AT&T’s cynical act

AT&T’s service sucks. Just listen to our most trusted newsman on the topic. But AT&T response to this core business problem is not to improve its service, to invest in better ways to handle more customers.

No, AT&T’s response is to change its pricing to make us use its service less.

That’s cynical. It’s evil.

AT&T got rid of unlimited data (except for grandfathered accounts … else those changed accounts could all cancel without paying AT&T’s just-increased cancellation fee). They paint it as lowering the price but in truth they lowered the value.

The sick and stupid irony of this is that it was AT&T — in the person of Tom Evslin, then head of AT&T WorldNet (remember them? AT&T killed that golden goose, too) — that turned off the ticking clock on the internet when it established flat-rate pricing of $19.95 a month for unlimited use of the internet. That is what exploded use of the internet and enabled us all to browse without worry. That turned the internet into an industry.

And now it’s AT&T that turns the clock back on. Tick. Just as mobile is about to explode with new devices and new uses for us all to be ubiquitously and constantly connected doing all kinds of new things and creating new value along the way, AT&T says it wants nothing to do with that explosion (because it would have to work harder and invest more to do better). So it makes a business strategy out of imprisoning Apple fanboys as long as it can and making them use its service less. Tock.

AT&T also tries to push us off its network both with its pricing and with the promise of wi-fi. Its press release even makes it sound like an AT&T service that we can use unlimited wi-fi in our home! Thank you, AT&T.

Let’s note that AT&T’s action in relation to the iPad is nothing short of bait-and-switch as it was sold as using the magic of unlimited data with plenty of data-rich applications and now the price of that gadget only soars if you actually use it as it was designed: to consume media constantly.

I would hope that Apple is chagrinned about the door to which it has delivered its customers. But Apple sniffed the shark when it picked AT&T, making Apple’s control more important than its customers’ service and value and its partner’s quality and ethic.

Of course, this is all the more painful because AT&T’s competitors also suck. Verizon, which most say has good service, has data caps. T-Mobile, which I’m using on my Nexus One, has unlimited data but its network is about an inch worse than AT&T’s. When I was on Sprint, its service wasn’t great but at least they still have unlimited data. But with Verizon and Sprint, I can’t use their phones when I go abroad.

America’s mobile phone industry sucks! That’s more than a mere consumer kvetch. It is a strategic failing.

Hey FTC, if you really want to serve the future of media, why don’t you figure out how to instill real competition in the mobile industry? Right now, it’s a miserable quadopoly that has us by the balls and squeezes.

Can you hear me now?

: Oh, I meant to add: With GoogleVoice and Skype, I don’t even want your voice minutes, phone companies. All I want is your data. And I don’t even necessarily want data over your stupid caps. I don’t want to worry about it. Selling me a service I have to worry about is bad business.

Can you hear me now?

: Here’s Steve Jobs at D on AT&T. Nothing is said of AT&T’s moves to screw his customers the next day. Did he know about it? When asked what he’s going to do about AT&T, he essentially shrugs:

: LATER: Folks in comments and Twitter say that this is an open market and AT&T can set the prices it wants. Yes. And I can get pissed and leave. They say that some people use lots of bandwidth; the classic argument. OK. So AT&T says that only 2% of users exceed its limit. So they are making 98% of users now be nervous in hopes they will use less of the service they are paying for. That is what’s cynical and evil.

  • I vote that all of us with “grandfather” AT&T data plans do our best to double our usage until our current contracts expire.

  • Right on Jeff.

    Right now, only the second tier mobile providers (T-Mobile and Sprint) have truly unlimited plans. Its a shame that we likely wont see true phone network interoperability until the rollout of LTE, but even then, Sprint has pidgenholed itself into WiMAX. The technologies are similar, and Sprint has made some rumblings that it might switch to LTE for 4G, but still.

    Looking forward to hearing a diatribe on TWiG!

  • digs

    Which is why I would never get sucked into the IPhone hype. It’s about making money, not connecting the world.

  • Marshall Kirkpatrick

    This makes me so angry. The web has had such an incredible impact on humanity and has so much potential for the future, other countries get so much bandwidth to their people and our future is being squandered by these wretched short-sighted people.

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    • is AT&T paying you to defend them? Jeff pointed out quoting AT&T that 98% of users have not gone over 2GB. The point is that AT&T is going backwards with this, and I highly doubt that they felt bad for 98% of iPhone users paying more than they consumed any data. Evil is usually obvious.

  • Hi Jeff. Ahem, don’t you believe at all in the power of markets? If AT&T’s new product/plan is really evil, won’t people stop using it? Conversely, if people don’t mind – or don’t abandon AT&T — didn’t AT&T act in shareholders best interest?

    • Right. And they just gave me the kick to leave — and I’m taking six accounts with me.

      • I think this is wherein the irony lies… As the exodus from AT&T happens (likely in say Sept/Oct, when a certain phone becomes available on the CDMA platform), then there will be bountiful bandwidth, for those who for what ever reasons stay…
        The tethering is what gets me… if your going to cap my usage, then why should I have to pay on top of that to tether. Disappointing day.

      • But the irony of it is, Jeff, that they may be happy to see you go. If you’re one of that tiny percentage of customers who use very large amounts of data – say over 2GB per phone per month – they may well be making a loss on your account.

        Bandwidth in the mobile world isn’t free, and it isn’t at the level of cost of fixed-line bandwidth. And that upgrade to an LTE network has to be paid for somewhere. Either the company borrows the money – in which case it has to make the customer pay (and make a profit) down the line, or it invests its own cash (in which case it still has to make the money back to keep shareholders happy.

        • I don’t go over the limits. My point is that I don’t want to worry about going over. Now I will. So I’ll use less. That is their goal. I’ll use even less.

        • Steve

          So your point is that the mere existence of a cap exerts some psychological force that will make you use less, even though your demonstrated needs are below the cap? I don’t get that. At least, I don’t have the same concerns, and I don’t think the cap will have any effect on my usage patterns.

