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AT&T Ditches Unlimited Wireless Data, Analysts Expect Few Repercussions

By Kelly Teal
June 02, 2010 - News

Telecom analysts at investment bank Stifel Nicolaus say AT&T Inc.’s much-publicized decision to do away with unlimited wireless data plans gives an early indication of the U.S. government’s reaction to such a move.

And, if those experts are right, well, the implementation of tiered-pricing models probably won’t have a big effect, despite cries to the contrary. Consumer advocate group Free Press, for one, is claiming AT&T’s decision comes at the very time the company’s investments, compared to revenue percentages, are in decline. This, said Free Press, shows that AT&T chooses to manage scarcity and ration its network, rather than build more infrastructure to meet users’ needs.

AT&T, in its official PR, says it opted for tiered plans to give customers the best data plan according to their usage. And, the company added, current smartphone subscribers can switch to new levels, if they choose, and without a contract extension. Plus, AT&T said, every plan comes with unlimited access at more than 20,000 Wi-Fi hotspots.

But where is this change really coming from? Probably from unprecedented smartphone mobile data consumption – stemming, most of all, from the Apple iPhone, for which AT&T is the exclusive carrier in the United States. The iPhone remains the most popular next-gen mobile device on the market, even with Google-powered phones available. Indeed, the iPhone sparked the smartphone craze lo those many years ago (OK, three, but seems like forever) and since then, yes, AT&T has had notable disruptions in its network as users tried to stream and download content.

The question now is whether AT&T is moving to the most logical form of pricing or whether it’s taking advantage of its smartphone-loving public. We can’t say. But as Rebecca Arbogast and David Kaut at Stifel Nicolaus noted, AT&T’s change provides an early test case for whether government – given the broadband reclassification and Net neutrality debate – would or should restrict broadband tiered pricing models. As Arbogast and Kaut wrote in their memo to clients, “We continue to believe that the FCC is likely to permit broadband providers, at least wireless providers, to experiment with different business models, including allowing tiered pricing, though we believe there could be different issues and problems for broadband tiers or caps imposed by companies that own content, depending on the details.”

In other words, after companies such as Time Warner Cable tried to impose tiered pricing on their wireline broadband access, such experiments failed once public interest groups and Congress protested. When it comes to AT&T’s latest announcement, Arbogast and Kaut foresee pushback from the likes of Free Press, but said they see the AT&T wireless usage-based plan as “likely to survive for several reasons: The company is lowering the entry-level price at the same time it increases pricing for high users; it is in a better position to argue that it has wireless traffic management issues; and it appears to have created a notification safety net for consumers who exceed their monthly allotment.”

The FCC is in the midst of a “bill shock” campaign, where it wants mobile service providers to let subscribers know when they’re going to exceed their plan’s limits; and if AT&T doesn’t follow through with its intent to abide by that rule, “there could be repercussions,” wrote Arbogast and Kaut. Prediction: AT&T will avoid such headaches to keep the FCC off its back.

And whether you agree with the idea of Net neutrality or not, the two analysts wisely note that tiered pricing was likely to come, regardless of Net neutrality rules. That’s because wireless operators are finding themselves deluged by unprecedented traffic and need some way – including financial means – to mitigate what crosses their networks.


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