Blog Post

If 2 GB is excessive, why is AT&T selling 3-GB mobile data plans?

When AT&T(s T) first implemented its throttling policies on unlimited mobile data plans last fall, it justified the move by claiming it had to limit the “extraordinary” consumption of a few greedy smartphone customers. We’re starting now to get a glimpse of what AT&T means by extraordinary. It’s only 2 GB – a full gigabyte less than it sells its newest customers under its most-common data plan.

Over the weekend, blogger John Cozen posted a recent e-mail exchange with AT&T about why his smartphone data connection was slowed down after he breached 2.1 GB in his last billing cycle. His argument was his usage couldn’t be subject to throttling since his data use must be well under the top 5 percent cut-off AT&T stipulates in its terms. AT&T’s response was very interesting:

“To give you a baseline – the average data use across the country by the top 5% of AT&T smartphone customers was 2GB per month, effective August 2011. The amount of data usage of our top 5% of heaviest users varies from month-to-month and by market, based on the usage of others and the ever-increasing demand for mobile broadband services. To rank among the top 5%, you must use an extraordinary amount of data in a single billing period.”

When AT&T introduced throttling in October, its highest-tier data plan was 2 GB for $25, compared to the $30 charge for unlimited plans that Cozen and millions of older AT&T customers still hold on to. That seems reasonable enough. If the 2 GB is what the top 5 percent of smartphone users consume and is at the level AT&T considers abusive, then 2 GB is a good place to set its cap, charging customers more if they exceed it.

But AT&T just overhauled its plan pricing. Its newest mid-tier plan charges customers $30 for 3 GB. Why is AT&T inviting new customers to consume a full gigabyte more of data while telling older customers – who pay the exact same monthly fee – that 2 GB of data is excessive? My bet is that the former is really a false invitation.

When AT&T first announced these new plans, I wrote there was good and bad in them for consumers. The bad is that new subscribers will have to pay $5 more a month than their predecessors for any of AT&T’s plans. The good is that AT&T is actually lowering the per-MB charges on data, which is ultimately necessary if average mobile broadband consumption continues to grow. Now I’m not so sure.

If 2 GBs is the average use for AT&T’s 5 percent hungriest users, that means 95 percent of AT&T’s customers are well under 2 GB each month. So the vast majority of A&T customers don’t get any real benefit out of the new 3 GB plans. To them it just amounts to a $5 a month price increase.

To be fair, AT&T can’t just price for what its customers are consuming today. It has to price for where they’re going, otherwise it would just be adjusting its rates every few months. It’s not unreasonable to assume that its customers average monthly data consumption will grow beyond 2 GB in the next few years, especially as mobile video services take off. AT&T is also a business that wants to make money off of mobile data, though this may be a rather sneaky way of doing it. Ma Bell’s data rates still far undercut those of its main competitor Verizon Wireless(s vz)(s vod), however.

But AT&T also claims to be facing a capacity crunch. Since its planned acquisition of T-Mobile has failed, the carrier has used every podium it can find to proclaim that its networks are reaching critical mass in an effort to justify its spectrum acquisition aims. On its fourth quarter financial call, AT&T Randall Stephenson even blamed the government’s failure to let it have T-Mobile as the reason why its forced to raise data prices.

If AT&T is so network constrained, if 2 GB of monthly usage is too much for its networks, and if it doesn’t have the spectrum to meet future demands, then why is it opening up the data spigot, actually encouraging its customers to consume more for an extra $5 a month?

iPhone image courtesy of Flickr user mark sebastian

20 Responses to “If 2 GB is excessive, why is AT&T selling 3-GB mobile data plans?”

  1. stikman

    if you never use up your 2 gig alotment give the remainder to me! ive been paying 30.00 a month to at&t since 2008, back when you would have thought me outrageous to pay such an amount while you could get by with your go phone. BWAHAHAHA !


  3. they can defend the change however they like. they will continue to be wrong until they stop requiring data plans and boasting services that consume WELL over their limit with just normal use (tv on your phone, video streaming, netflix, thousands of apps, gps, pandora, etc.). Youve seen the commercials. If they want to throw around the words “blazing fast” and “high speed” they have to be able to back them up. If over 80% of the available phones require data plans (a crock of **** in its own right that i dont know how has not faced major legal action yet). If your whole ad campaign is based on selling MORE Smartphones that can do MORE things and require MORE data, logic would have it that you need to be prepared for doing just that.

