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AT&T Learns Exactly the Wrong Lesson About Data Usage (designbygravity.wordpress.com)
200 points by cschanck on June 9, 2010 | hide | past | favorite | 109 comments

The japanese market pricing provides a sensible alternative: Scaled pricing with a reasonable limit.

You pay a minimum monthly price up to a certain cap, and any usage over that cap scales your total bill linearly up to a maximum total bill, beyond which your usage is effectively unlimited. The minimum is about $15 and the maximum is about $50. Not exactly going to break the bank, and totally reasonable.

Metered usage is not evil, people just need reasonable assurances that their bill has a safe ceiling.

I'd be happy with that pricing if it didn't restrict tethering.

Verizon requires a $60 plan for tethering, even if you use very little and restricts it to 5GB (pay twice as much for less bandwidth). This scaled pricing would allow you to tether and pay little if you use little. Obviously, there are ways around this, if that's your thing.

E-mobile's pocket-wifi plan starts at 350yen a month and goes up to about 4980yen. They even come with a free wifi connector and the first 3 months a 1000yen off.

While they're not a cellphone carrier, they are highly competitive when it comes to ubiquitous wifi.

With Docomo the amount of data you need to consume to hit that max is quite low, however. Less than 100MB. I assume it's the same for Softbank. The pricing is geared toward customers that use the network for email and browsing shitty iMode sites like Mixi on a tiny screen.

Docomo and Google have done very little to promote Android here, by the way. In one year I've seen one device other than my own, and it was the same model (the HTC Magic, one of the few models you can get).

Great network here for voice and especially data, but it mostly goes to waste.

Yikes, I looked up the specific values involved for softbank (as they are the exclusive iPhone carrier) and the $10 usage is roughly 1.5 mb. The max-ed out usage is.... 8.5mb.

The current values in the scale are clearly a bit antiquated, but the concept seems like a good one.

Hey entrepreneurs: pretend for a moment that AT&T is YOUR company. You have a hit on your hands (the iPhone), but one that has crippled your network in major metro areas like San Francisco and New York. Investing in new cell towers means not just millions in capital expenses, but also years spent arguing with NIMBY neighborhood associations who don't want to see any more of your ugly towers. And, you have a way to reduce the monthly fee for 98% of your users, prompting MORE people to sign up for revenue-generating data plans, while dis-incentivizing the 2% who use the most data. What would you do?

As to those who are wondering why they have to pay extra for tethering, are you really surprised that a company would charge more for a service that you value, which will result in heavier usage of their resources? How many Hacker News readers run web companies with "freemium" business models? How do you sleep at night charging your customers for only twice the number of accounts/downloads/records that you give away for free to others?

As to those who are wondering why they have to pay extra for tethering, are you really surprised that a company would charge more for a service that you value, which will result in heavier usage of their resources?

If it results in heavier use, they should just charge for the use directly, not micromanage how I use the service. In the freemium scenario, it would be like charging extra to be able to access the website from more than one computer. Both are stupid because both require nothing to "support"; they inherently work as part of the existing infrastructure. On the other hand it does take resources to try to block that functionality, because you have to actively look for "cheaters".

"If it results in heavier use, they should just charge for the use directly, not micromanage how I use the service."

When you sign up for a 2GB per month plan with AT&T, they are counting on the fact that you won't actually use that 2GB, because for most users, it's just too hard to suck down that much data through your smartphone (especially if, like me, you're roaming onto a WiFi network at home and the office). When you use tethering, you're pretty much guaranteed to use more of that 2GB.

When you go to an "all-you-can-eat" restaurant, you do know that they don't actually expect you to eat until you get sick, right? If every customer did that, they'd probably have to raise their prices.

When you sign up for a 2GB per month plan with AT&T, they are counting on the fact that you won't actually use that 2GB

Maybe people just don't like being lied to?

What would you do?

Announce a US$50 per month femtocell subsidy for anyone who installs an AT&T femtocell in their house in targeted neighborhoods.

The femtocell range is extremely short. It wouldn't do your neighbors any good. (I have one.)

I am a data pig. I average between 1.5 and 2 gigabytes a month over the last 6 months. AT&T hates me, apparently, though they are happy to take my money.

I'm not sure how that helps the point the author is trying to make, as he/she will actually be paying less now than they were before, even as a self-proclaimed "data hog".

A few more random points that I thought were misguided:

1. Not everyone should be attached to their phone like many of us are. Perhaps Apple and AT&T have done some market research and concluded that some people just aren't going to pay more than $15 / month for data, because they just wouldn't use it much. Better to offer those people a path to becoming customers than mindlessly trying to turn them into consumers of a service they don't want or need (expensive unlimited bandwidth).

2. It will apparently be possible to retroactively upgrade from the 250 MB plan to the 2 GB plan if you're going to be over, so the fears of forgetting that you left Pandora running and paying hundreds seem to be a bit unfounded.

