New AT&T data plans milk data gluttons, lower costs for most

As AT&T Wireless CEO Ralph de la Vega has hinted at for months, AT&T announced this morning a major overhaul to its smartphone data plans. AT&T will now offer two-tiered data plan pricing, with a top cap set at 2GB. Though most users should save money, according to AT&T’s research, users that relied on unlimited data will be paying more.

The company has also announced that a long-awaited tethering plan will for the first time be available to iPhone users, about a year after tethering functionality was enabled in last year’s iPhone OS 3.0 upgrade. iPhone tethering will become a reality “this summer” with the iPhone OS 4.0 upgrade; curiously, the new pricing plans go into effect the exact same day that Steve Jobs is expected to announce the next revision of the iPhone at WWDC. Along with the new smartphone plans, AT&T is also capping iPad 3G users at 2GB per month, effectively wiping out the “amazing” pricing that Steve Jobs announced back in January after only one month of iPad 3G availability.

“To give more people the opportunity to experience the benefits [of mobile broadband], we’re breaking free from the traditional ‘one-size-fits-all’ pricing model and making the mobile Internet more affordable to a greater number of people,” said de la Vega in a statement. De la Vega and other mobile CEOs have been suggesting for a while now that “unlimited” plans weren’t tenable with the growing tide of smartphones and other data devices. The good news is that these changes should offer some savings for a lot of users; the bad news is that some of the changes make AT&T’s data far more expensive compared to plans from other carriers.

Tiered pricing

AT&T will now offer a lower-end data plan, called DataPlus, for $15 per month. Users on this plan get 200MB to use for one month, and those that go over will be given an additional 200MB for another $15. According to AT&T’s analysis, 65 percent of its smartphone customers use less than 200MB on average. Checking around the Orbiting HQ, all but one of us with an iPhone on AT&T fall into this category.

The new high-end plan, called DataPro, gets you 2GB of data use for $25 per month. If you go over 2GB, you’ll pay $10 for each 1GB increment. For example, if you use 3.5GB, you’ll pay $25 + 10 + 10, or $45 for the month. AT&T is not offering an unlimited data tier at any price. The company says that 98 percent of its customers use less than 2GB of data, so among these two plans, all but the heaviest data users should theoretically save on their monthly bill…

…unless you are interested in the new smartphone tethering plan. AT&T will charge you an additional $20 to use your smartphone for wireless data use with a laptop or other device. However, tethering can only be combined with the 2GB DataPro plan, and the $20 per month charge doesn’t include any extra data allowance. There are no pay-as-you-go options for tethering; It’s $45 per month for 2GB total usage (with $10 per GB overage) or no tethering at all.

These pricing plans go into effect on June 7 for all new AT&T customers signing up for new contracts, and current users can switch to the new plans without a contract extension. Those that are currently on a two-year contract for a $30 per month unlimited data plan can continue to use it, and can even renew their contract and keep the same data plan as long as they continue to use the same device.

At first glance, it appears that heavy users could just stay with their old plan and keep on using up to 40 percent of the data traffic on AT&T’s network. If you want tethering on your iPhone or other smartphone, however, you’ll have to switch to a new plan. And once you switch, you can’t go back.

To help mitigate the sting somewhat, AT&T is offering free access for all smartphone users to its network of over 20,000 branded WiFi hotspots around the country. AT&T has offered this to iPhone users for some time, so this is nothing new for them.

iPad downside

iPad WiFi + 3G users, who were sold the promise of unlimited data for $30, might be in for the biggest shock by these pricing changes. Just a month after the iPad WiFi + 3G went on sale, AT&T is pulling the $29.99 unlimited data plan and replacing it with a $25, 2GB per month plan.

Those that are currently signed up for a $29.99 unlimited plan will continue to be renewed at that rate. However, if you cancel that plan for any reason, you will not be able to sign up for it again—2GB for $25 will be your only option.

“For $25, we’re providing customers with a large amount of data,” AT&T spokesperson Seth Bloom told Ars. “We believe that 2GB of data on the 3G network will be plenty for most customers, especially since based on the trends we’ve seen thus far, iPad customers tend to use WiFi a lot.”

Inexplicably, the company is keeping the $14.99, 250MB per month plan for the iPad. “We have a unique pricing model for iPad, as we do for other emerging devices that don’t require a contract term or commitment,” explained Bloom. However, it makes the low 200MB cap on the DataPlus smartphone plan seem questionable.

To be fair, prepaid data pricing from the likes of Verizon or Virgin Mobile is quite a bit more expensive (Verizon charges $30 for one week of 3G data access with a 300MB cap), so AT&T’s pricing with respect to the iPad isn’t that bad in comparison. However, there are no monthly contract options, nor are there options to share that data allowance with an existing data plan. And the one-month pricing switcharoo is, we expect, going to leave a very bad taste in a lot of users’ mouths.

Anti-consumer?

So far, it seems that most users could end up paying less. But not everyone thinks AT&T’s new plans are a good deal for consumers.

“While AT&T asserts that its high-end 2GB cap will only impact the heaviest users, the fact is that today’s heavy user is tomorrow’s average user,” Free Press policy counsel M. Chris Riley said in a statement. “Internet overcharging schemes like the one AT&T proposes will discourage innovative new uses and stifle healthy growth in the mobile broadband economy. It is price gouging for AT&T to charge the low-end users $15 per 200MB, and to charge $20 for tethering capability even if no additional capacity is used. This pricing system is clearly divorced from the actual underlying cost of service.”

Let’s consider the data plans further. The 200MB cap on the low-end DataPlus tier effectively makes the price per gigabyte $76.80. But users on that plan can only get an additional 200MB allotment for another $15; they can’t opt for an additional 1GB for $10 like users of the DataPro plan.

The Data Pro plan is effectively $12.50 per gigabyte, with $10 per gigabyte for each additional gigabyte. That’s far more reasonable than what AT&T is charging for the DataPlus plan, and accomplishes AT&T’s goal of curbing the abnormally high use of a small percentage of users. For comparison, however, smartphone data plans from Verizon are $29.99 with a 5GB cap, making the effective price per gigabyte just $6. So while AT&T may charge you less, you’re also getting far less than what the competition offers.

And comparing total monthly plan costs, Sprint offers a great deal as well. While AT&T smartphone users can have a bill as low as $54.99 with the new data options combined with the cheapest calling plan, Sprint customers can get unlimited mobile-to-mobile calling, unlimited SMS and MMS, and unlimited data for $69.99. “With the latest phones delivering capabilities never before offered on a wireless device, customers are using more data, not less,” Sprint spokesperson Emmy Anderson told Ars. “With Sprint Everything Data plans, there’s no need to get out a calculator to tally up prices for each feature or guess how much data you’ll use in a month.”

The tethering pricing is also a raw deal for consumers. US iPhone users that have been waiting for a year may gladly pay the extra $20 per month fee, even as users in other countries have been tethering for a while without issue—some for no additional charge. But that doesn’t make it a good deal, even though other carriers, like Verizon, also charge an additional fee for tethering. Verizon charges just $15 additional per month, it also includes a 5GB monthly allowance. And while AT&T effectively charges 1¢ for each extra MB over the 2GB cap, Verizon only charges 5¢ per MB—and you don’t have to buy extra data in 1GB chunks.