  4. AT&T is being greedy and dumb. I received the message last month at 2.1g here in Texas. I need my phone to work while I’m on the road, so my contact is coming up and when I buy a new phone it simply won’t be with AT&T again.

    I don’t want to do business with a company that is trying to steal from me. If they would serve me like they did in the past I have no problem paying them.

  5. They are doing it to me too and I’m grandfather in. Two YouTube vids and then I get that message. Why make phones do all this stuff and then your not able to use them. Stupid . When my contract ends moving to another provider. If all providers do this then going back to the old. Text and talk.

  6. I got throttled on a tiered plan for going over on usage. They are throttling the unlimited customers at 2gigs to persuade them to jump on the tiered plan. I know several people with LTE phones changing the APN to a H+ setting once the throttling begins to still get good speeds and they are taking advantage of that unlimited data using over 20 gigs.

  7. I don’t understand the 5% policy at all. One in every twenty users is in the top 5% bracket. And when they have been chased away, there are always new users in the top tier. A fixed “top x%” can not be excessive: from a statistical point of view there are other ways of pointing at extreme usage.

  8. You know whats great about this? Companies like Bell, Rogers (Canada) and AT&T all claim about how the top 5% are using all the data and slowing everyone down.

    Where the hell is all the documentation on this? Wheres the hard numbers? Let the people see it!

  9. No doubt AT&T will soon begin to give refunds to the LOWEST 5% data users, since those users are saving AT&T money AND freeing up bandwidth for the top 5%. LOL, yeah, right.

  10. Kevin,

    Once again you point out the obvious with this article. I really hate to bash AT&T. However, they make it so easy when they pull rhetorical excuses out of their rears. I am amazed that this carrier has as many subscribers that it does. They have always been the masters of manipulation. We are fortunate that the FCC saw through this and denounced the Tmobile acquistion.

    I hope people wake up and observe the direction of AT&T.

    “AT&T is not responsible for consumer stupidity, but we can sure benefit from it”

    John B.

  11. i also received the sms and email about being in the top 5% just minutes after going over 2Gb for the month with 5 days left in my billing cycle and I also called
    According to Patty (my account “manager” for the call)AT&T takes the market (in my case Illinois) and then groups those with unlimited data by billing date. So if I am in the top 5% in Illinois for people with a billing date of the 14th- then I get throttled
    What i think they want to do- is get more and more folks on to the 3Gb/$30/month plan decrease the number of unlimited folks and slowly by attrition- 2Gb may be in the top 5% forcing everyone into the 3Gb plans….just my 2cents…any class action lawyers out there listening????

  12. You’ve read my thoughts on this so I won’t re-post my link. Corporate greed has run amok among U.S. carriers, and they’ll do anything to make an extra buck, even if it means making a donkey’s-rear out of themselves. They are full of BS.

    Unlimited data FTW!

    • Kevin Fitchard

      You’re beginning to lure me over to your side, Luscious. :)

      I still don’t think unlimited unthrottled data is sustainable forever, but stuff like this convinces me that the operators have far more headroom than they’re letting on.

  13. I have never heard of AT&T throttling anyone until they reach about 5GB. Not only that but the new 3GB package is not only available to new customers it is also available for existing customers to switch to. AT&T has changed their data plans due to demand. The more applications grow the more data usage is needed for the customer to use the same apps they did before because those apps are doing more with then Internet. AT&T is changing because they have to. Stop complaining about it and get the extra GB for 5 bucks if you need an extra GB and if not save yourself 5 bucks and keep your $25 package like myself. I’m on my iPhone all the time and I have not went over the $25 package one time. And I don’t even have wifi at home. I have no idea how you guys are using so much data anyway.

    • Brent Smith

      Tiered plans are never throttled because they charge you overages if you go over. What irks me is that when loyal AT&T customers pay the same amount of money *and* get inferior service compared to new customers.

    • Kevin Fitchard

      Hi Alan,

      The point I’m trying to make is that level of demand simply doesn’t appear to be there, at least not yet, but AT&T is charging as if it did. The vast majority of customers on the new plans don’t need that extra GB (according to AT&T’s own figures), but they’re still paying for it. You have a choice to stay on the $25 plan, but new customers don’t.

      If you parse AT&T’s numbers, the top 5% of users are consuming an average of 2 GB. Meaning roughly 2.5% are consuming more than 2 GB a month (the distribution of usage could throw that percentage off a bit, but not that much). That means less than 2.5% of users would ever benefit from the extra 1 GB that the $30 plan delivers.