3. The part where the author rants about how the entire wireless infrastructure should be overhauled so he/she can avoid paying for metered bandwidth really goes off the deep end. Like this gem:

And yes I know the wireless protocols are not super-amenable to this sort of thing, the way a wired router or switch might be, but that is again just your poor engineering. Fix it already.


I think you are missing the key point: Apple wants people to use their fancy devices more, not less.

You spend this money on this awesome device that does awesome things, Apple makes money when you use it (via iAds, via google searches, via many things) and AT&T is saying to their customers "don't use your device too much!"

I'm betting Steve is totally pissed off at AT&T right now.

So we should force iPhone users to pay for unlimited bandwidth so that we can try to force them to "do more awesome things" with their phone?

What this argument is not taking into consideration is that some people don't use their device as much as others, and they do so by choice. Plenty of people will take a $10 discount to cut their phone usage a bit, and be happy that someone offered them the choice. Personally, I'm a data-crazed maniac who uses my iPhone constantly (and uses around 900MB/month) but that doesn't mean everyone is (or wants to be).

I'd also argue that there are only a few applications that consume large amounts of bandwidth, such as streaming/downloading audio and video. You can still take full advantage of your phone (with the exception of those two things) and not use much bandwidth.

Offered tiered pricing. $5/mo for 100MB, $10/mo for 250MB, $20/mo for 1GB, $30/mo for unlimited.

That's what they're doing, although not with the exact tiers you mentioned.

As for the $30/mo unlimited, I believe part of the reason why AT&T removed the unlimited option in the first place is because a disproportional amount of bandwidth is spent by people who jailbroke their iPhone and use 100+GB/month using it as a 3G modem.

As if anyone can actually get a good enough signal to pull 100GB off the AT&T network. You have to be masochistic to use a AT&T 3G exclusively.

Also, you don't need to jailbreak to tether. I forget the details, but basically you go to a web address and install a new carrier profile and thats it.

If AT&T want to be the big boys on the block they have to invest in their network, end of story. The reason they got rid of the unlimited option is because they want to make all the money and not do a thing to improve their network.

Wouldn't poor 3G speeds also be a good reason for someone to use their iPhone less? If AT&T's policy changes skim off the top 2% of heavy users the remaining 98% are going to end up with a better experience and possibly use their iPhone more. It's hard to frame it only in terms of bandwidth too. Apple must make more revenue off the person who buys a $10/20MB game than they do from another user downloading the free Netflix app and streaming 1GB/month of data.

I've never understood the argument that capping data plans will improve the "experience" for the non-heavy users. Capping doesn't change the fact that AT&T does not have the tower capacity to support as many iPhone users as they already have, so even if they can curb the 2% of heavy users, the other 98% are still overloading their towers and receiving poor service.

The only thing data caps do is generate more money for the provider by charging heavy users for the excess data they use. Whether they actually use that new money to improve their towers is a completely different topic; they certainly haven't been improving capacity well enough for the past three years, when they already generate plenty of revenue. Why will it be different with caps in place?

Edit: I saw the same thing happen with Time Warner Cable in Rochester, NY. Just s/AT&T/TWC/ and s/towers/copper/ and it's the exact same situation.

>I've never understood the argument that capping data plans will improve the "experience" for the non-heavy users.

It isn't a difficult concept. A very small number of people contribute significantly to the network load. Yeah, ideally there's more capacity than anyone can ever use, but back here in reality that would be remarkably expensive to fulfill.

It's the same thing with crime, btw: A very, very small percentage of people are responsible for the overwhelming bulk of crime.

> It's the same thing with crime, btw: A very, very small percentage of people are responsible for the overwhelming bulk of crime.

Is there a study that shows this? Intuitively, it makes sense, but I'm curious. Of course, we must be talking about serious crimes, as pretty much everyone breaks some sort of law almost every day.

Slippery slope. What profiles do you break it down to? Race? Age? Education?

I'm sorry, I'm confused as to what you're talking about. I was speaking in large generalities, not refined ones...

But this is exactly my point. Caps will not stop all (or even most?) heavy users from being heavy users, and there is no data (that I've ever found) to show that caps do anything other than generate more revenues, which may or may not actually be spent on improving the network.

When other major countries are investing huge amounts in their infrastructures to support higher and higher capacities and bandwidth for lower and lower prices, our ISPs are instead capping bandwidth and increasing prices without investing that higher revenue into better service.

Changing the plans so that people get charged for data over 2GB will certainly curb unlimited usage. It's the basics of economics.

Especially when you pay $25 per GB, and it costs an extra $10 per GB. People will probably stop streaming Pandora over the cell network, and heavily watching movies.

Canada has had data limits the entire time, and Blackberry has been constantly cautioning US providers about offering unlimited data plans in the name of providing better service to their customers.

This kind of limitation for regular ISPs is ridiculous, because the cost of bandwidth is actually cheap, but it's different and much more expensive with cell phone networks.

