add any value to the iPhone and iPads etc …but are simply willing to pick some VAT.

    So many carriers billing vendors are convincing them to come back to this volume based charging and fake value mantra. It just neglecting the subscriber.
    AT&T and like would be much wiser to keep subscribers loyal (which is very easy when working with Apple, a monster in transforming users into fans, much more than just loyal)…than trying to gamble.

    Just a though.
    In europe, this idea has been abandoned more and more. just sorry for the US consumers locked in such old style network strategies.

    GigaTom

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  39. Apple and AT&T greed. This is why I have 2 Jailbroken unlocked iPhones.

    I use T-Mobile prepaid SIM’s @ .10 per min. No data just WiFi, works great, costs me about $10 a month per phone. Use Skype for calls when in WiFi areas.

    Will never sign a long term contract again, it’s anti consumerism. Just say no.

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  40. If he wants to make it customer-friendly, GIVE US THE CHOICE TO HAVE UNLIMITED!!!!

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  41. goodbye AT&T, Hello Sprint

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  42. When I jailbroke my iphone 3g a year ago – I could tether for free. Even then, I didn’t use more than 2gb a month, and I only used tethering sparely, as it is slow and cumbersome and kills the battery FAST. I could also make my own icons, change the background on the screen, and make my own sound effects for things like startup/shutdown/texts/mail etc., and even record videos on the phone, something they are just now starting to let people do.
    Why do I have to wait for, or pay extra for, functionality that is already there, or to use data that I have already paid for?
    I can see capping the data usage, but why not open up tethering for free? The question should have been “Why charge at all for something the phone readily does?”
    I like my iPhone. It plays videos, I can make my own free ringtones, iTunes is a good mp3 management tool, and I like my podcasts. With AT&T stifling innovation and shafting customers, I might look at droid when it comes time to upgrade…that, and Verizon actually has 3g in my area. I don’t care if AT&T has the “fastest 3g network” in the country. Who cares if you cant get on it?

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  43. What burns me the most about this is the American consumers sheep like mentality. We are allowing these corperations to rape us and we don’t even ask why. It seems to have slipped by everyone that AT&T has been double charging at least 65% of their customers for years. Look at the numbers for what they say and not what they want you to belive. If they can remain profitable with their new plans, this is what it breaks down to for me.
    Only 2% use more than 2gig per month= overcharging 98% by at least $5 per month for years= how many billions.
    65% use less 200mb= overcharging 65% by $15 per month for years= how many billions.
    Any idiot that can count should be able to see through the statstical mumbo jumbo they spew to make you think you’re getting a good deal. They have been publicly raping our wallets for years now, just gave us all the data to prove it, didn’t invest any back into improving the network, wraped it in a new package with a cost reduction sticker and knew all the while we would buy it without question because after all we are just sheep with money. Come on America, pull your head up out of the grass and look around. The wolves are coming.

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  44. [...] U.S. operator to kill the all-you-can-eat data plans that are a staple for American operators, opting instead for tiered plans with caps and heavy penalties for overages. While AT&T’s competitors have yet to follow, [...]

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  45. ATT are crooks. That is why I’m giving my iPhone to my daughter, so she can use it as an iPod. Then I’m going to Sprint and getting the Evo which allows up to 8 computers to connect with it. All for less then I’m payin now with ATT and includes unlimited data. See ya ATT. X

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  46. I just signed up for ATT since the WP7 will be GSM until mid 2010. I was very disappointed to see Tethering costs an extra $20 and you really don’t get any extra data. I think enabling functionality which already exists on phones is absolutely BS.

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  47. [...] based on the time of day make more sense if the goal is to alleviate network bottlenecks. However, AT&T claims its pricing change is about value, as opposed to a tool to fight congestion. Instead of treating all bits the same as most current [...]

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  48. The only reason I am with AT&T is iPhone. AT&T has had many promises for improvement. I believe AT&T management doesn’t have any reception problems, as long as they are sitting in their offices. Shame on you AT&T for promising and not delivering.

    Today I received a letter from AT&T about the new 4G improvements they have in the pipelines for many areas! My only comment left is I don’t care about your 3G, 4G, or 5G when I don”t even get 1G on my phone.

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  49. Mark’s logic escapes me, at&t’s data structure is such that the only plan that makes any sense is unlimited. Their 200MB plan reduces your available useage by 96%, but they only reduce your cost 50% and have the audacity to say that they are doing you a favor. The intermediate 2GB plan reduces your available useage by 60%, but they only cut the price less than 17%. If you have the audacity to try to use your device with any kind of flexibility by tethering they will hit you with a 66% surcharge for using the data you already paid for in the initial $30.00 data plan.
    I just went down and read some of the other comments and it appears that we are all perceiving Mark’s comments the same way, but I have bad news for Mark. As the world becomes increasingly more wired it will become possible to get value out of a smart phone through wi fi networks and consumers may just choose to own their smart phones without a data plan at all. Mark is inadvertently opening the door for competition from LAN’s. If I worked in a major metropolitan area and could get unlimited wi fi for $9.99/month I would strongly consider it. The best part is that wi fi is faster than 3G or 4G, and they don’t whine about tethering. I think I just made my first million!

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