The Good and the Bad Regarding AT&T’s New Data Plans

Wednesday, 2 June 2010

Good: The big plan, “DataPro”, now costs $25/month and gives you 2 GB per month. That’s $5 cheaper than the previous “unlimited” plan, and, according to AT&T, 98 percent of their current smartphone customers use less than 2 GB per month. Almost all current iPhone users should save some money, even if just $5 per month. (I use about 500 MB per month, on average, and the most I’ve used in the past year is 1 GB.)

Good: The bandwidth overage fee for DataPro is a reasonable $10 for each extra gigabyte. Verizon and Sprint charge around $50 per extra gigabyte in overage fees. If you use more than 2 GB per month, you deserve to pay more than the rest of us who do not. Why is this hard to understand?

Good: These plans are for all smartphones. No more discrepancies between what’s allowed for BlackBerrys or Android phones (e.g. tethering) and what’s allowed for the iPhone.

Good: $15/month for the 200 MB/month “DataPlus” plan is a great starting price, and AT&T claims that 65 percent of their smartphone users use less than that. I thoroughly doubt that 65 percent of their iPhone users use less than that, but I’ll bet many do.

Bad: The overage charges for that DataPlus plan are shitty. They get charged more — $15 — for another measly 200 MB. That’s usurious. For $15, they should get an entire extra gigabyte.

Bad: Tethering is finally going to be supported — a year after it was supported on numerous other iPhone carriers around the world. But tethering costs $20/month and you don’t get any extra bandwidth at all. If you don’t get extra bandwidth, what are you paying for? It’s one thing to charge extra for tethering on an “unlimited” data plan, but it’s outrageous to charge $20 when the bandwidth is already capped. They should just include tethering support at no additional charge in the DataPro plan. (That’s what Rogers does in Canada, after running a six-month experiment to see how it worked out.)

Bad: Why did they change the plans for the iPad so soon after it was announced? What kind of company has a data plan for a flagship product, the iPad 3G — what appears to be the flagship product of the entire industry this year — available for just 30 days before changing the terms significantly? The “$30/month for unlimited, cancel or downgrade at any time” deal was a highly touted part of the iPad introduction. $25 for 2 GB isn’t bad at all, but it’s just downright weird for it to change so soon after the iPad 3G went on sale.

iPhone OS 4 and Multitasking

Remember too, that Pandora is coming. I know Pandora already has a popular iPhone app, but I seldom use it because it doesn’t play in the background. It will soon, and once it does, I’ll be using it. I’m sure I’m not alone. How’s that (and Skype, and other background streaming services) going to affect monthly bandwidth averages for iPhone users?

Lower Monthly Fees and Market Share

I don’t expect iPhone retail prices to drop this year. I think $99 / $199 / $299 are price points Apple wants to maintain. But these aren’t the real prices for iPhones. They’re subsidized, paid for by AT&T in exchange for all U.S. iPhones being locked to two-year AT&T contracts. Economically, the low-end iPhone could surely be “free”, and the higher models cheaper. But there’s a psychological branding angle that Apple wants to maintain. Apple wants the iPhone to be perceived as an affordable luxury item, not a cheap or free gadget.

A $99 entry-level purchase price is not going to keep many people from getting an iPhone. The biggest barrier for many consumers, I think, is the size of the monthly bill. Under the old rates — where there’s one and only one mandatory iPhone data plan, the cheapest plan you could get was $70/month: $40 for 450 voice minutes, $30 for data, and no included SMS messages. Now, under the new plan, you can pay just $55/month: $40 for voice and $15 for the DataPlus plan. That’s a lot closer to the sort of monthly charges that non-smartphone users are used to.

(Maybe I’m wrong on this, though. What if this month’s new next-generation iPhone goes on sales for $199/299, but the 3GS drops below $99, in a move for market share?)

Compared to MiFi

Before I decided to get an iPad 3G, I thought about sticking with a Wi-Fi-only iPad and getting a MiFi from Verizon or Sprint. The advantage to getting a MiFi: it would work with all of my computers: iPhone, iPad, MacBook Pro. The downsides: a 5 GB plan is $60/month, and I’d wind up with another gadget (and charger) to schlep around.

AT&T’s $20 charge just to enable tethering is bullshit, but even combined with an iPad 3G data plan (so as to get 3G service for both an iPad and a MacBook) it’s a lot cheaper than a MiFi — especially if you can get by with the $15/month iPad plan most months, as I expect I’ll be able to. And Fraser Speirs makes the case in this piece that the schlepping/annoyance factor with the MiFi ought not be discounted:

When using the 3 MiFi, there is too much setup involved for casual use. A lot of this is down to the poor design of the 3 MiFi. Here’s what you do to get online:

  • Power on the MiFi
  • Wait for it to acquire the network (20 seconds, in my absolute-best-case experience - usually much, much worse)
  • Turn on the WiFi radio - another 10 second operation
  • Turn on the 3G radio - 10 seconds to turn on, another 10 to get to 3G status
  • Unlock the iPad, get it associated with the MiFi, get an IP address - another 10-15 seconds

Compare to the 3G iPad: you unlock it, you’re online.

Duncan Davidson expects to save money ($20 bullshit tethering fee notwithstanding) as well:

Running the numbers, if I had been able to use my iPhone for data tethering over the last six months — paying the $20/mo tether charge and $10 for the overage — I would have saved $230 over paying my $60/mo bill to Sprint. Factoring in the $5/mo difference in monthly price, I can expect to save $260 over the last six months of this year if I drop my Sprint card and move to tethering via my iPhone.

So while AT&T’s new plans are not entirely good news, the good outweighs the bad overall.