You are implying that a few heavy users are the cause of everyone else's poor experience (a non-obviois fact), and you compare this to frequent offenders placing a high burden on police forces (a somewhat more plausible fact). I agree that it may make intuitive sense that if I use 10x the bandwidth as you that I use 10x the capacity, but I am not convinced this is a fact. Do you have any support for this claim?

> I'm betting Steve is totally pissed off at AT&T right now.

You think Steve just found out about it now? You think AT&T didn't consult with him?

Personally, I think Steve probably knew a while back, was pissed off then, and is still pissed off.


A lot of startup activity is centered around the internet. Limiting internet usage that will mean that people won't be able to use our web services just because their monthly bandwidth quota is up. This is a barrier to the web-centric view that Google/Facebook/Twitter/etc have been propounding. This is not a step in the right direction.

I agree with you.

The truth is, there's simply not enough bandwidth, especially not to stimulate "unlimited" data use and motivating people to become "data hogs." And it's not easy at all to increase the resources. There are real physical and technical limitations for providing more bandwidth which are hard to overcome in many areas.

The unlimited data plan was designed for much less devices in the wild.

> The unlimited data plan was designed for much less devices in the wild.

The unlimited plan is and always was a marketing ploy to make the plan look like a deal. It's just too bad that AT&T (or at least one of the other major telcos) haven't been brought to task for their deceptive marketing practices.

That's probably because they use their extra revenue to bribe the people whose job it is to take them to task for their deception, rather than investing that money in infrastructure upgrades.

> 2. It will apparently be possible to retroactively upgrade from the 250 MB plan to the 2 GB plan if you're going to be over, so the fears of forgetting that you left Pandora running and paying hundreds seem to be a bit unfounded.

Well... In one of the initial discussions someone did the calculation that if you leave Pandora playing for 40 hours/week, it amounts to 5+GB of data, and that's on the low quality stream.

There is usage-based billing for utilities, so it is theoretically possible to do this fairly with other things. However, it requires the corresponding regulations: for gas and electricity, you have meters; you also have labeling requirements on the products you buy, so that you can tell what they're going to be using.

Apps don't have meters, and they don't have any mandate to tell you that they're hogs. Therefore, tiered bandwidth billing is unfair: it is simply not possible for a customer to know when they're buying something that will cost them dearly in terms of bandwidth usage, nor is it feasible to isolate which of 100 apps on their phone is responsible for their overage billing in a given month.

You do have a point, but really: when was the last time you went and looked at your meter to make sure you weren't using too much? Or looked at how much energy something used when deciding whether to buy it?

The problem is that power use is limited by physics. If your gas stove valve was stuck open and was venting your gas line you'd know, because the house would turn into an oven. Bandwidth use is not limited by any laws except the capacity of the device, so the difference in usage can vary over a much larger range than power use can.

I see lots of geeks rooting their Droids and installing ntop or similar utilities when this sad day comes.

I too dislike how AT&T foisted these prices on us - but I disagree with the author here.

He seems to be advocating that there's something wrong with not consuming 1.5-2GB a month. He's a heavy user - cool, but I see no reason for the majority of the world to be just like him.

> "Why are so many people using so little bandwidth? Or, put another way, you should be ashamed of yourself if you sell a device like the iPhone and then encourage people use it so lightly that they only consume a couple hundred megs of data a month."

Honestly, I don't think anyone has been encouraging people to use less bandwidth. For most users a few hundred megs a month is plenty, and there's nothing wrong with that. Unlike us geeks they're not constantly chained to their gizmotrons, and do not live like cybernetic organisms. That's perfect okay, and in fact I'm jealous of that lifestyle sometimes.

Don't get me wrong, I think it's very short-sighted to cap bandwidth - we may very well be killing the next world-changing app in the crib. The world will find use for all of this bandwidth if we let them, but at this point in time I don't think one can look at the bandwidth usage numbers and proclaim that people aren't using their phones enough.

At what point does the phone stop working for us, and instead we for them?

I think he wants to say AT&T should get the users hooked to using lot of data, so they as a subscription company can keep making money from users for a longer time.


If you're AT&T, when households are looking at their bills for stuff to cut, you don't want them looking at their data plan and saying, "well, I guess I don't use it very much..."

You want the gym membership to get the axe.

But most AT&T customers are locked into long-term contracts, so they can’t just up and decide “I’ll cut the data plan”.

My startup was recently bought by Nokia, and unsurprisingly, one of the fringe benefits of working for Nokia is getting a free smartphone (GSM 3G) with an unlimited data plan (T-Mobile, thank God). My wife and I looked into cancelling our Verizon family plan and moving to just one line for her, but the early-termination fee is so high that it’s cheaper for me to just keep the Verizon phone. And since our Verizon plan has free in-network calls, it’s also cheaper for me to carry the Verizon phone, so that she can call me on it.

