The unlimited data plan is heading toward extinction, and AT&T's new plans are not the solution. Here's what the wireless carriers need to do to get it right.
The myth of the unlimited wireless data plan is dead. AT&T put the first couple nails in its coffin when it rolled out its new pricing for mobile data plans, which discontinue the mythical "unlimited" plans and more than double the cost of data per gigabit.
The problem is that AT&T's plans do not make sense. With a new era of mobile data quickly sneaking up on us, it's time for wireless carriers to get this right. We've got some suggestions.
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Verizon has a similar idea
Verizon was already planning to get rid of the unlimited plan tied to one device. In May, Verizon CEO Lowell McAdams stated that when his company's 4G LTE services start rolling out later this year, many users will want to connect multiple devices to it and that the current data plans will not be a good fit for the new reality.
“I expect people will have four or five or perhaps even more devices they will connect to the network,” said McAdams, presumably talking about households as well as highly-connected professionals. McAdams said that Verizon would likely sell people "buckets" of data that they could use across multiple devices.
AT&T's new plans
AT&T's new plan doesn't use the bucket strategy, but it is preparing for the same reality that its data network will soon be used as an Internet on-ramp by many more devices than just smartphones. Lots of new iPad 3G models are being activated on AT&T, for example, and later in June the company will finally launch tethering for the iPhone (and other smartphones).
So AT&T is phasing out its unlimited data plans, which were never actually unlimited because they were capped at 5GB per month. Current subscribers will get grandfathered in with their unlimited data plans ($30/month), but they will not be able to add the new tethering option to it.
Speaking of the the tethering plan, it carries a $20 access fee and it doesn't provide any additional bandwidth. It simply allows you to use some of your wireless data to share your mobile Internet with a laptop. And unfortunately, the price of AT&T's wireless data just went up. Here are the details of the two new plans:
- DataPlus - Customers pay $15/month for 200MB. If they exceed the cap, they pay another $15 for 200MB. For this plan, the rate is $75 per GB.
- DataPro - Customers pay $25/month for 2GB. If they exceed the cap, they pay another $10 for 1GB. For this plan, the rate is $12.50 per GB.
Simple math reveals the illogic of the AT&T pricing scheme. A person who exceeds the DataPlus cap will end up paying $30 for their data (say 201MB). Meanwhile, a person on the DataPro plan pays less than that ($25) for 2000MB (10x the amount of data).
AT&T says that 98% of its wireless data customers use less than 2GB of data per month and that 65% use less than 200MB. I have an iPhone on AT&T so I looked up my data usage and discovered that I've been using an average of about 300-400MB of data per month. The chart below shows my data usage for the past six months.
That means the 2GB ($25/month) DataPro plan would obviously be a decent best fit for me. It also means that, theoretically, if I were to use 5GB (my current cap) on the new plan it would cost me $55 rather than the $30/month it costs for my current AT&T unlimited plan.
So, from that perspective, AT&T is clearly raising the price of its data. The current unlimited plan costs $6 per GB. The new DataPro plan costs $12.50 per GB. The new DataPlus plan costs $75 per GB.
AT&T's two-tier plan is not executed well. If you exceed the 200MB, you should simply be bumped up to the the DataPro plan and charged $25 for the month for up to 2GB (rather than $30 for up to 400MB).
If carriers like AT&T want to do tiered access then they should be perfectly transparent about each of the tiers and not make you "sign up" for one. You simply pay for the tier you land on that month, based on your usage. And, the tiers need to have a more equitable pricing scheme. The fact that the per GB cost for the DataPlus tier costs six times the rate of the DataPro tier is not acceptable.
Based on my current usage, I could save $5/month in exchange for giving up access to 3GB out of my 5GB of data usage, but not being able to use that data for tethering or additional devices makes it of little use.
I think Verizon and my CNET colleague Molly Wood have it right: What we need now is the ability to buy one pool of wireless data and use it across multiple devices. However, the thing I'd add to the equation is that the wireless carriers stop making us "sign up" for a plan. They should set up usage sensible tiers and have people pay according to the tier they land on that month.
For example, the data cost could be set at a base price of $10 per GB (still higher than the $6 per GB rate of the current unlimited plans). The pricing would look something like this:
- $10 for 1GB
- $20 for 3GB
- $30 for 5GB
- $50 for 10GB
That would keep light data users from over-paying for basic services, while allowing heavy data users and households with multiple devices to get the access they need at a reasonable price that's comparable to the cost of today's $30/month unlimited data plans on most carriers ($6 per GB).
- New AT&T data plans for iPhones, iPads, more (CNET)
- iPad 3G Shortage Won't Bar Getting Unlimited Data Plan, AT&T Says (New York Times)
- AT&T makes sweeping changes to data plans, iPhone tethering coming (Engadget)
- Welcome to AT&T's tiered pricing world: Will Verizon follow? (ZDNet)
- The Good, the Bad and the Ugly of AT&T's New Pricing Plan (GigaOm)
- Check your AT&T data usage to keep within new iPhone, iPad plans (CNET)
- Candid answers from AT&T on the new iPhone data plans (TUAW)
- Apple's current iPad software won't allow iPhone tethering (AppleInsider)
- It's time for universal data plans (Molly Wood)