Blog Post

Does Apple Have It In for AT&T?

Today’s unveiling of the Apple (s aapl) iPad, which resembles a slightly larger iPod touch and has the tech world all a-twitter, seems like a brutal blow to AT&T (s T). First of all, it’s unlocked, and as such can run on other GSM-based networks, which means that AT&T may not be the only place iPad users can get their mobile broadband. Plus the pricing seems like it will cut into AT&T’s profits.

Granted, the extent to which a consumer could find another mobile broadband provider in the U.S. is unclear, as the micro SIMs that CEO Steve Jobs mentioned in his onstage presentation may not be tuned to other networks (see Why Your Nexus One Won’t Work on AT&T’s 3G for an explanation). PCMag has a nice story on micro SIMs for those who are curious — they’re basically smaller SIM cards. AT&T won’t comment on the announcement, but I imagine it will be a topic on the carrier’s quarterly results call tomorrow morning.

The revolution in pricing offered by the iPad is very clear. Jobs said those wanting 3G connectivity could get a prepaid AT&T data plan that allows about 250 MB of data downloads for $14.99 or an unlimited plan for $29.99. The 250 MB plan costs half as much as AT&T’s other prepaid data plans, presumably cutting into Ma Bell’s data margins. And the unlimited plan is the same price that folks currently pay for unlimited data via the iPhone, which had AT&T executive Ralph de la Vega complaining in December that folks were downloading too much. And giving folks a bigger, faster device isn’t likely to get them to cut back on their data consumption.

For more details on the iPad, a roundup of how AT&T has prepared its network for this moment, and some great facts about the average monthly data consumption on a superphone vs. a data card, check out my latest piece at GigaOM Pro (subscription required). Hint: the average superphone user already consumes more data in a month than a 250 MB plan accommodates.

15 Responses to “Does Apple Have It In for AT&T?”

  1. Michael Campbell

    First of all, it’s unlocked, and as such can run on other GSM-based networks,

    Can you name one? It won’t work on T-Mobile due to radio frequency differences.

  2. it is not real clear. is the 250 MB plan for a month or is it use it when you need it without losing it? if apple/AT&T sells the latter type of bundles it could be real interesting for people who only occasionally need data outside of wifi coverage.

  3. At almost 200 MB for the Hope For Haiti Now album from iTunes, most of the 250 MB would be used immediately. Add to that the size of movies downloaded, and the $14.99 plan is useless for people who plan on using the iPad for what it is intended – a multimedia device.

    It will take some convincing for me to buy this device since I already have a smart phone. The larger size would be nice for movies when commuting if someone else is doing the driving, and a dock with a physical keyboard might come close to being a replacement for a notebook computer for some people.

    The main use for this might be as a replacement for those tons of textbooks which students have been using to damage their backs for years. Only time will tell.

  4. They are kidding right. $30 ontop of your other costs for unlimited data. I went with Straight Talk Unlimited prepaid as I get Unlimited data, minutes and messages for $45 monthly.

  5. why the microSIM? the only explanation that i can think is that they do not want SIM coming in and out and going back and forth between ipads and phones.

    i know that i would definitely like to have this iPad prepaid data plan in my iphone(currently a wifi only device.)

    the cultures of prepaid and of owning unsubsidized phones/device very much go together. i want to own 1 or 2 carrier data plans that i can move around through a bunch of different devices. both the mircoSIM and the ‘sign up directly through the device’ speak of a tight integration between the data plan and the device itself. i have to say that i do not like that part at all.

    the pricing for th unlimited i OK though. perhaps the first reasonably prepaid data pricing since the discontinued unlimited mediaNET of a couple years ago.

    i wonder if tethering will eventually be possible. the iPad could potentially be a wifi router for a laptop or other device.

  6. Did Apple have a choice if they wanted to make it compatible worldwide? Until Verizon gets 4G up and running I doubt you’ll see any of the Apple stuff using it. And if Verizon takes as long on 4G as they did in my area with 3G we’ve got quite the wait.

  7. Alfred Packer

    “Plus the pricing seems like it will cut into AT&T’s profits.”

    Please explain this analysis. AT&T pays Apple for each iPhone sold. Then charges $30 + voice/SMS plan. So their costs are: device subsidy + network capex + network opex + customer opex.

    On the iPad, their costs are similar for network capex + network opex + customer opex, but they have less opex on the voice side (they pay no intercarrier compensation), and they pay no device subsidy.

    I’m not seeing how this arrangement “cuts into their profits”? If you mean their operating margins, I doubt it given the lack of device subsidy. If you mean contribution margins, I very much doubt it, given the lack of a device subsidy.