The flip side of this is that people who abandon their carrier because of network issues will be more like a slow leak than a stampede, so AT&T executives with an eye on quarterly profit results would rather do anything but invest heavily in building out their infrastructure.

That doesn't significantly change the issue.

Whether one can cut the bill immediately or in X months time, the point is that the last thing AT&T should want is people saying, "why am I paying $X when I hardly use it?"

They should want to have mobile data usage so ingrained in their customers' lives that people wouldn't dream of cutting it when their contracts run up.

AT&T has sold a lot of data plans by making them required for iPhone purchases, and plenty of people wanted the fancy new toy. What happens when smartphones aren't the fancy new toy? How many AT&T iPhone customers, if they had to drop their iPhone and get another phone, would still buy a data plan if it was simply an option rather than a requirement?

Actually I'd rather they eat less fast food. If they stop going to the gym they will get less healthy and die sooner. I'd like them to be using my product for as long as possible.

Wow, 3 down votes for pointing out that fast food isn't healthy and is bad for my business (if I'm not selling fast food).

3 down votes for off-topic blather. Nice try, though.

But if the heavy users of their services are costing them more than they're making, and generally degrading the quality of the service, that argument doesn't really hold up. I'm going to assume that, like most similar business models (including gym memberships and all-you-can eat buffets), AT&T relies on light data users paying for more than they use in order to subsidize heavier data users that use more than they pay for. Encouraging people to become heavy users that are an overall cost to the business so that they stick around longer would seem like the classic "we lose money on each one, but we make it up in volume" sort of mistake.

It would be like encouraging people to eat more when they go to an all-you-can-eat buffet by giving them doggy bags to take home as much as they want, on the theory that then they're more likely to come back. If you're losing money on those people you don't really want them to come back.

It's obviously an open question as to exactly what their costs per user are for light versus heavy users of data, but I'm going to infer from their recent actions that they've decided that at the moment supporting heavy users of data isn't such a great business to be in.

Your argument makes no sense to me. Why would the length of my subscription with AT&T have anything to do with how much data I use? If I only use 100MB a month and am happy with that, how would paying less for it make me leave AT&T faster?

> Honestly, I don't think anyone has been encouraging people to use less bandwidth. For most users a few hundred megs a month is plenty, and there's nothing wrong with that.

I don't think they're outright trying to discourage usage, but any cap whatsoever will make people paranoid about using it up, and have the effect of making them use it less. If there's no limit, you never have to worry about it, and will feel free to use it all the time. But if you know that you could hit that cap at some point, you'll think twice before starting up Pandora or YouTube, even if there's no reasonable way you could hit your cap.

I disagree with the author's points. AT&T doesn't care how integrated a mobile device is into their customers lives. All they care about is the money the customers pay them. And the more customers they have, the more money they make. However, instead of building a robust mobile infrastructure that can support all users, they try to cram as many low-usage customers they can on their outdated network.

Alienate one network "hog" and you'll find 49 others who will pay the same amount of money for a fraction of the usage. And for all the users they lose, they'll recoup millions in overcharging.

I love how customer satisfaction is one of AT&T's most important goals...

In Easter Europe you get the following from the official(read most expensive) iPhone carrier: $5 for 200mb, $9 for 2gigs and $18 for 10GB, $40 for unlimited.

These plans may be slightly cheaper than US plans, but that is nothing special. What is nice, that if you DO go over your limit, you can continue using the net downloading/uploading albeit at a ridiculously slow rate 16kb/8kb. If you want to go back to your usual speed you send a SMS and upgrade for $1 per GB or go to the next plan.

What is better in this approach is that the customer is never charged over what they agreed to pay in advance.

Sure beats paying $200 for a local phone bill in early 90s in USA for connecting to local ISP...

The author really hasn't considered it from AT&T's perspective. On one end, they're hearing complaints about their terrible network, and on the other end, they're facing large costs to improve their infrastructure to support people with unlimited accounts. Aside from the comparatively small increase in subscriptions they'll get for their improvements, they'll see no income for their investment.

However, if AT&T were to force out the unlimited data pricing model and replace it with per GB pricing, they'll be able to fund the scaling their infrastructure up as the usage increases. Similar preferences for per-GB models have been voiced by other telcos as well, claiming "unlimited data is dead" (I don't know where I read this). Frankly, I'd be surprised if there wasn't some collusion amongst the big telcos regarding this.

I'm not saying I'm happy about this, but I think the scenario I describe is much closer to reality.

My only thought is that the other 'big telcos' got billions of dollars from the US government to upgrade their infrastructure. Whatever became of that?

This is why I have little sympathy for them when they bitch and moan about how people are using 'too much bandwidth.' Also note that they never come right out and say things like, "We oversell our bandwidth," or, "Our infrastructure can't handle what our customers are using." It's always framed in terms of the 'big bad' users that are hurting the poor ISP's stalwart network.

Granted, I'm not sure that AT&T falls into this net. They probably didn't get government money to build out their 3G network.

