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AT&T Shuts Down the Mobile Broadband Buffet by Ending Flat-rate Mobile Plans

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AT&T (s t) today revamped its data offerings for both smartphones and Apple’s iPad 3G (s aapl) with plans that cost less but also limit monthly data. In other words, as of June 7, the all-you-can-eat pricing for iPhone data plans goes out the window.

Current customers can keep using the plans they already have, but new customers will have to choose either a 200 MB or 2 GB data plan for their smartphone or iPad 3G. Smartphone tethering is an additional fee option for the higher-capacity plan and applies to the iPhone upon Apple’s upcoming release of iPhone OS 4. AT&T will provide software and text message tools to help customers meter their data usage for both. Here’s a rundown of the new monthly plans, both of which include unlimited Wi-Fi at AT&T’s 20,000 hotspots:

  • DataPlus — 200 MB of data for $15, which equates to $75 per GB. Customers that exceed the data cap will pay an additional $15 for another 200 MB.
  • DataPro — 2 GB of data for $25, which works out to $12.50 per GB. Customers will pay $10 for each GB over the cap in a given month.
  • 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.

The move comes less than a week after Verizon said it would move to a tiered pricing model for its next-generation LTE network. But AT&T isn’t waiting for a new 4G network to make the pricing changes. Instead, the carrier is adopting the model for its 3G network on June 7  — the exact day the next data-hungry iPhone is expected to launch  —  as a means to help shape the way consumers use its network. Meanwhile, T-Mobile will throttle back bandwidth, so its customers won’t pay overages for additional data. Instead, they will give up the convenience of fast mobile data after racing past the data plan cap.

Customers used to current unlimited smartphone data services are likely to cry foul over the new plans on cost-per-GB basis. But that argument is invalid on an unlimited plan because the per-unit data cost varies on a monthly basis — the price is fixed, but usage is not. And research indicates that customers paying $30 a month for AT&T’s current unlimited smartphone plan will save money and still have their needs met by the new $25 plan for 2 GB of smartphone data.

AT&T says that 65 percent of its smartphone users use 200 MB or less each month on the 3G network and 98 percent use under 2 GB. Is that marketing fluff? Perhaps not. Chetan Sharma, a wireless analyst, estimates that data card users consume on average 2 GB a month, while superphone users consume about 500 MB, so AT&T’s estimates sound accurate. And our own recent poll at jkOnTheRun — a community of die-hard mobile enthusiasts– shows similar results: 80 percent of respondents use 2 GB or less of data on their smartphone, and many of those that exceed the 2 GB threshold do so because they tether their smartphone for data usage. My own monthly data usage on T-Mobile’s network with a Google (s goog) Nexus One routinely tops out at the same 500 MB that Sharma estimates.

While most smartphone users won’t suffer from AT&T’s new tiered data plans, those who own Apple’s iPad 3G model will. Due to the larger display and affinity for content consumption, iPad users are likely to consume much more data than those on a smartphone — three times more bandwidth-hungry video on the iPad than on other devices, to be exact.

Unfortunately, today’s mobile data networks have a fixed capacity, so carriers have to adopt one or more new models to help manage network use. Otherwise they’d be offering the equivalent of an all-day buffet that runs out of food by lunch.

Related GigaOM Pro content (sub req’d):

Metered Mobile Data is Coming and Here’s How

58 Responses to “AT&T Shuts Down the Mobile Broadband Buffet by Ending Flat-rate Mobile Plans”

  1. I always thought of AT&T as a cell phone provider and that’s pretty much what I used them for. For years I paid whatever they charged me, renewing my contract every 2 years just to save a bit on the purchase of a better phone. But, somehow it just became ridiculous to keep upgrading for options I didn’t really need. It was more like an imposed need brought up by AT&T as a means to get more $$$ out of our pockets. Just last year when my last contract expired I held off on temptation and switched to a prepaid plan – NET10 to be exact. It’s probably the best decision I’ve made in a while! I was paying $80 a month and more than 1/2 the minutes were going to waste. I now pay about $25 and have just enough minutes to last one month. I’m also a lot more careful in terms of how I manage those minutes and have realized that I really don’t need to be on the phone 24/7. This prepaid plan has great pricing and great phones. At 10 cents a minute and 3 cents a text it’s probably the best plan out there right now. I’m might be the exception, but I really don’t think an iphone or smart phone or touch screen phone are necessary. My motto is, as long as I can make and receive phone calls, I’m ok. No more provider induced needs. It’s time to watch my pocket and AT&T is certainly not going to do it. Thanks NET10!!!

