The all-you-can-eat data buffet is now closed

On Wednesday AT&T announced plans to scrap its unlimited data plan and replace it with tiered pricing.  New users will buy a bucket of bytes; most users are likely to select 200 meg for $15/month or 2 gig for $25/month.  Currently everyone pays a flat fee of $30, which means you can watch as many video files and download as many songs as you like -- marginal cost is zero.  With a flat fee, a relatively small number of power users ends up consuming a disproportionally large share of bandwidth capacity.  Under the new payment scheme, users have to decide if the value of the extra bytes offsets the extra cost, providing an incentive to conserve on data usage and thereby allow the existing bandwidth to be more widely available.

Ironically, AT&T has always sold a bucket of free minutes of phone time accompanied by a fairly steep fee for each extra minute.  One has to wonder why they and other carriers did not adopt this approach to data from the offset.  A possible answer is that they wanted to demonstrate the benefits of the device and encourage people to buy the service.  Now that the iPhone and other smartphones have become ubiquitous, the freebies for power users are over.  Most users will save a few bucks each month, as long as they do not get hooked on the YouTube app.