I'd really appreciate it if AT&T would just come out and say this, but they're not. Unfortunately I fear they'll put this pricing into effect and still offer the same shitty service.

I'd email ATT's CEO to suggest this, but I'd be afraid of getting a cease and desist warning in response. ;)

They might not be facing such large infrastructure cost if they had continuously upgraded their network. I remember reading last summer, that the last 8 quarters (basically since they got the iPhone) AT&T network investment had gone down.

On one end, they're hearing complaints about their terrible network, and on the other end, they're facing large costs to improve their infrastructure to support people with unlimited accounts

Of course, there's never any shortage of money in the kitty at AT&T to buy advertising to tell the world how great their network is.

This is precisely what the "inversion of the telco model" talks about. And ATT ignored. Users want to pay for features, not access.


Pray that this mindset does not infect your ISPs and tempt them to introduce traffic caps.

Having your users be paranoid that they're going to go over their cap and get absolutely reamed for overage charges is not exactly how you build an advanced, high-bandwidth content delivery system.

Even less are going to be "data pigs" that use a trivial 1.5GB after such a change, high prices guarantee that.

Silly buggers.

It doesn't have to work that way. Internode, an ISP in Australia (for consumer connections) will monitor your usage, send you notices on how close to the cap you are, and then shape you back to slightly faster than dial-up speeds. YOu then have the option of checking your email (slowly) and maybe chatting, or purchasing a datablock and becoming unshaped within the hour. (I semi-regularly purchase blocks during months of high usage when getting close to 90% of the cap to avoid slowness). It's fair, and everyone pays for what they use.

Internode is a bad example, they are the best of the lot in Australia/NZ, as I know from personal experience :)

I suspect how it will work out if it happens in the US is rather more like how Telecom NZ or Vodafone operate (Telecom used to be mainly owned by SBC/AT&T).

Where either you don't have the option of a data block past a certain upper bound, and get shaped to 64kbits for the rest of the month (Vodafone).

Or you have the option to remain full speed but the overage charge is out-of-this-world insane, something like 2c/MB. That's right, per MB. 10GB over cap is $200 added to your bill. Ouch.

Is their line running at near capacity at all times? If not it seems not only not fair, but silly to have their network lines sitting mostly idle for the last week of every month.

Rules and pricing needs to be simple and consistent. Even if it was possible to implement QoS to broadband, it would be awfully confusing for both the consumer and the telco. Why should someone in a busy area be capped when they reach the limit, while someone somewhere else can keep going? It might make sense from a technical perspective, but not at a consumer level.

If the telcos are not price gouging, there shouldn't be a problem with data caps. Stop being a cheapskate!

Your point seems to contradict itself.

>Even if it was possible to implement QoS to broadband

It most certainly is possible.

>Why should someone in a busy area be capped when they reach the limit

What limit? I'm arguing that there shouldn't be a limit. You just provide a guaranteed minimum bandwidth. When the line is under-utilized the connected clients can use as much as they can. When utilization goes up traffic is shaped down as far as needed to handle it.

With data caps then people in your less busy areas will find themselves completely offline toward the end of the month while the line sits idle. Why?

You would have to ask them that question to get the full answer, however I have never experienced bandwidth issues in the 5 years+ I have been connected.re. Idle pipes at the end of the month, this is likely mitigated by each customers billing cycle starting when they first use the service.

Pray that this mindset does not infect your ISPs and tempt them to introduce traffic caps.

I don't think this would be such a bad thing -- just as you pay on a per-unit basis for the water and energy you use, paying per unit of bandwidth consumed seems entirely reasonable. In an unlimited plan, typical users effectively subsidize a small minority of heavy users.

Of course, the real problem is the outrageous charges for when the bandwidth cap is exceeded, as well as the lack of proper notification for when you run over your limit.

Bad analogy. If you waste 50,000 gallons of water by leaving your water hose on while you're on vacation, that's 50k gallons that the community no longer has [1]. The only way someone downloading e.g. 5gig of data in a month can cause anyone else to not be able to download is if the line is running at 100% capacity 24/7. The only possible impact the person could have is making communications take a little longer during the times he's bursting. But this is easily fixed by bandwidth caps and burst limits.

Do you have any evidence that lines are getting anywhere close to 100% utilization perpetually?

[1] I'm simplifying of course, but this is the basic idea.

On big access networks you have to stay far away from 100% capacity. 60-75% is the minimum where you will start seeing the negative effects of channel contention. On a cellular network sharing data & voice you also have a good amount of bandwidth reserved for real time services (phone calls) to factor in along with all the PHY/MAC overhead. There's probably some QoS overhead to calculate in also. I'd say there's a very good chance AT&T is running into channel capacity problems (further evidence being dropped calls/failed calls when devices have good signal. That means they're requesting a real time service and there are simply not bits left over to grant it. Try again in 5 seconds and it works because bandwidth has been allocated/reserved for voice calls)

If they ever drop calls from capacity problems then something has gone horribly wrong (either tech wise or provisioning).