  2. Duskrider

    Here in Canada, at least with Fido, tethering from your iPhone is free with the 1GB+ data plans. I’ve been using that for quite a while now – about 5 months – and it works great.

    They also have an “insured” data plan where you can pay $5 extra per month which allows you to go over your limit and just get bumped up to the next tier rather than going to a per kilobyte price. For example, I can get 1GB for $30 and 5 cents per kilobyte if I go over, or pay $35 and if I go over I get billed $65 for 2GB. Not a perfect system, but a wee bit more of a win-win than anything else I’ve seen. Certainly prevents those $1600 surprise bills from Windows Update running or some such.

  3. Duskrider

    So, if most users don’t use more than 500mb, why do they need to change the plan and cap it?

    Something doesn’t make sense… are they just doing this for the small percentage of users that go over 500mb?

    I think they are preparing for the future, with tethering, estimates of HUGE increases in video on the ‘net and TV streaming services coming down the pipe. I think using today’s stats is subterfuge and nothing else.

  4. Barbara

    No thank you! I’m glad I don’t buy into this iPhone and smartphone craze. Call me old fashion, but I’m happy with my basic Net10 LG300 which I use only to talk and text. At $15 per month, I do not need “data” access. Mean while, my husband is the exact opposite. He has the Google Incredible with Verizon and swears that it’s better than the iPhone. He showed me some of the stuff that this phone can do. And although I was very impressed, I’ll still be sticking with my simple, Net10 phone!

  5. It doesn’t surprise me in the week that we hear about video calls coming to mobile devices.
    It is their greedy way of making a ton more money soon. This consumption estimate is going to be blown away and the companies are going to take a ton of more money off their customers. Maybe in a year or two the move will be back to “eat as you can” – but the taste of greed will turn these American companies insane for now.


  6. Seems like service providers in the USA are going backwards, not forwards any more. Who are they to say how much data we can use on our smartphones? And what about those that DO use more than 2GB or 5GB? It’s become very convenient for companies to feed people all kinds of BS and use “statistics” for an excuse! Shame on you AT&T.

    I was already heavily restricted by the 5GB broadband cap, which is why I chose to tether for free and use my existing phone’s unlimited data plan for mobile use. While not the most elegant solution or fastest, it works, and gets me the stuff I need on whatever device (smartphone/netbook/notebook) I happen to be working on WITHOUT worrying about how much I’m “allowed” to consume. Yes, I’m a heavy user, but keep in mind the fixed price I pay goes to the service provider every month, whether I use 7GB, 700MB or none.

    Compared to the deals offered by GSM providers in Europe for comparison (14GB plans for around $35/month) we should be getting similar or better alternatives, not worse. AT&T has been bashed enough for it’s poor network, but now giving you less and charging you more for it is inexcusable, especially for folks paying premium for a 3G iPad.

    TMO may have taken the wiser approach throttling your speed and letting you go over your limit – the ability to connect is still better than not being able to connect at all. Sprint would be the outright winner, except that CDMA is fast becoming inferior to GSM with increasing smartphone usage.

    With AT&T reducing their offerings and incapable of improving their infrastructure, it would seem fit for the FCC to introduce a third GSM provider to the USA on the 2100 band to help meet demand. Competition is one thing, but as a consumer I want choice. Forcing people to pick between technologies (CDMA/GSM) is akin to being in the stone age of cell phones. That may have been fine for devices like the Nokia 5100, but people don’t use those phones anymore. Data traffic is slowly overtaking voice, and networks incapable of handling that will fail.

  7. dstrauss

    Doesn’t this strike everyone as a “convenient” development on the verge of iPhone 4’s video conferencing, high quality media streaming, and tethering capabilities? Add to that the huge data center Apple is building, with all the emphasis on cloud computing, and you have a recipe for tremendous long term profit growth for AT&T. For now AT&T can say 98% are below the new 2GB cap, and it will take a little while to take hold, but soon we will be demanding even more bandwidth. Couple that with the no longer “unlimited” iPad – the king of media consumption, and AT&T is striking now before the Oklahoma land rush hits and we all become bandwidth hogs.

  8. anybody ever think of charging a cent/GB fee instead? its the only way to universally compare prices across carriers & accurately pay metered usage.

    it may not be PR friendly way to do things, but its honest.

  9. Jason

    This is a total win for me. I’m currently paying AT&T $30 each for my and my wife’s iPhone data plans, plus another $60 for a 3G card in my laptop. I just checked my data usage, and my wife’s usage is well below 200MB per month, mine is about 500MB per month on average. The 3G card gets used only when I travel, and peaks at about 500MB per month. So I can easily go with the DataPlus for the wife, DataPro+tethering for me. That’s only $60/month total, vs. $120/month today.