        • If you don’t want to worry, then don’t worry, be happy. In the event that you go over the limit, you can afford an extra ten bucks or.

  • Karl Marx was wrong

    Quite the marxist screed. Spectrum is a scarce resource. Companies pay lots of money for it. They spend more money to build a cell network utilizing that spectrum. Some people use lots of data, some people don’t. Those that do should pay more. It is the ultimate example of a potential for the tragedy of the commons. There is no incentive other than price for heavy users not to be heavy users. If you still want to use a lot of the network, well guess what, you have to pay for it. The mistake was ever offering unlimited broadband/wireless data usage in the first place.

    • Nicholas Chase

      It’s OUR spectrum, we’re the ones leasing it to them. We have a governing agency to make sure we aren’t getting screwed, as we are. The ipad was launched with the promise of unlimited internet. If it wasn’t for the corporate socialism we currently have, these companies wouldn’t be able to make a dime in profit. They’d rather keep us in the dark and squeeze every last penny from apple fanboys than get with the program and enable their network to handle the next generation of web consumption.
      ATT never proved that these measures were neccessary to do anything but make them more money. They make so much money off us already it’s obscene, and then they use it to lobby congress to let them charge us MORE for LESS.

      • Amen, brother.

      • Dave Murphy

        Of course the spectrum belongs to the public, and THEY are the ones PAYING US for its use. Then THEY are the ones who pay more money to build the towers and the transmitters to communicate using that spectrum. Then THEY are the ones who pay for the bandwidth and the switches to connect all of those transmitters to the Internet. So some how WE then are the ones who are “getting screwed” when we are given a discount of, in my case, $60/year to access all of that infrastructure?

        You are correct that AT&T has never proven “that these measures were neccessary [sic],” but I’ve never needed a company to prove how necessary it is to give me a $5/month discount. I’ll simply accept the lower price with a smile on my face.

        A $15/person all-you-can-eat buffet theoretically represents a better value than a fixed-price sandwich at Subway, but I’d still prefer to go to Subway, walk away full, and pocket the extra $10.

      • It’s THEIR multi-billion dollar infrastructure – or did you personally install those cell towers, lay or lease that fibre cable which connects it all, and install the back-end switching and billing systems?

        Of course, you could just get the government to build it all for you. How would you like that as an alternative?

      • JayG

        We could argue about who the internet belongs to forever. The point is that wireless data is a resource: similar to water, electricity, minerals, livestock, crops, etc…meaning that it is not unlimited – including the internet. No matter what you think of AT&T, they provide a convenient means to access the internet wirelessly, just like water purifcation, power generators – you get my point. To think that wireless access should be unlimited is wreckless and selfish.

        I love the fact that you get can a cheaper data plan. My wife recently switched to a droid, but I was so insensed that she had to have the $30/month data plan to get the phone, no exceptions. I thought that this was an AT&T thing, but it’s true across the big 4. I checked our data usage over the past year, and most months we would not reach 200MB. I’m definitely switching to the $15/mo plan.

    • Steve

      Totally agree. I have an iPhone, but I don’t use anywhere near 2GB of (cellular) data a month. So for me it’s a price cut. Effectively, I’m no longer subsidizing the heavy users. Seems perfectly fair.

      AT&T needs to pay for more bandwidth somehow. I’m OK with letting those who are taxing the network the most pay more than I do for that infrastructure expansion.

      • Michael

        I don’t come anywhere near 2 GB a month, either – because I live in one of those many areas where 3G is not available and it would be kind of difficult to get there on EDGE which is pretty inconsistent even when it does work.

        If AT&T could show a cause & effect between doing this and actually improving the availability and reliability of their network, it might be worth having to think about caps. Or I can just wait until my contract runs out shortly, pick up a Sprint EVO with reliable 3G in my area and an unlimited plan.

      • Steve H.

        I agree, this is not a big deal. Since I am mostly on WiFi, I don’t use nearly 2GB per month on network. ATT needs to control its bandwidth usage. 1) by providing some incentive to use WiFi when available and 2) make the 2% who use more than 2GB to think about usage.

        My prediction. Within a couple of years, network capacity will again exceed consumption and we’ll see the return of unlimited plans.

  • Jeff,

    An AT&T spokesman told me that current users can keep the existing unlimited plan, even if they get a new phone. So far, existing customers don’t have to change if they don’t want to, even when contracts expire.

    • John T Davis

      Yet, you must change to a new plan if you want officially supported tethering, which I imagine most of us want. And tethering means you’re much more likely to go over 2 GB of data.

  • Mike Claiborne

    Jeff – Smart phone usage is increasing bandwidth usage at a fast rate in the US. Carriers are spending billions to purchase spectrum and build networks to support the growth. Where do you think they get the money to pay for it – should they just give it away for free? Charging users by the amount they use the network is fair and makes common sense – it’s not not evil. Your blog hosting company has a tiered pricing plan – are they evil?

    Also, don’t confuse quality of service with a usage-based pricing model – they’re not related

    • Oh, yes, they are. AT&T’s network is overtaxed. There are two solutions to that: improve it or get people to use it less.

      • Karl Marx was wrong

        AT&Ts network is overtaxed because a handful of users, 2-3%, account for a disproportionate amount of traffic. Why is it so unreasonable to charge these people accordingly. The average Blackberry owner uses 55 MB / mo, so for them the new plan is a price cut. If you own an iPhone or an iPad, and if you suck down a ton of data, you should pay for it. That’s not evil, that’s not cynical, that’s just fair.

        • That’s the company cant.
          So the company is making 98% of customers watch the clock because of the 2%? AT&T wants that 98% to worry and thus use less of what they’re paying for. That’s the cynical, evil action.

        • Dave Murphy

          You’re making a logical error in assuming that the 98% of customers who use less than 2GB/month now need to “watch the clock” to stay under that limit. You can count me in the 98% — my usage has not exceeded 500 megabytes in any of the past 11 months I’ve owned a 3GS. No, I most certainly will NOT be “watching the clock” because a 2GB limit is no different than “unlimited” to my usage. It would be interesting to see what percentage of iPhone users consume between, say, 1.25GB and 2GB who may approach the cap in an outlier month, but it is far less than the entire 98% of users you assume it to be.