But my point was that bandwidth is (or should be) renewable. If you do a download when everyone else is doing one your traffic should be getting shaped down to the provisioned minimum until there is room for it. This will make the traffic slower during those times, but there are going to be times where nearly no traffic is on the line.

That's somewhat reasonable, but ISPs are not reasonable. They cannot say no to the free money from overage charges, and the rate-limiting "solution" lets them defer infrastructure spending almost indefinitely.

It hardly ever works out in a reasonable manner.

I've lived in 3 countries with traffic caps, and it almost always ended in tears, and made me rather bitter about the whole thing.

I still have a copy of my $900 internet bill somewhere.

And rate-limiting would be great if it was to something reasonable like oh, I don't know, minimum 512/1024Kbps? Surfing at dialup speeds is virtually impossible for a household in this day and age, and that's what the majority of them drop you down to.

Great, "20MBps" internet. That you can use for 5 days, and then its 64Kbps for the rest of the month, sucker.

Metered usage would be fine as long as the price weren't usurious. $5/GB with tethering? Sure, meter my usage. But AT&T is charging $20 for literally nothing all — they don't provide anything extra for the tethering option — and that's on top of already high prices ($1/15MB with DataPlus). Metering should not be an excuse for gouging.

I wonder if apple could use this to get out of the exclusive deal without penalties?

I'd be almost certain that this was discussed when renewing their exclusivity deal.

However, your phrasing implies that you think Apple is "stuck" and getting shafted by AT&T. Really, it is quite the opposite. Apple surely looooves the exclusivity deal because they can leverage it over AT&T to collect globs while AT&T eats the cost over the life of the subscription. The exclusivity deal is one of the key reasons that Apple is able to offer such fantastic hardware at their current price point.

Yeah, apple is making out like a bandit while AT&T ponies up the cash and takes a reputation hit every 2 months.

Are you kidding me? It's AT and fucking T. They don't let you get out of your two-year contract without exacting their poiund of flesh; what makes you think they'll let something as lucrative as iPhone exclusivity just wriggle away?

It's not a let them sort of thing. It could be violating some portion of the "marketability of the device" or any other sort of wiggle room words good lawyers can use to make raw deals grounds for cancelling a contract.

Some specific points of the new pricing are really outrageous honestly. The fact that they do tiered-pricing is, while annoying, kind of their prerogative. It actually sounds like it could save me a few bucks.

However, paying $20 (!) to have access to tethering without extra bandwidth, is complete non-sense. I just can't find a reasonable explanation for this. As well as the price for extra data for DataPlus plan: $15 gives you 200MB, whereas $10 gives you 1GB if you are on the DataPro from the start. I also assume they won't have roll-over data: if you use less, you lose, if you use more, you lose.

Finally, having data caps impedes on the benefit from getting multi-tasking. Besides a faster switch between apps, the point is to have apps stay connected while you're doing something else. (think Pandora) If you start thinking about your data usage, you'll have to think about what's actually running. Exactly what Apple didn't want you to do.

The tethering thing irks me too. If I pay to get 2gb of data, AT&T has no business telling me what kind of information my 2gb constitute. This is a blatant violation of net neutrality, so it seems that when (if?) these services get reclassified as network providers then these sorts of things will never holdup.

A friend of mine who works for Apple told me (a year or so ago) that the reason for this is because ATT (and similar companies in other countries) wants to discourage tethering due to the fact that they don't have the infrastructure to accommodate lots of high bandwidth connections that you use when you tether. They were gambling on the fact that you need to do a lot more "work" at the moment still to browse/etc. on your phone. But this was before multitasking -- I can only bet they were throwing their hands up in dismay when multitasking came in :)

I can understand this idea when it's an unlimited plan: if you tether, you're likely to use a lot more bandwidth than with just your phone. So, if you tether, you'll impact the infrastructure.

But since they're limiting your bandwidth already, I'm not so sure why it matters if you use it from a laptop or from your phone.

In the end, I know why they're doing it: because they can, and because they want to limit the number of people who do it. It just bothers me because it doesn't make sense technically.

What kills me is that when the ATT spokesman mentions the subscriber percentages in the NYT article (quote and link below), he says "smartphone" and not "iphone".

They have a lot of smartphones (http://www.wireless.att.com/cell-phone-service/cell-phones/p...) to average the usage numbers over and push the percentages up. I wonder what the iphone percentages are.

"He said 65 percent of the company’s smartphone customers tend to use less than 200 megabytes a month, and 98 percent averaged less than 2 gigabytes." http://www.nytimes.com/2010/06/03/technology/03phone.html?sc...

I'm sure AT&T knows more than me about pricing but...

I doubt the fact that they'll be getting tons of new customers because people can now save $10 a month. Apple has intentionally scaled back on the number of different models they offer (on all products). Why? Because otherwise there is too much choice.