  10. Richard Garrett

    It would seem much more fair if these new pricing structures included reductions in voice plan charges. Like many, I am using fewer and fewer of my 450 voice minutes allocation on VZW but still paying $39.95 p/mo. During this billing cycle I’ve used only 60 minutes. Thus my real cost for data is about $63 per month. Voice is becoming a cash cow for carriers just like text.

  11. Se7en

    While I understand that AT&T will allow current iPad 3G owners to “continue” with their $30/unlimited plan until they choose a different one, in which case they lose it…that really wasn’t what we bought into.

    We bought into a NO CONTRACT plan, with two options-250M or Unlimited, that we could turn off and on at our leisure. How can AT&T change that just one month after the iPad 3G actually shipped? Or are the 250M/Unlimited plans going to be available at our leisure UNLESS we choose the new plans?

    • exactly. i have been thinking of getting an iPad 3G. the plan was to buy no data most months and just use WiFi, but once or a few times a year when traveling grab the unlimited option and use really heavy as my only internet connection for a couple or few weeks. looks like that option is gone.

      perhaps there can be case for a class action here since this is clearly a bait and switch. i am only going to feel different if AT&T/apple come out and state that all current ipad users are grandfathered in too being able to start and stop service with the old options.

      • You guys are asking the same question I have: has AT&T converted the 3G iPad from pay-go to contract? Tofel’s post doesn’t address this very import question. In fact, I haven’t found the answer anywhere yet.

      • OK, I went to the AT&T Facebook page. The good news is that iPaddata will still be pre-pay. The bad news that it’ll will be $25 for 2GB instead of $29.99 for unlimited. Probably not a problem for most customers as AT&T says, though I have friends that easily exceed that on a regular basis. Companies that are or plan to do streaming on the iPad are probably not happy campers right now.

        AT&T offered to grandfather in current iPad owners under the old rates probably to avoid the lawsuits you describe. One interesting note: reports are starting to come in that iPad delivery dates are getting pushed back to after the date the new plans go into effect. I wonder if iPads ordered before but delivered after the changeover will be grandfathered as well?

        My next question, how will this effect AT&T MediaNet rates?

  12. what about video/skype calling? no way the usage stays near this rate. Why not just charge more for phones/devices that use more (like they already do w/ usb type modems for laptops?

  13. Scotty

    Can someone please explain why I have to pay $20 per month to use my Bluetooth/USB cable/Wifi for tethering? Now that the account is no longer “unlimited” and I still only get a shared 2GB cap why am I paying more???

    That sounds like a RIP OFF to me!

    P.S. Welcome back Kevin, I was starting to think the cows got ya. :-)

    • I’m faster than the cows – usually. ;)

      Your concern is spot-on, Scotty. The $20 is basically a service fee but doesn’t provide any additional data. That makes no sense to me — if you tether your phone to use data on a bigger screen, you’re more likely to use more data. We’re trying to get a call with AT&T and specifically ask that question as well as others.

      • bjtheone

        Ugh! Data is data is DATA damit!

        While I would prefer if carriers actually offered real unlimited plan (ie actually were unlimited if they claim they are) I have an even bigger issue with the concept of X $ for Y Gb, but only if you consume it in a certain way. Once I buy a certain size of data bucket it is MINE to use as I want. Adding a extra fee for tethering without even given you a larger bucket is basically double billing.

        It makes no difference to the network how you actually consume the data, as usage patterns will smooth out the bumps (if I tether and rip through my monthly allotment in a first week of my billing cycle, I will likely use way less for the rest)… spread that over a huge user base and spikes don’t matter. Watching video on a itty bitty screen moves the same amount of data as watching the same video on a bigger screen.

        This is only going to get worse as smartphones get smarter (solid flash performance, larger screens and faster CPUs) [Dell Streak and HTC Evo come to mind] and more big bandwidth apps/features become available (streaming TV is likely the next big one).

        If Skype or any VoIP app ever really comes to 3G I expect that to be another big one.

        Funny that the carriers were willing to sell you unlimited or large data bucket plans when most people could not actually consume the data. As soon as devices come out that can actually come close to consuming (on average) what they were selling, they pull the plans and jack up the prices. Will be interesting to see what this does to new iPad sales on AT&T.