      • I’m hearing from some mobile gurus that one of the real reasons to install price caps is that some users had jailbroken their iPhone and installed BitTorrent client software. Although I shudder to think what that does to battery life, walking around your high school corridors while up/downloading Iron Man 2 XVIDs and Slim Shady at 320kbps is certainly a drain on the system. I’m guessing that there have been a lot of meetings about this, involving the Usual DRM Suspects (RIAA, MPAA, etc.), as well as engineers pointing to pie charts showing how much of the bandwidth is being used for mobile piracy.

        How much are you willing to suffer degraded service because your neighbor has no disincentive from being a Bad Actor? (And I’m not talking about Tori Spelling-like Bad Acting, although that’s certainly objectionable too.)

        I think we’re going to see an industry-wide push on the part of the cable/DSL/wireless guys to really bust on the whole “neutral pipe” thing, with arguments carefully couched in terms like the above. Which, according to WWGD unfettered free-market theory, they have the perfect right to do, no?

      • kthejoker

        … Or charge more for bandwith overages to help pay for network expansion?

        What a whiny baby you are. They can’t afford unlimited plans on their system. They can afford tiered systems. It really is that simple.

        Pay for your usage and shut up.

  • Marcotte Anderson

    I agree that the change in pricing sucks. I was considering buying an iPad for my wife, but now I probably won’t. It’s likely that she won’t use that much data on the iPad, but it’s hard to accurately predict what our usage will actually be. It would be nice to have the unlimited option.

    That said, I don’t see how this can be considered an “evil” act by AT&T. This is the market at work, and while I think there should be more regulation in a lot of markets (say, bandwidth or offshore oil drilling) than most, I don’t have a problem with ISPs pricing their bandwidth based on volume. Supply is restricted and demand is high. It is only natural that price should increase. As it does, there will be incentive for AT&T and the other three (and hopefully some new companies) to invest more in their networks to increase supply (and thus their respective bottom lines). I seriously doubt that AT&T is making this pricing change *in lieu of* investing further in their network. You can’t grow bandwidth or cell towers overnight. As investment in the networks increases, we should see a lowering in price.

    • lms10045

      Why would your wife need 3G for an iPad? Isn’t it more a device to be used while home or in a hotel room? There is also plenty of activities that can be done offline once what you need has been downloaded.

  • I am German and came to the United States in the beginning of this year. Before I came here, I thought “everything tech is cheaper in the U.S.” I quickly learned that this is wrong in many areas. Internet and cable TV companies charge people ridiculous amounts per month.

    The majority of Americans has no problem with paying around $100 per month for mobile phone contracts. And I thought we pay much in Europe. I cannot believe what phone companies still charge people for the ability to send texts and even worse, how the price policy doesn’t really let you pick anything else than unlimited plans. Even prepaid phone prices are high and make it almost worthless to not have a contract (AT&T $60/month – more than I pay at home for an iPhone contract).

    I wish there was more competition here enforcing real price wars. I wish you had better flexibility in building your Minute/Text/Data packages, especially for prepaid. I wish there were better bargains for students.

    Oh and, of course, the funniest thing from a European point of view: U.S. carriers charge for incoming Calls/Texts. Think about it.

  • Welcome to the rest of the world, Jeff. Nice that you and America can finally catch up :)

    The only provider that has unlimited* here in the UK is O2, who had the iphone in the first place. Orange has it, but it’s unlimited**. Vodafone doesn’t bother and just publishes the cap at 5GB.

    AT&T have done a bit of a bait-and-switch, but hey – while this is going to effect the digerati, 79.75 million of the 80 millions iphone users in the US*** will never notice. Except the smaller bill.

    For New Zealand, where I’m from (but dont live), it’s closer to 200meg/month on a normal allowance, which costs about the same. (and dont bother with the “bits have to travel further” argument, ‘cos it doesn’t hold much)

    * fair usage applies, usually around 5GB. We will cut of you off it you go over, or change 10p/meg

    ** 5GB then we REALLY cut you off. Orange are quite draconian I believe.

    *** number pulled out of my backside….

    Have you actually looked at how much you _actually_ use? I did – it was around 100meg/month. I tend not to watch video on my phone (I can’t stand most of YouTube, and I download BBC iPlayer via my laptop), but other than that I’m a pretty normal/heavy iphone user…..

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  • Christopher Frear

    This is the same trick our cable company/ISP tried, only they offered no way to monitor usage or any guidelines for guessing. Two months over our allotted download cap would earn a warning, three months over would merit a cutoff unless we upgraded to a business-size (and cost) plan. This in the era of Netflix? No surprise that service had been degrading for months prior because they weren’t investing in equipment. It was the most effective program for shedding customers I’ve ever witnessed.

  • Tom

    How many of you who posted here, actually go above 2GB per month on their iPhone/smartphone?

    • That’s not the point. The point is to imagine what will happen when mobile broadband is truly unlimited (which I’m certain will eventually happen.)

      Just because most people don’t push the boundaries doesn’t mean the fight for freedom of speech was pointless. Freedom is a value in itself.

  • Matt Grisafi

    “America’s mobile phone industry sucks!”

    Couldn’t agree more. Verizon’s products are pretty good, but after two weeks dealing with their abysmal customer service — in-store, online and via phone — I was ready to switch… except there’s no one worth switching to. A sorry state of affairs.

  • James Moore

    One correction Jeff. VZW does not currently have a cap on its unlimited, smart phone, data plans. The MiFi of course does have a 5gig cap.

    Having said that, I’ve read that VZW will making changes to their smart phone plans in the near future; One of which being 86ing the unlimited plan.

  • digs

    Jeff, your six accounts won’t even matter. Too much Iphone hype, too many people drank the Koolaid. They’ve got plenty of customers. It’s a business, not a religion.