Most people have no idea how much data they use in a single month, and as mentioned 98% aren't using a massive amount. So, to squeeze a few extra dollars out of the 2%, they just made the decision way more complicated for everyone.

People buy iPhones because they are sexy, easy to use, their friends have them, etc. There is no need to complicate the purchasing decision by forcing people to start guesstimating their data usage.

What happens now when my mom decides to get an iPhone? Before she could buy knowing that "it just works". Now, she's going to call me and start asking questions about which plan she should get, then get confused by the answers (since tech-wise we don't really even speak the same language). All of the sudden, it's starting to seem like a headache.

For each customer they don't sign up because of the complicated pricing (or those they lose because people who don't use that much bandwidth are now afraid that they're going to be constantly being charged for overages), they would have to sign up an extra 6-10 customers who signed up because they can get a plan for $10 a month less than they could have before.

Seems unlikely, no?

In the short term, I am not sure that this is that big of a deal. My data use would be 3 to 4 times higher than it is now (and thus approaching the author's) were it not for the fact that most of the time I am using my phone on a day-to-day basis, it is in areas with wifi (since I live in Cambridge MA, it is conceivably possible that I have wifi coverage 90-100% of the time; to save battery, my radio is off unless I think I explicitly need it). I do not think that AT&T and Apple are trying to cause people to use their phones less, but rather to improve the cellular networks by causing people to use wifi - be it at home, work, or Starbucks - as opposed to AT&T's overwhelmed towers. I think there is plenty of evidence to support this, from the fact that the $15 200 MB plan explicitly allows you to temporarily switch to the $25 2 GB plan during months when you would experience overages, to the technical limitation of Apple's video calling only working over wifi.

Since I cannot tell the future, I have no idea if this will have a chilling effect on data-intensive apps or workflows yet to be developed or envisioned. If AT&T increases the amount of data included in its plans at some point in the near future (which would be reasonable, although possibly less profitable), this would be a moot point.

Your suggestion that people need to curb their 3G usage to help AT&T's poor towers is precisely the logic they're employing. It isn't valid, though. The capacity of AT&T's network is not a finite resource. They can make more. In fact, the government gave them money to improve their network, but they just pocketed it and opted to create artificial scarcity instead.

In other words, AT&T's towers are overwhelmed because AT&T didn't build enough capacity. That's not my fault and I shouldn't be paying for it.

The article claimed that the new data plans would cause people to use their phones less. I do not believe this is true, but I do think it will either cause people to use wifi more and cellular data less (if they are heavy data users like the authors) or not make any changes (if they are "normal" users). Nothing in my original writing was meant to suggest that AT&T subscribers with data plans (like myself) should use wifi more.

A few insane overage charge stories in the media will definitely cause people to avoid using their phone as much. It's not something people should be thinking about when they use the phone, it's counterproductive.

> In other words, AT&T's towers are overwhelmed because AT&T didn't build enough capacity. That's not my fault and I shouldn't be paying for it.

Who exactly is supposed to pay for it, if not the people using it?

Please link to something about how AT&T got money from the government.

Here's the thing: tiered data usage makes sense. Otherwise people who hardly use much data are supporting the people who use a lot, and are paying more than they should.

This is like charging a flat price for petrol, say $50 a week, and expecting people who only drive occasionally to the shops to pay the same amount in fuel as people who make regular interstate trips.

For the 98% of people, their iPhone service just got cheaper, and for 65%, a reduction by half in their data bill.

It makes sense now, riding on the back of years of growth fueled by demand. Bandwidth is cheap! Sure, I'll pay for a few extra gigabytes. But without the years of "unlimited" plans, we would still be living in an age of glacial bandwidth speeds at extravagant prices. The demand for bandwidth drives the cost of providing that bandwidth down.

Tiered usage charges slow growth. That's great for AT&T, but bad for consumers as it also slows the decrease in the cost of bandwidth. You save a few pennies, and we all suffer from the lack of investment to support growth which in turn drives innovation.

I'm not so sure that it does. I live in Australia, where we've always had limited downloads and speeds. When I first got ADSL (about 6 years ago), my AU$60 bought me 2GB quota at 256kbps. Now it gets me 120GB and I sync at 19Mbit (the fastest my phone line will allow).

The lack of competition in the US broadband and phone market is the cause for slow growth, not download limits. You can say that Australian broadband is still expensive and slow (in comparison to some countries) but that is at least partially due to the low population density and the massive distances between cities. Australia has 219 ISPs offering ADSL (source:broadbandchoice.com.au), and as a result the value for money offered has increased significantly in past years, and will continue to.

You may be right about the result but the gas analogy doesn't work. To make it work you would have to image customers all getting gas from the same tank. While they're filling their vehicles the tank is getting lower but the instant they stop the tank is full again. Not slowly filling up with gas, instantly full capacity again.

I'm not sure what difference this makes. I understand that bandwidth is limited by transfer rate and not data transferred, but there is still a limit which the company does not wish to reach.

