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

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When AT&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, 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

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