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  • RomanJ

    Absolute crap what cell phone companies do to their “valued customers” so a couple of customers use a lot of bandwidth. BooFreakinHoo. I am pretty sure the costs in America are comparable to the costs of Canadian carriers which is about 12cents per GB! But effing Rogers charges $60 per month for what costs them 72cents at max usage. Easy to say don’t use it or change carriers but when you don’t have those options ya just gotta take it up the ass. Capitalism is good but psychotic greed should be cause for justifiable homicide (but it is not so do NOT start killing)

  • lms10045

    I am extremely lucky in that I am home most of the time. I do not need a smart phone, and just have a little Virgin flip phone for emergencies, for which I pay $80 a YEAR. I have satellite radio in my car, and I am thinking down the line of getting an iPod Touch for which services like Rhapsody are now offering caching for offline listening. In short, I have organized my life so that I do not want or need a smartphone in order to avoid the nearly-the-size-of-a-car-payment monthly bill that always goes along with it.

    All of this reminds me of the time I spent in Europe in the late ’90s when you had to pay per minute for the internet. I set up my laptop so that it would quickly log into AOL grab new e-mails, send out e-mails I had just written, and then quickly log off. You are right that turning on the clock makes using the internet less enticing. I am also curious what a service like Pandora Radio is thinking, considering that streaming music costs a lot of data. Will this mean a decline in ad revenue for them?

  • Remember, Jeff … With AT&T, you never have to say goodbye, because every call ends with “Hello?”

  • AT&T was the reason I jailbroke my iPhone in front of a Medill class three years ago and, why two years ago, I unlocked it to let me operate my device overseas with any sim card.

    This data cap crackpot scheme was surely influenced by seeing how riotously profitable Rogers has been in mistreating Canadians with data caps and overpriced data rates. I was working in Toronto two weeks ago and at a home dinner of two Toronto Star editors was shocked, literally stunned to learn what they pay for data services we have, until now, take for granted.

    Americans are now feeling the pain their neighbors to the north have never NOT known.

    Truth be told. The third-world has better data flow for mobile. I know firsthand. I am currently writing this on my iPhone from an island in the Nile river in Cairo.

    BTW, Rogers charges a felonious rate for roaming. I just checked my bill and paid $8.42 for a 14 minute call to a 1-800 toll free number to a B.C. hotel that I made when working in Vancouver in April.

    Jeff – if AT&T is now Judas then Rogers must be surely be Lucifer.

  • cmajewsk

    Both Sprint and Verizon have “world phones”, both in Blackberry and WinMo flavors…

  • This post is just one of the many case studies that proves the importance of making your customers happy. “The best products turn its users into evangelists.”

  • Tim

    The Australian mobile industry is the same. i.e. sucks balls.

    HOWEVER. It is getting better. We’re nowhere near having uncapped data, but here’s how we’re going.

    We’re on a UMTS 3G network, covering all 4 bands.

    Optus: ok coverage, but, their data throughput is absolutely woeful (I work for them, but wouldn’t use their data for quids). No international data roaming cap. Market leaders in iPhone sales/plans in Australia.

    Vodafone: not-too-bad throughput in Sydney and Melbourne, but coverage is absolutely woeful (WTF? No coverage near Melbourne airport). Plans are good, but useless given their suckiness. They have an AWESOME international data cap ($200 for 500MB) which I’ll be using when I head to France in July for Le Tour.

    Three: coverage is crap outside capital cities/major regional centres. Generous data and call caps (they were the pioneers here). Are now in an alliance with Vodafone. However I do not believe this yet extends to infrastructure sharing. Outside of capital cities, they roam onto Telstra, which is not good considering none of their plans include roaming.

    Telstra: AWESOME coverage, AWESOME throughput, alas, they still have a public service mentality (I’ve worked for them) and their customer service is shyte. I am on Telstra. Their data plans (and call plans) have been reminiscent of times of yore: some sort of robber baron rates.

    However, Telstra have finally responded to Optus’ market share, and have released much more generous cap plans, but, they are still miles away from Optus’ plans (i.e. 1GB versus several GB), but, their coverage and throughput are vastly superior as they are not over contended like Optus.

    Really, no one in Australia needs more than a few GB of data on their iPhone (yet).

    iPad sales in Oz might drive data lower. The problem for us is our non-proximity to the US and Asia and the EU, where most content is coming from.

    As Google and Akamai cache more data here, though, and as (If?) Southern Cross data becomes cheaper, and as economies of scale permit, we may see it decline further.

    We seem to have a couple of years of step-innovation in Australia, in terms of pricing/data/call rate innovation (both in terrestrial broadband and mobile broadband).

    You guys are far from sucking the worst.

    Those zany Euros have pretty good coverage, not sure on their plans. We were lost near Sees, high in ze Swiss Alps, late one rainy night, on the way to Provence for L’Etape last year, and Gmaps on my iPhone was fasssssst and had coverage everywhere on Vodafone (.DE and CH).

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  • Let’s start with a fuck AT&T and their other fucked up friends. The drop of unlimited services is absurd. I won’t purchase anything other than unlimited services hence the reason the mi-fi providers can kiss my ass along with those unlimited providers that charge a far to high fee. The funny thing is that we will most likely use our now limited services to more pointedly criticize our overall shitty service providers. Keep up the good fight Jeff. Many of he other comments mention business reality. Last time I checked reality in business has been mostly determined by consumer demand. The solution is to try and meet consumer demand not pull back services in order to profit in the short term. I would love to go on but I have better things to do before my local ISP takes up the AT&T business model. Fuckin please!!!

  • Attaboy, Jeff. You tell ’em. There is a business opportunity here for somebody to step into.

    But the FTC isn’t going to help, and you know it. Name the last time the FTC did anything except protect the interests of incumbent legacy actors.

  • In Germany basically all unlimited plans are bandwidth reduced to GPRS rates (typically 64kb/s) after a certain amount of usage (mostly 5GB/month).

    I think that this is a fair solution.