Even if such a fuel tank existed, would it be unreasonable for BP to charge by the litre of fuel removed? I think it'd be the most sensible way to avoid demand overriding supply, rather than charging everyone increasing amounts for access to the fuel source.

>Even if such a fuel tank existed, would it be unreasonable for BP to charge by the litre of fuel removed?

But effectively no fuel was removed. Look in the tank, it's full right? What you would charge for is accessing the tank at all because unless it is sitting at 0 constantly (complete continuous usage) there is effectively no difference between someone who took 1 gallon and someone who took 1,000 gallons.

EDIT: Your point "but there is still a limit which the company does not wish to reach" is certainly valid, but properly dealing with this is complex. Simply capping to e.g. 5 gig is just going to leave you with empty lines for the last part of every month. Since your problem is utilization, not capacity this doesn't even address it. You had room for twice as much access but instead you look slow and expensive.

If you had a company large enough to run its own networks how would you deal with growing capacity? By putting some kind of bizarre transfer cap? No, that would just get you fired. Instead, you would shape traffic to even out the utilization and add infra as soon as you passed some utilization threshold.

The way this is combated by Australian ISPs is to offer 'off peak quota' - a kind of bonus for when bandwidth utilisation is low, as well as having people's quotas reset at different times of month. This isn't a great solution, and would not work for phones as the off peak quota is used for things such as torrenting, when people aren't at their computers.

The problem with shaping traffic is that it means companies simply shape during busy periods, rather than increasing capacity. By offering download limits at set speeds, ISPs guarantee a speed you will receive (limited only by the quality of copper in your phone line).

My point is largely that charging people who use download the most more money (and therefore, on average, are increasing the load at peak usage most often) is the most sensible method of controlling load. If your experience with mobile internet is anything like mine, consumers certainly do not want bandwidth shaping making it any slower.

Shaping is only part of the solution. Normal utilization will consist of spikes. Shaping is just to smooth those spikes out as much as possible. When there is no utilization then you can use up the whole pipe if you like. If utilization is consistently passed some threshold then providers should absolutely increase their infra.

That said, the Australian solution sounds quite good as far as metering goes.

I found the following portion to hit home the hardest in regards to the new data usage cap:

Doesn’t that just grind cloud-mobile, gaming-mobile, video-mobile, and some-really-cool-but-currently-unknown-mobile development to a halt?

This seems all too true as we know just how fast the mobile industry grows each year. OnLive cloud computed gaming is supposed to be live within two weeks. I can only imagine that within a given period of time they'll be porting it over to iPhones and iPads. AT&T seems to be stifling innovation with these caps.

As the speed at which we access data increases, so do the bandwidth requirements for retrieving more data at a faster rate. We're talking higher video resolutions, higher sound quality, and more content immersion. Rather than paving the way and pioneering a new wave of applications, AT&T has bastardized their network with low data caps that will leave us developers pining for more within the next two years.

While the entire media industry has been trying to figure out the secret sauce to getting users to pay for content, AT&T went ahead and did it ... other people's content.

Does anyone realize with the new Camera on the front of the Iphone coming out, this Data usage issue will change drastically?

The Camera phone will use Data. They are charging for more data. They are set to make a bit of money off this...

While the potential for extra data usage with 3rd party apps may be there, Apple's FaceTime video-conferencing software is wifi only and won't run over the 3g network.

FaceTime does not run over the cell network, it uses wifi for the video component.

The only way that this would be fair would be for usage to stop the second a cap was reached and then user agreement to pay extra. I hate the kind of charges where you're constantly wondering how much you're spending.

I wish that instead of 2gb/month I could do 12 gb/6 months. My data usage spikes a little on weekends and a lot when I travel, but during the workweek it's pretty flat, so I'd want to save it up for those long trips.


On your mobile phone?

They're not capping bandwidth at all, just setting a precedent for charging you more for it.

i asked that exact question, if most users use only a few hundred megs... why is tethering another option. Why can't that be built in... surely the network can handle all iphone users using a few hundred megs to a gig of bandwidth a month...

Without tiered pricing why on earth would they want to encourage people to use more data?

Great essay. Verbalized exactly what I was thinking.

i speculate AT&T can't support everyone at 2GB without massive infrastructure upgrades. which certainly impacts their pricing strategy.

Indeed, that's exactly the point the author doesn't get. AT&T is doing this specifically to reduce usage, without pissing off their customers. In exchange for giving people a cut in their data plan costs, AT&T's system load goes down. That means a more responsive and reliable network for everyone.

And it's a lot easier than spending money on upgrading their infrastructure.

Personally, I'm pretty happy with AT&T's changes. When I'm not using the service, out of the country, etc., I pay less. The overage charges are reasonable. Get real.

Only the self proclaimed "data hogs" are complaining.

Now, if they would only let me unlock my damn phone as a paying customer of 5+ years....

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