"Apple iMessage is a classic example. If you're using iMessage, you're not using one of our messaging services, right?"
It's hard to believe this is a real quote by such a senior executive. If the profitability of your business is so significantly based on a hack (SMS) that you stay awake at night worrying about it, and you didn't bother innovating by developing a real solution to the problem (pervasive real-time communication) in the past 20 years while the hack became popular, then you absolutely deserve to lose this profitable part of your business - especially when you're in the friggin telecommunications business!
What makes the move from unlimited data to "pay for what you eat" is the bizarre tethering restriction: they expect people to pay $25 more per month to tether without additional data.
If your shifting your model to selling data, wouldn't you want to make it as easy as possible for your customers to consume more data?
I don't get it. If tethering was free, I'd use more of it, and happily pay for it.
You probably know this already, but AT&T relies on most customers using nowhere near their data cap each month; allowing tethering would significantly decrease their profitability.
They can make a profit from someone who uses 5gb and pays $55 in a month, but I suspect they make more from someone who uses 400mb and pays $25.
Despite SMS being a hack that costs carriers (essentially) nothing to send [1], the reality of this situation is that telcos will be/are quickly losing one of their largest profit points to services like iMessage.
Real question: Where are they going to recover that profitability from?
I'm genuinely curious... why is AT&T losing so much money over iMessage? When iMessage came out I went to downgrade my SMS plan, and found you can no longer do so. It is unlimited SMS or no messaging. Not everyone I know owns an iPhone and $.20 per SMS adds up, so I am stuck paying for unlimited.
Mysteriously, AT&T changed their plans very shortly after Apple announced iMessage. Obviously they foresaw a lot of people downgrading their plans so they just did away with the tiered plans completely.
I was going to say something similar. While I realize that we are mostly entrepreneurs here, aren't there some of us who believe in working hard and providing a reasonable service or product at a reasonable price? In all seriousness, people often consider giving to charities and whatnot as a contribution to society. Wouldn't it be even greater to simply run a service - especially in this case - for an "honest" amount of money; ie, enough to make some profit, save some, and cover costs? Is this line of thinking completely absent from society?
Where are they going to recover that profitability from?
They won't. They'll eventually need to adapt to the reality of their business, which is to move data from one point to another. They'll get to decide how to monetize their dumb pipes but their current SMS business model won't last.
Another real question is this: Do people think the first of the major telcos to buckle down and actually do this will pull quite far ahead of the others?
Sheesh. The iPhone pretty much single-handedly catapulted AT&T from an also-ran cell carrier to the top. I'm sure "unlimited" was a bit of a headache for them, but surely it was well worth it in the end.
How about AT&T Customer regrets choosing AT&T iPhone model?
As an AT&T iPhone user (grandfathered with the unlimited data plan), I've had nothing but poor service in both Silicon Valley, CA & NYC.
AT&T's CEO regrets offering unlimited data because AT&T has to "invest capital"? As an iPhone user experiencing the lack of capital investment every day, I have no sympathy and only hatred for AT&T.
In the end AT&T and the other carriers don't want to be "dumb pipes", but that's what consumers want. Can you imagine the same applied to water? "I'm sorry sir, but we know you used an unapproved toilet AND you went over your allotted shower minutes this month."
We can only hope that it'll work out in our favor and they can stop preaching to us how we should use their bandwidth.
You're not understanding what tnash said at all. Each of the utilities you list is a "dumb pipe". The utility company doesn't dictate what you do with the utility, and they don't charge you a different price for running a lightbulb vs. a washing machine. It's all about how much, not what's done with it.
The telcos want to be exactly the opposite. They want to control what you do, how you do it, and how much you pay for doing it, not based on the bandwidth used, but the nature of the use. This is the antithesis of a dumb pipe.
The iMessage thing is, IMO, the more interesting comment. Apple has effectively ripped a revenue stream away from the providers, and they can't do much about it apart from raise prices for other stuff.
They're not alone, of course- BBM does the same thing. But they're all disjointed networks, which plays into the provider's hands right now. People still need text plans to contact people on other devices. I wonder if we'll see an app like WhatsApp finally get big enough to challenge that.
