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ATT Looks to Boost Profits Via Apple iPhone Data Charges


AT&T (T) announced today that it is eliminating unlimited data plans for its wireless service. The move comes conspicuously just before the expected launch of a new Apple (AAPL) iPhone in about a week, the data hungry device that is blamed by many as the culprit behind recent criticism of AT&T’s network and reliability. Now that the Apple iPad is also draining AT&T bandwidth with 3G data plans for the tablet computer, it’s clear T stock needs to do something about managing its wireless data network.

It doesn’t take a genius to figure out that the move is a clever way to ration data use to prevent further overtaxing of AT&T’s wireless network. The move is being billed as a way to make mobile data access more affordable, with a bottom level plan starting at $15 a month for Apple iPhone customers, but that’s a stretch. The plan is only cheap if you barely surf the web or check your email – which pretty much defeats the purpose of an iPhone. The move has some customers frustrated that Verizon (VZ) may not get a chance to carry the iPhone until next year at the earliest.

Consider the new DataPlusplan, the cheapest available, which provides 200MB of data for $15 per month. AT&T claims this is a great value for light data users who pay $30 for the unlimited plan right now, saying that about 65% of its users average less than 200MB of data each month. But note that the overage charge is another $15 for every 200MB over that limit. And if 65% of users average less than 200MB each month, that doesn’t mean it’s much of a deal for someone that flip-flops between 150MB and 250MB. The means your bill would flip flop between $15 and $30 – or even as much as $75 if you happen to jump up to 1GB of use on a peak month.

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And don’t think for a second that’s the ceiling. The internet is chock full of horror stories about $1,000 bills due to files downloaded without regard for their size.

Now let’s look at the next step up, DataPro, which includes 2GB of data for $25 per month, and will charge each additional GB used over this limit at $10. You can hear the sales pitch now – if you think you’re going to use just 250MB of data, just get the DataPro plan and then you can get ten times the data for $5 less. Overages are $10 a GB after that.

A moderate internet surfer who checks mail regularly and downloads attachments could easily top this 2GB limit. That means the plan will actually cost them more than the current $30 unlimited agreement presently. And if seeing that bill results in a “chilling” effect for iPhone email junkies, then AT&T wins out again even if it loses $5 a subscriber by reducing the data drain overall on its network.

The real killer is an additional $20 surcharge for the AT&T thethering plan for iPhones – or sharing your iPhone’s internet connection with a device such as a laptop. This charge doesn’t include the cost of a single bit of data download. If you thought iPhone users could chew up the data with their Apple smartphones alone, just imagine the fees that will rack up as they use both their phone and computer on the same data plan!

Of course, gigabytes and megabytes are just an abstraction for most of us. So consider this: By Apple’s own data calculator, streaming 30 minutes of video a day — and doing NOTHING else — chews up 1.7GB of data on its network each month. If you’re just surfing the web or reading email, however you can view 300 web pages each day and send 300 emails and reach the same number.

Some folks may not find the AT&T fees a limitation. But unfortunately, many of those people who don’t care about video or streaming music or downloading big files aren’t iPhone owners to begin with. The purpose of a smartphone is to go beyond just calls and text – or even email and web surfing.

If smartphone users want to do those things, AT&T is making sure it will cost them a lot more.

Tell us what you think here.

Article printed from InvestorPlace Media,

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