Smartphone Users Should Celebrate AT&T Scrapping Unlimited Data

We knew this day was coming. AT&T announced today that it will no longer offer unlimited data plans for wireless customers. There's little doubt that many of its customers -- particularly iPhone users who love their data -- will be angered by this move. But really, the vast majority of mobile phone customers should be quite pleased.

For anyone new to AT&T, the following options will be provided for data:

DataPlus: 200 megabytes of data for $15 per month

  • Overage charge: $15 for each additional 200 MB of data

DataPro: 2 gigabytes of data for $25 per month

  • Overage charge: $10 for each additional 1GB of data

 

According to AT&T, 65% of its smartphone customers use less than 200MB per month, while 98% of its smartphone customers use less than 2GB per month.

Current AT&T customers pay $30 per month for an unlimited data plan. If you combine all that information above, you quickly learn that this change is only bad for 2% of AT&T smartphone customers -- the data hogs. Everyone else should manage to decrease the cost of their bill.

In fact, 2 gigabytes is an awful lot of data. Here's a chart from AT&T showing how much usage each plan would allow:

at&t chart 2010-06.PNG

I consider myself virtually addicted to my iPhone. I obsessively check my e-mail on it (6 accounts!); I listen to streaming music as I walk to work; I surf the Internet fairly often; and I've got dozens of data-driven apps. Yet, going through my bills for the past several months, I can't find any month when my data usage exceeds 500 megabytes. So even though DataPlus wouldn't work for me, I would only be using one-quarter of the DataPro allotment and save $5 per month. Meanwhile, my fiancé isn't as big of a data user. Her monthly average is around 50MB. That means she could use DataPlus. This would reduce our combined monthly bill by $20.

According to AT&T's usage statistics above, our experience is not unusual. Most customers are much better off under this new pricing scheme. But that means AT&T is worse off in a sense -- it will collect less in fees. So why would it do this? Several reasons jump out.

First, this change is likely transitional. At this point, the service provider is just getting customers used to the idea of eliminating the unlimited data option. Eventually, it could raise its prices to levels that are more profitable for the company -- and less attractive to customers.

Second, AT&T is sticking it to the heavy data users. That 2% of users is obviously using far more than the average customer. Yet, these people are paying the same amount for their data plan. That doesn't make sense. AT&T wants these people to pay more or curb their usage. After all, anyone using more than 2GB of data per month is putting far more stress on the company's network than the average user.

Finally, think about psychology. Even if you know that you'll probably never exceed your 200 MB or 2GB plan, you may lower your usage a bit. When you go to an all-you-can-eat buffet, you almost certainly eat more than you normally would. After all, you have an incentive to eat as much as possible -- that's what you're paying for. But if you got a regular meal at a restaurant, you'd still be full, but probably not as stuffed. AT&T wants to translate this to data. Even though people aren't likely to go over their limit, they will behave differently knowing that their plan is no longer unlimited. Less data usage will improve network traffic.

Now that AT&T has broken the glass when it comes to charging for data, you can expect other service providers to follow. All are aching to do so, as they know that mobile data is the future, so there's much money to be made on it. Even though customers will hate it at first, the average smartphone user is better off at this point. They'll pay less and the data network will function more smoothly.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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