    It doesn’t take anybody offline (even the heaviest of users) , and provides an real unlimited experience for 99+% of all users..

    It took us a couple of years and rounds to get there.

  • Justin Hassler

    Google Voice uses the voice plan, not the data plan

  • Ryan

    And what’s going to happen when monthly usage stats are available for 3G iPads? A device that practically begs you to watch Netflix on it? The “ultimate” web browsing experience?

    And when netflix is available on the iPhone? And Pandora in the background with OS 4? I’d imagine that 2% is going to get quite bit higher.

    AT&T is a business, and it makes sense for them to make as much money as possible. But just as cloud computing and content delivery is gaining steam and propelling us into the future of computing, especially in the mobile sector, they are putting a leash on it. Less bandwidth means less use, less use means less money for the industry of cloud content providers, and less money for them means less growth in that area. That just sucks, plain and simple. And what comes around goes around, as cloud services are the whole point of having data plans in the first place.

    Of course people who use more should pay more than those who use less. They should have had the $15 plan from the beginning – it solves that problem. But ditching unlimited is really just the easy way for AT&T to ease network strain, rather than improve it. I’d wager they’re actually going to lose money, if there is any truth to the 2% figure. Those 2% are going to pay more, while 98% pay less. How is that going to equal making money? It won’t, but it gets them out of paying for increased bandwidth (for the time being anyway, usage is just going up as services improve and smart phones become more and more mainstream).

    I have a feeling a lot more people are going to start bitching when iPad usage numbers are available. Rightly so. Same with OS 4 and backgrounding apps. And the tethering deal with no added data? I don’t even know what to say. That just sucks.

  • Lefty Levine

    Calling this evil is either naive or deceptive. It’s not an issue of morality – it’s one of strategy.

    We’re really just looking at different ways of charging people. Right now, AT&T charges everyone the same price. Soon they will charge some people more, according to how much of the product they use. This is like the difference between an all-you-can-eat buffet and a restaurant. You might think of the new plan like an airline, where first-class passengers subsidize most of the costs of the flight. I could resent them for getting better service, or I could thank them for allowing the airline to lower the cost of my flight.

    If one were concerned about the health of our nation, as Jeff says he is, one could point out that watching video on an iPad is the most expensive and least energy efficient way our species has yet invented to watch moving pictures, and much of it is powered by coal. Jeff’s argument seems to be that, by making bandwidth artificially cheap for some (but not all) customers, AT&T was delivering a positive effect to society by encouraging our use of video. I’d argue that AT&T was imposing a negative externality on society in the form of pollution.

    Perhaps this is a good strategy and perhaps it isn’t. But calling this evil just seems silly.

    • I agree – As much as I don’t like the new pricing strategy because it might limit growth of a great mobile environment, it is a pricing strategy that they feel is needed to keep them in the game. I expect At&T felt this was the right move given the future expectations, not the current reality (e.g., the needs are only going to go up, and probably exponentially over the next few years). If it is possible the other market players will top AT&T and take their business. So the market will work it out – and I hope usage is not limited!

  • Ryan


    I do think a significant amount of people will be more cautious about usage. At least for a while. Think about it, you yourself either checked it before, or at least checked it in response to this. Why would you do that? Because you felt some need to. And that was with an unlimited plan. Many people don’t check it now and are safe assuming their usage is low for good reason: why bother? It’s unlimited. Take that away and a lot more Mom’s are going to limiting kids usage, and YouTube addicts are going to be getting a little more nervous.

    Also, consider that you obviously have a good idea how this stuff works. But what about one market the iPhone and iPad are clearly marketed to as the best option? I.e., the computer clueless? Think about the iPad’s new tag line, “you already know how to use it.” Many people still don’t have the slightest idea how much certain activities eat up data, and when someone tells them there is a limit, they are going to be much more moderate in their use.

  • Ryan

    Multiple comments! Shame on me. Oh well, new ones keep popping up as I type and submit…

    Anyway, Lefty I think you have a point, but it doesn’t really add up. Are you saying that we should moderate our energy usage for the sake of society and the environment? That’s a great idea. I remember as far back as elementary school hearing the same thing, and it’s an idea that has caught on and been pretty effective.

    The problem is that it’s mostly been effective at drawing away from the urgent need for government and industry to develop and move towards an infrastructure built on clean, renewable, efficient energy. It’s really pretty appropriate you brought it up I think. Once again, limit the consumer, not hold the provider responsible.

    Don’t get me wrong, conserving energy us a good thing. But it’d be nice if the government and industry did their part too.

    • Lefty Levine

      >>>Anyway, Lefty I think you have a point, but it doesn’t really add up. Are you saying that we should moderate our energy usage for the sake of society and the environment?

      I think so, but that wasn’t really my point. What I’m trying to say is that what Jeff sees as a moral issue is essentially just a pricing issue – and not a very important one at that. He’s arguing that by pricing its service in a certain way, AT&T is encouraging users to watch less video, which is ‘evil’ because it will somehow hold back the Internet. But it could just as easily be ‘good’ for other reasons. Point is, it’s neither.

      Resources are limited and pricing often allocates them effectively. That’s life.

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  • Steves

    So 98% still have unlimited plans now with the 2GB cap. And they save a minimum of $5/month. And that is “Evil”. I question your lack of logic on this.

    For 98% of the users, they do not have to watch their usage or change their habits to save money. For many people (2 of the people on our plan), they have NEVER ONCE gone over 200 MB so they will be saving $15/month. And this is Evil. I question your lack of logic on this.

    For 2% of the people, they will potentially be paying more. These people have the following options:

    1) move to another network. (Makes AT&T happy)

    2) change their usage habits to curtail network bandwidth. (Makes AT&T happy)

    3) simply spend more per month. (Makes AT&T happy).

    For options 1 and 2 above, 98% of smartphone users will also be happy. Me, I am taking our $35/month savings in stride and with a happy face.

    NOTE: Verizon has already said LTE will be priced on a pay per bit basis.

