AT&T, wireless provider for Apple's iPhone, on Monday will become the first major mobile phone company to stop offering new smartphone customers a single monthly price for unlimited Internet access. AT&T expects the new limits and pricing to boost sales. "Some customers, up until now, have been hesitant to sign up for a $30 monthly data plan" for unlimited access, says Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets. Existing customers can switch to the new pricing or keep their current all-you-can-eat service until their contract expires.
Newcomers will have two options: Under the DataPlus plan, subscribers can pay $15 a month for 200 megabytes of data; that would handle about 400 photos or 100 minutes of streaming video. The DataPro plan offers 10 times that capacity, 2 gigabytes, for $25.
AT&T will send text alerts to customers near their limits. DataPlus customers who go over will be charged $15 for an additional 200 MB. DataPro users will pay $10 for an extra 1 GB.
AT&T says 65% of its smartphone customers use less than 200 MB a month, and 98% use less than 2 GB.
But, largely due to the success of the iPhone, AT&T "has the most loaded and most used data network in the U.S.," says Roger Entner, head of telecom research at Nielsen.
And just 3% of AT&T's smartphone customers account for as much as 40% of its data traffic, contributing to slow transmissions and dropped calls. Unless they upgrade their network, AT&T must control heavy users, or at least get them to pay more, Entner says.
With the limited airwave spectrum available for wireless broadband, he adds, it's just a matter of time before other providers — including Verizon, Sprint and T-Mobile— switch to usage-based pricing.
Verizon Wireless CEO Lowell McAdam said last week that it would "make sense" to have such pricing later this year when his company introduces a speedy 4G service.
Apple's new iPad tablet also uses AT&T's wireless service. The new pricing will offer those customers 2 GB for $25 a month; current customers can keep their unlimited service offer for $29.99 a month until their contract expires.
IPhone customers who pay an extra $20 a month soon will be able to use the phones to provide Internet connections for laptops or other devices. This process, called tethering, has been available on competing smartphones for years. Tethering will be finally be available on 3G iPhones this summer when Apple releases a new operating system, AT&T says.
While AT&T is touting their new plans as a positive trend, technology experts aren't so optimistic.
Steve Jobs personally commented on AT&T's service at the D8 Conference. Though he was somewhat enigmatic about his opinions -- wouldn't want to bite the hand that feeds, after all -- he did dish a backhanded compliment. "When Walt Mossberg asked Jobs how AT&T was doing on the network side of things, Jobs at first said AT&T was doing 'pretty good.' But then quickly noted that 'they have some issues,'" TechCrunch reported.
Other opinions in the blogosphere were similarly mixed. "Already we can see the comments forming: This is about throttling bandwidth. This is about giving less for the same amount of money. But we see a lot of good here..." Matt Hickey wrote for CNET. (Throttling has been a big PR nightmare for other companies, especially Comcast.)
The possibility of even more shifts in data usage plans intrigued Ryan Kim with the San Francisco Chronicle. "The big question is will these limits change as the usage goes up and the networks get more upgrades? If not, this could be affect an increasing number of users and could throw some cold water on the mobile data revolution going on.
Even if the limits change, just knowing there are limits could stifle some usage. That might be good for network reliability. But it still feels like the end of an era."
AT&T could win or lose in this situation -- it's hard to tell. Most customers will only care about saving money. Hardcore data users could get upset about the sudden changes. And new iPhone and iPad customers who like surfing the Web on their phones and tablets, respectively, could get really upset. What will be especially interesting to watch is how other wireless carriers will react to AT&T's brave new world. Competitive pricing between carriers could definitely entice customers away from Ma Bell, meaning AT&T just shot itself in the foot.
Read more on PCWorld.com: "Is AT&T Just Hurting Itself With New Data Plans?"