        Disclaimer: I have a 6 Gb for $30 plan that I don’t plan on giving up… :-)

      • I hear you on the data thoughts, but this statement isn’t necessarily true: “Watching video on a itty bitty screen moves the same amount of data as watching the same video on a bigger screen.”

        Plenty of video providers optimize for smaller screens, i.e.: why send a 1080p video (2.1 megapixels per frame) when a VGA video works just fine on many smartphones, aside from the newest ones? Lower resolution and compression techniques can greatly vary the amount of data sent. Just a clarification….

      • Scotty

        If you get them on the phone could you also ask them if they’re removing their hidden limits as well?

        Call me cruel but I like to send links to hot now apps to my iPad 3G buddies and tell them they need to DL them now… only they’re all over 20MB. :-)

        If the connection is no longer “unlimited” why the need for a 20MB restriction? Or restrictions on video et al???

      • bjtheone

        While I agree with the clarification you made, I still stand by the data is data comment. The big picture is how much data is moved by the network.

        Local/peak/burst demand is only an issue when it is being driven by a geographically related event (ie a big conference). Users doing high demand stuff is smoothed both by the size of the network, and the the fact that they will do it at different times.

        Extra billing for tethering is double dipping. Pure and simple. The fact that many/most (?) users do not really understand the issues and think it somewhat magically allows the carriers to get away with such absurd behaviour.

        A very good analogy would be if the gas station charged you $1/gallon for your beater, but demanded $2/gallon for exactly the same gas if you were filling up your SUV or sports sedan. Picture how well that would go over, and yet other than on tech forums, their is very little outcry or thoughts of government intervention.

        I have not seen one study, event a flawed carrier sponsored one, that shows that data consumed via tethering, has a higher network impact than data consumed directly on the device. Also, the same carriers would be delighted to sell you a MiFi or a USB 3G modem for your laptop. Are the /Gb data rates significantly more for those type of plans?

  14. I guess if you try to see the positive. . . at least for those that don’t need much data they can now get a smartphone without a full data packages. Personally most data for me goes through WiFi as I’m around it 95% of the time so paying for a carrier’s data is a bit of a rip since I don’t use it and I’m sure there are many others out there like me.

    Heck, I’m still waiting for Google Voice + Gizmo5 :) seamlessly integrated into Android. . . I can live with WiFi ;)

    It will be interesting to see what happens when Android hits the prepaid carriers.

  15. A reasonably priced, unlimited data plan was one of the key features touted by Apple and AT&T when the iPad was introduced. To shift gears 2 months later after the sale of 2 million iPads is nothing short of bait and switch.

    • Guess that innovative mobile broadband plan that Apple worked with AT&T wasn’t all that innovative after all! For the moment, I’m glad I went with a Wi-Fi iPad model. I’m using a Verizon Wireless MiFi (capped at 5GB) and the portable tethering feature of Froyo / Android 2.2 on my Nexus One with T-Mobile – no cap but slower throughput after 5GB.

  16. Looks like a win for Sprint. Verizon will probably follow ATT’s lead and implement the same pricing structure. Sprint has bucked the trend recently by launching unlimited data plans on its Virgin Mobile brand with a $25 entry point for unlimited data and 300 minutes of voice service. A 3G Blackberry can be used on Virgin for $35 with unlimited data and 300 minutes. The thing to watch for will be what happens when Android devices begin to hit the pre-paid networks. If Walmart’s Straight Talk introduces an Android device with unlimited data and talk at its current $45 price, the game will be over for the major carriers.
    I see this move by ATT as a proactive measure before the launch of the new iphone with its forward facing camera which will increase data use as people will begin skyping indiscriminately. The new plans will keep this data usage in check so that the network won’t become overloaded.

    • Santiago

      This could also spell disaster for Sprint. Networks charging extra for usage above the norm could help offset their cost for service provided. Sprint’s network could begin to suffer from the cost vs revenue for service provided. Then again the Revenue could out weight the cost. I do hope sprint comes up on top and continues to provide unlimited data.

      • Sprint can conceivably stick with current plans for a bit thanks to the 4G network — it’s more efficient in terms of how much wireless data is transferred over spectrum. Will be interesting to watch though.

    • Informed

      Actually, Verizon’s big-mouth CEO said over a week ago, Verizon will be switching to tiered plans next year. That is when Verizon hopes to have LTE available to their customers. The reason why At&t and Verizon are implementing those types of plans, GSM is poor in America. At&t’s current network is terrible, when Verizon and At&t finally do get LTE, it’s basically a marginal upgrade from HSPA+. Sprint have the benefit of having more spectrum, as well as a 4G network that was primarily designed for data.