  • Eric Gauvin

    It never was “unlimited” in the first place. It was limited by typical consumption. It’s just like an “all-you-can-eat” meal. The price takes into account the full range of people who eat a little or a lot. Those who eat a little are indirectly subsidizing those who eat a lot, but if everybody suddenly developed the capacity to eat significantly more, the restaurant would need to change its pricing. Makes sense to me.

  • eskop

    I’ve always found the terms and the quality of network of US mobile providers unbelievable. I don’t know if you still have to pay to receive texts and calls, but the rates are still very high compared to providers around here the last I checked. Is it because of lack of competition? Or because of competing CDMA/GSM incompatible standards?

    In Finland mobile broadband is almost always unlimited bandwidth but speed capped depending on the level of the data plan. Nowadays the competition has pushed pretty much every provider to offer unlimited bandwidth and unlimited speed data plans for around 13-15 euros/month. That’s typically around 3.6-5 Mb/s UMTS in cities and suburbs and 1-3.6 Mb/s in rural areas and GPRS in the middle of nowhere.

  • boon dock

    No offense, but your continued defense of this irrational, childish rant is making some of your readers realize they maybe shouldn’t pay much attention to you anymore…

  • Thor

    This is a seriously whiny post. I am very happy with the new plans. I consider myself a fairly heavy iPhone user, but neither my spouse or I have ever gone over 200 mb per month. It really makes me wonder what these heavy iPhone users are doing to even get close to 2 gigabytes. Even those who stay under 2 gigabytes will save money. My spouse and I will save $30 per month. Our iPhones just became a lot more affordable.

    For those who are using more than 2 gigabytes, I see no problem with paying by the gigabyte for bandwidth. If all that internet use over the cellular network is so important to the person, it has to be worth another $10. If it’s not, then that person should get on WiFi somewhere.

    Finally, given that AT&T will send you warning messages as you come close to your plan limit, you really should not have to stress about it that much.

  • JB

    I think this is a GREAT idea. I despise subsidizing “gamers” and dorks who watch movies online using cell and fiber connections. I don’t like subsidizing airheads whose cell phone conversations amount to 6 hours per day. If anything, band width should be scarcity priced like water is in the desert. The unit cost goes UP, not down, for high volume usage. That 10th GB should cost 10 times the 1st GB.

  • Alan

    After much thought, I think there is a solution that would be slightly easier to swallow for many.

    Add two additional tiers to the data plans:

    $45 for 5gb cap. $10 per gb over this, as with other tiers.

    $55 for unlimited (IPad only, as long as it does not support tethering)

    A 2 gb cap when every other provider has a 5gb is an issue for many. For many of you who have functioned with a 5 gb cap, you know that this really is the minimum amount for any real serious data use. I’m not talking about some light surfing and emails on your phone, I’m talking about tethering your laptop or having a wireless modem and actually USING your computer to do some work, some play, etc. With 5 gb, you have enough breathing room to use gotomypc or a citrix client, stream a little audio, update a driver, watch some video, and basically USE the data service you paid for without running around looking for wi-fi hotspots. If you beat on it and constantly do large downloads, bit torrent, or stream 5 movies a day, you will blow right through this, but 5 gb should be enough, and if you over use it, you will pay $10/gb overage, which means that for those burning through an ungodly 10gb/month, you’ll pay $90/month for data.

    I’m sorry, but when you have tethering and multiple devices all sharing the same point of access, then you can’t have unlimited. There will always be folks who will try and abuse tethering, so you really do have to put a cap on it. (Let’s be realistic, there isn’t unlimited wireless bandwidth) All of these BS stories about 2% of the users using all the bandwidth are, IMHO, BS. IPhone users as a WHOLE use alot more bandwidth than blackberry users, but that 2% figure is the scare statistic thrown about (even for WIRED internet) that until tethering kicks in doesn’t directly apply to ATT. Yes, there are abusers out there. There are folks running bittorrent and filesharing clients 24/7, who take pride in the fact that they have used 50gb or more of wireless bandwidth in a given month. So you provide a cap that is high enough that most users won’t ever hit it, and then charge a per unit of use cost for bandwidth above that.

    On the other hand, for the IPad, I think you really do need to have an unlimited plan. $55/month is in line with what other carriers are charging for data service, and without tethering, it will burn through data, but there is a natural limit. You can’t run a bittorrent client, or download 200gb of newsgroup porn, or connect it to your network and feed 20 users off of a single connection. These are all issues with tethering that are not present with the IPad (Unless I’m being Naive about jailbreaking and Apple’s level of control over the platform?)

    The IPad 3g should mean cloud. I have access wherever I am, no need to go hunt down a wifi hotspot, it just works. ATT is disingenuous when they try to say that the FREE access to wifi hotspots from them makes up in some way for the change in data plans. In my area, that means Starbucks and McDonalds. This is NOT everywhere. If you travel alot, we all know that travelers are often viewed as a troth of money that everyone tries to feed from as often and deeply as possible. Free WiFi? I haven’t seen it. Not of any use anyway and certainly not at the airports I’ve traveled through. Even the hotels that provide Free wifi are often hit or miss.

    Most people will take the unlimited plan for the first month, and hey, if ATT is correct and 98% of these IPad users are using less then 2gb of bandwidth a month, then they’ll either change down to the $25 plan or just keep overpaying ATT $30/month for bandwidth that they don’t use. For those who use the device heavily and as meant, they will use more then 5gb. There is a natural upper limit though.

    For the record, I have had my IPad 3g now for slightly less then a month, and ordered a second one for my dad before the announcement. My usage, btw, is already close to 4gb, and this is without excessive use on my part. I know the IPhone folks are pissed about this change, but for the IPad 3g owners, it simply cripples the point of having gotten a 3g. I’m not some simple user either. I support and maintain numerous users who all work over cell modems. I have a sprint overdrive that I use quite heavily. I’m in a 4g area but travel outside to 3g only areas on a regular basis. I have multiple devices, laptops, netbook, and now an IPad.

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  • TheDukester

    What an incredibly clueless rant. “Cynical”? “Evil”? “Watching the clock”?

