Unlimited data plans, R.I.P.

AT&T announced last week that it was no longer providing unlimited data to its $30/month customer base.  Once users reach 3GB per billing period, their speeds will be slowed significantly.  Right now 5% of users will be impacted, but that percentage is sure to rise.  AT&T customers have three options: (1) be more careful with their device settings and use WiFi as much as possible (as opposed to the 3G or 4G AT&T network), (2) switch to a different billing plan and pay higher monthly rates to get the same speeds as they did under the original plan and (3) switch to other carriers.  Sprint is the only other carrier with an unlimited data plan and, unless they see a surge in customers, one would guess that they will be next in line to generate more revenue from network users. 

In the short term, I imagine there will be some very upset, unhappy people.  But as broadband gets more and more available and runs at faster and faster speeds, one must question how much value AT&T's proprietary network will generate. 

Not so fast on AT&T merger with T-mobile

The US Department of Justice has filed a lawsuit to block the proposed merger between the nations 2nd and 4th largest wireless carriers.  The Feds say the merger will result in reduced competition, meaning higher prices and less innovation.  AT&T and T-Mobile obviously disagree and the burden of proof will be on the DoJ. 

It will be interesting to see the proof.  Deputy Attorney General James Cole makes two unconventional arguments for an antitrust case: (1) that the merger would adversely affect those with low incomes and those living in rural areas and (2) T-Mobile would expand and create jobs whereas the merged firm would eliminate jobs.  Antitrust laws in the US have traditionally focused on maintaining competitive conditions.  One will search in vain to find language regarding citizens in rural areas, low income citizens, or job creation in the Sherman Act, Clayton Act or FTC Act.  In fact NYT notes that T-Mobile's parent company Deutsche Telekom is looking to exit the US market.

As MBA 505 students learn, there is a crucial difference between protecting competition in the marketplace and protecting individual competitors in that marketplace.  As long as Verizon sticks around, AT&T is likely to have all the competition it can handle. 

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.