Probably not. There have been dozens of challengers (Kik, Beluga, WhatsApp), no one has gathered the ubiquity or reliability of SMS. The one one I can conceive of hitting that goal is Facebook, and at the moment they don't seem to be trying too hard.
I am surprised Google Voice hasn't been mentioned as an alternative. It piggy backs on existing networks by allowing you to communicate with Google servers over your data plan, which forward your texts as SMS to their destinations.
I run it on my smartphone and use my Google Voice phone # exclusively. As a result I have been able to get rid of my SMS Verizon plan over a year ago. This is completely transparent to my contacts who have no idea that they are texting/calling a google voice number.
I doubt it. The beauty and the reason that iMessage and BBM took off is because it was built right into the phone. Those messages get treated as first class citizens while third-party applications are off somewhere else. When I get a text message and an iMessage I can read them in the same place which is a plus to me. If I'm jumping around in disjointed conversations, sometimes with the same people, through different apps I don't want to really use that service anymore.
I bet Ma Bell had the same sad face on when they no longer had a monopoly on leasing phones to customers.
Time moves on and the pipes get commoditized. I hope congress chooses to side with the people rather than mandate profits for the corporations to whom we lease our airwaves.
I disagree with his assessment. He only has to "invest capital" for each megabyte you download insofar as he merely has to maintain his current network. An individual user has a hardware limit on the amount of bandwidth they can consume, be it imposed by the network or the consuming device. "Each additional megabyte" consumes no more or less bandwidth than the megabyte before it nor the megabyte after it. He has the same maintenance cost whether this individual user is paying per megabyte or per day of access.
What causes him to have to invest capital is each additional simultaneous connection which uses his network. These analogize to subscribers to his service, not bits of data sent over his network.
I mean, does he really believe that he can change people's collective usage patterns during peak hours merely by limiting their consumed bandwidth for the whole month? Surely not. If anything, it will persuade people to eliminate their extraneous data usage and only use it when the data connection is "most important". I'm not one for blind guessing, but I have hunch that these "most important" times of data access probably correlate to his current peak hours.
The power companies face this same problem with throughput, and what do they do? Do they cap the amount of power you can receive per month in order to alleviate load? No! They invest in throughput, and when things get sketchy during peak times, they enforce throughput caps like rolling brownouts.
I have a hunch AT&T also does this with their forced data throttling on those who are consuming the most bandwidth, as if they were the problem! But they are also convincing people to pay more for less with monthly data caps. How they can get away with this is very surprising to me, personally.
I suspect their ability to get away with it has an inverse correlation to their customer's ability to understand what's going on. There's probably a little bit of the execs having no idea what's going on as well. (They don't strike me as the types who would easily understand the difference you pointed out.)
As customers become more knowledgable about what's going on, and why it makes no sense - AT&T et al will either be required to change their business model or someone will eat their lunch.
I keep hoping the same thing will happen with the major cable companies as well. Die, Comcast, die.
This is like regreting modern agriculture because you could charge more from starving people if food was lacking. When given the option, the monopolies will always go after the "easy" model, which is of scarcity, instead of making money by just offering plain good service in the first place.
It does not surprise me in the slightest that the AT&T CEO spends his nights lying awake regretting that he could have screwed his customers even harder.
Can imagine him holding back sobs as he considers how he might even have held back the future for 2, 3 more years and squeezed a few more dollars out of 10000% markups on SMS, charging by the kilobyte for data and restricting access to only approved apps/websites. Poor guy, you can tell it's going to haunt him.
I would be fine with a data transfer cap, if it scaled with technology or time. However looking at my internet provider, I have not seen an increase in the data cap since it was implemented. Meanwhile both services and technological capability have increased.
It's hard to believe this is a real quote by such a senior executive. If the profitability of your business is so significantly based on a hack (SMS) that you stay awake at night worrying about it, and you didn't bother innovating by developing a real solution to the problem (pervasive real-time communication) in the past 20 years while the hack became popular, then you absolutely deserve to lose this profitable part of your business - especially when you're in the friggin telecommunications business!