    That’s either plain paranoia or else hit-bait. Probably a bit of both.

    Like MANY people, I will HAPPILY save a bit of money, and I won’t be watching any clocks. I’m really not seeing the “evil” in that.

    Oh, and you’ve been Fireballed:

  • Excellent post. “Selling me a service I have to worry about is bad business” sums it up best. I quit AT&T ages ago because of poor service – actual and customer. Will never go back and I’m iPhone-less because of that.

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  • RobM

    I don’t know how much of the “98%” will need (or feel the need) to ‘watch the clock’ because they sail close to the limit. Let’s say half of them (and with respect I think that’s being generous to you). Aren’t AT&T’s obligations to those people satisfied with a tool that lets them check their bandwidth usage?

    I’d like to get everything for a small flat rate fee, too, don’t get me wrong, and I’m certainly not going to defend carrier profiteering, but things need to be paid for and surely the choices are a tiered service plan of some kind or the cost of the “flat rate” rises and the 98% are subsidising the 2%. I don’t think that’s right either.

  • Luigi Boccabella

    You list your creditibility with the childish “Apple fanboys” reference.

  • The 2% whose porn habits lead to over-consuming wireless bandwidth is primarily responsible for the fact that the 98% will one day have to “watch the clock” if they’re anywhere close to the limit, although most people aren’t anywhere close.

    The alternative to bandwidth caps is more aggressive network management, but network operators can’t do that without running afoul of the network neutrality regulations promoted by people like, um, Jeff Jarvis and Google.

    Karma’s a bitch, ain’t it?

    I’m waiting for some non-cynical, non-evil company with shiny halos to build a free, ad-supported wireless network with unlimited speed and no usage caps. Gee, how much longer will it take?

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  • It was the most effective program for shedding customers I’ve ever witnessed.

  • Buck Jackson

    When reading Jeff’s ‘deep thoughts on business’, remember that he is a journalist, NOT a businessman.

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  • William

    Heads up, I was told by an AT&T retention supervisor that if you upgrade your IPhone (even while on contract) that you will be forced into on of the new data plans. She said even when the new IPhone’s come put. Maybe she was off the mark a bit, but I wouldn’t put it past AT&T. Also, she said IPad users grandfathered in may have to move over to a new plan in the next 3 months, as they will just out right no longer offer unlimited 3G.

    I got my IPad 3G on the release day, but was still able to return it to Apple (with not too much resistance). I wanted the 3G version to use the 3G service. I really feel like Apple/AT&T did a bait and switch on me. I love Apple, but this isn’t right…

  • heather

    i work for a call center for at&t and yea this is going to suck b/c the cust dont pay attention to data usage now what makes u think they are going to in the future. ppl will just keep calling up and saying they didnt use that much data or they dont connect to the internet or whatever the case may be and ya know what we do (or att i should say) they tell us to credit the cust back as a one time courtesy and get them on a plan that would have covered those overages(the att stores are the worst for this). i DONT agree with them taking away the unlimted plans and this is another thing to add to the list as to why i HATE iphones!!!!!!!!!!!

  • Whyerless

    As someone who works in these kinds of technologies, I would be ecstatic if AT&T were to make the necessary investment and install a gazillion extra base stations (along with the requisite optical backhaul).

    The necessary investment however is really huge and to justify it the unlimited monthly rate would probably have to be a lot higher than it is now.

    The future may well be wifi centered, with seamless handovers to the 4G network when wifi is not available.

  • Sam

    It’s really too bad Apple didn’t use a quad-band radio so they could support T-Mobile UMTS, or even better, Gobi for universal support.

  • Rick B

    I consider these 2 companies to be… we, not necessarily evil, but very nefarious nonetheless. AT&T for its crappy coverage, fees, service & so on & for Apples heavy restrictions on all of their devices (even the Mac lines have restrictions that no one really thinks about, ever tried to attach a Zune or Creative Zen product on your Macbook?). Heck, look at Apples treatment of Adobe, almost THE reason Apple survived much of the 90’s. Heres to Verizon & the Droid incredible.

  • And thanks AGAIN to the EU for an open market! Forcing the separation of mobile networks from the service providers was the best thing which could happen to us (in the EU). By today we can choose in the majority of all EU-countries out of more than 50 mobile service providers. Want to know what the benefit is? Competition! For my data flat rate, I pay just 15,00€ (18 USD) a month – and by the way – without any contract. If I don’t like the service provider anymore, I select another one next month.

  • I’m so annoyed with ATT just cause of the fact they are limiting users and hurting innovation. I would imagine if you have an ipad you are definitely going to be aware of how you browse on the web.

  • ML

    Here’s why you don’t need to worry.

    AT&T writes that the company “will send three text notifications – after they reach 65 percent, 90 percent and 100 percent of the threshold. Customers will also be sent emails if AT&T has their email address.”

    “Additionally, customers with iPhones and other select devices can use the free AT&T myWireless application to check data usage. The application is available for download in several smartphone app stores. Also, AT&T customers can call *DATA# from their wireless phone to check their data usage for the current billing period. They receive a free text message with their usage information. Customers can also go online to to see all of their usage information, past and present.”

    And an “online data calculator enables customers to estimate their mobile data usage and get a better sense for which data plan is right for them. It’s located at”


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  • Right on Jeff! First, let me say how I love your book WWGD! It has changed my outlook on so many things!

    It is a shame that AT&T, who back in the day brought us unlimited dial-up (I remember reading about this in WWGD) and brought us unlimited mobile computing, is hurting us and themselves. I too blogged about how “I love Apple, AT&T not so much” (Please Google the title with quotes)! In the spirit of WWGD, AT&T should set up an ideashare built on (like Starbucks and Dell did) and let us solve their problem(s). How about in addition to the cap plans, sell me an unlimited plan at $100, maybe a 10GB plan at $75 –don’t judge my math, just some ideas going through my head.

