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AT&T Kills Unlimited Data PlansJun 04, 2010 (Zacks.com via COMTEX) -- In a major move, AT&T (T) has introduced new data plans for its smartphone and iPad users, thereby bringing its existing unlimited data plans to an end. The new price plans, which replace AT&T's current $30 monthly unlimited wireless data plan, however, do not affect the carrier's existing subscribers who can continue with the benefits of unlimited usage. Nevertheless, existing smartphone users have the option to switch to the new plans without extending their service contracts. AT&T's announcement comes ahead of the introduction (likely June 7) of the next-generation iPhone by Apple (AAPL). Ma Bell's new strategy indicates a paradigm shift in wireless tariff structure as the industry is again becoming more and more inclined towards a tiered (or metered) pricing system, replacing the existing flat-monthly unlimited plans. Carriers abandoned tiered plans years ago when they launched unlimited plans to encourage customers to spend more on data services. Under the new structure (effective June 7, 2010), AT&T's customers have the option to choose from two data plans, namely, DataPlus and DataPro, according to their needs. The $15 per month DataPlus plans offer 200 megabytes (MB) of data and are tailor- made for subscribers, who use their handhelds for web surfing, email and social networking. If a customer exceeds the monthly usage quota, he/she will be allocated another 200 MB for an extra $15. DataPro has been designed for heavy data users and offers 2 gigabytes (GB) of data for a monthly charge of $25. Customers who exceed the usage limit will be provided 1 GB of data for another $10. Users of this plan can tether their smartphones to laptops to access the Internet for an additional $20 a month. Tethering for iPhone will be available on the forthcoming model. AT&T's move comes as a consequence to the data overload on its networks, especailly due to heavy usage by iPhone and iPad users. The carrier remains challenged by serious mobile data traffic congestion as a result of high-bandwidth demand on its network due to excessive data usage. AT&T has stated that roughly 3% of its smartphone customers (essentially the iPhone and iPad users) account for 40% of overall smartphone data usage. AT&T is making significant investment on network infrastructure improvements across highly congested areas to offload traffic from its overcrowded network. The carrier expects the new price plans to curb heavy data usage. The sunny side of AT&T's new policy is that customers who use less volume of data have to pay much less than those using their smartphones to access high-bandwidth applications (such as HD video streaming, Internet music or downloading huge data files). AT&T claims that 65% of its smatphone customers use less than 200 MB of data and will thus benefit from the DataPlus plan. On the other hand, customers using more data may experience a bill shock, especially if they exceed the allocated monthly data limit, given the overage charges. So "tiered-pricing" has reappeared to affect heavy data users. It will be now interesting to see whether AT&T's Tier-1 rivals follow suit with similar strategies. Archrival Verizon (VZ) recently revealed its plans to shift to a tiered pricing policy for its 4G data plans, which are based on data usage. However, Sprint Nextel (S) seems to be stuck with the unlimited approach while Deutsche Telekom's (DT) US unit T-Mobile USA appears indifferent. Nevertheless, AT&T's revised pricing policy may reignite price competition among top-tier US carriers. Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Investment Research.See all today's Analyst Blog entries. |