    Just as wired bandwidth was a problem back in the 90’s (remember 10MB to the desktop), Mobile bandwidth is a problem now. We can solve this. WWGD?

    Maybe Google or someone as well funded, using transparency to allow us (we the people) to design (gather requirements) and build the first American Data-Network to handle Mobile Computing. After all I think the future is Mobile Computing. Let’s not put a noose around Mobile Computing’s neck!!!

    My 2 cents –Jerry

  • I have three reactions to AT&T capping data usage and lowering prices for perceptually lesser options. My first reaction is well summed up by Jeff’s tirade against AT&T. Why on earth should I have to put up with metering my usage? I’ll never forget my first cell phone bill after my future wife and I started texting each other. We both had to pony up $150 MORE on top of our overpriced (and under used) voice bills. I should have been leery, but I was too stupid to do that. I needed unlimited, and I hate that they take something that is essentially free and charge through the wazoo.

    Secondly, it’s a free country. If AT&T wants to do business this way, that’s their prerogative. They work under a profit motive, much as I work under a saving motive. Their job is to get my money, and my job is to keep it. What I like about AT&T is they make my information EASY to find. Unlike my many years at T-Mobile where I never exactly understood how much data I was using, I know precisely how much I use with AT&T. Is it cynical to put limits on everybody to try to stem the tide of 2%, but it is fair. I hope this causes a mass exodus of people upset by the new policy…but we all know it won’t. It will tick off the techies, and leave the vast majority who already operate under limits on most other carriers undeterred and undisturbed. They will probably be only too glad to save $5-10 a month for a service they used infrequently. We are a vocal, but financially insignificant minority here.

    Third, it’s all about the phone. The 800 pound gorilla in the room is Apple. Steve Jobs has made a beautiful, technically sophisticated phone that appeals to people who want to think of their phones as black boxes. When I bought my wife and I two iPhone 3Gses (is that right?), she couldn’t understand why on earth we would spend so much on a phone. It will now literally take plastic surgery to remove it from her hand. When Apple embraces Verizon, the problem only changes names. We will still pay the same and deal with similar data caps from nearly identical cynics. Jeff, I know you argue that Apple is the exception to the WWGD model, but let me argue that it’s not. It’s closed, singular vision is what will keep me at AT&T. I rue the day I gave my wife an iPhone and not a Droid. The Google model is simply better. Why should I marry both a phone and a provider? Android lets me move when it makes sense, and all my data goes with me. If I jump ship now, my wife will go through serious Apple DTs. Google has this right. Apple is simply wrong, and as long as we are wedded to the iPhone, our destinies are not our own–Steve’s sticky fingerprints are all over them.

  • Personally I am lucky enough to be grandfathered in, but I would like to have the FCC, FTC and any other F, T, C, A and B government agency to go after AT&T for there claim about network speed and reliability and coverage and all the other crap AT&T likes to lie about.
    I love my 3G and have put MAJOR thought into switching over to Verizon and the Incredible or Droid, but just can not jump ship yet since the iPhone fits so well in my life right now.
    But AT&T needs to be tar and feathered and held accountable for the lies they tell. AT&T should be kissing the feet of EVERY iPhone user and Apple for boosting them to where they are today.

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  • Making customers your enemy is usually a good recipe for failure. In the long run this will hurt them.

    Where I live there are a few comparable problems with wireless Internet services as people travel abroad quite a lot these days (which results in humongous fees). Now the EU is supposedly an open market but on this topic the old, boxed in, proprietary view of the customer prevails. The point the companies seem to purvey is that customers should apparently not use their mobile device when on the road:)

    I am pretty sure it is a death roll, just give it some time

  • Stew

    Isn’t this the health care debate redux? If you don’t expose a user to the true costs of delivering a service, and make it all you can eat, you incent people to use as much as you can.

    Infrastructure is expensive, no matter who has to build and pay for it. I agree that an unlimited option should be offered – I’m just not sure any of us would like what it would be priced at.

    We have lots of great new toys coming out that assume bandwidth will be cheap and unlimited. I’m willing to bet that smart people will find ways around these constraints, just like every other constraint has been worked through.

    We forget that in most other markets, usage is metered (the metering rates in many cases may be less, but it is still metered). Unlimited buckets are an American phenomenom.


    The new AT&T pricing is very fair, and I think the writer is going overboard, perhaps forgetting that each chunk of data usage will only cost him $10 extra in a mos, not like the old days where each minute of talk time overage was 40cents a minute or more! If you’re using the bulk of the resources you pay a little more, seems fair to me!

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  • JK

    ATT’s arguments that people can use their wireless connections are disingenuous. Time Warner is experimenting with data caps as well; so this just shifts the data to a second provider that you have to pay for. The promise of the iPhone and iPad was that you might be able to just have one data plan. Now, that’s not possible if you want to watch videos or do anything else that consumes bandwidth.

  • I think Jeff it right in the article when he mentioned “Bait & Switch” AT&T promised one thing, and suddenly that’re offering that as soon as they see how popular the IPad is, and the see the hit on the network that it bringing.
    Instead of doing what they’re paid to do serve their customers, and that includes building out their network, improving customer service, they go the other way and screw over their customers. Has anyone looked into filling a investigation against them in their promotional practices, not to mention , how about backing up those 98% numbers with real data, not sales jargon.?
    Would love to see California state Attorney General looking at them, asking questions..

  • Patrick Johnson

    I left AT&T due to this silly business model. While I love the iPhone, the network never really worked for me, dropped calls and half the time the phone was nothing more than a glorified iPod. Not Apple’s fault, but AT&T.
    With this news, I made the decision to leave AT&T and Apple, now I am with Sprint and got the new 4G phone. Unlimited data, very fast, and I have yet to find a place where I don’t have at least 3G coverage.
    So far, so good, but I do miss my iPhone.

  • he point is that AT&T is going backwards with this, and I highly doubt that they felt bad for 98% of iPhone users paying more than they consumed any data. Evil is usually obvious.

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  • I just want to say that I made the decision to leave AT&T and Apple and I have got the new 4G phone.