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AT&T’s Money-Saving Plans Will Cost Users More, Analyst Says

AT&T’s Money-Saving Plans Will Cost Users More
Apple Inc.’s iPhone with its applications and faster downloads, has phone users sucking up more data. Photographer: David Paul Morris/Bloomberg

June 23 (Bloomberg) -- When AT&T Inc. halted unlimited wireless data plans this month, the company said 98 percent of smartphone users would save money with its new pricing. The savings may vanish for half its users by 2013, one analyst said.

The average customer will consume more than 2 gigabytes of data a month within three years, up from 150 megabytes in 2009, according to independent analyst Chetan Sharma. Though AT&T could change its rates in the future, the cost of such data use at current rates is $35 a month. That would make it more costly than the $30 AT&T previously charged for unlimited data use.

With devices such as Apple Inc.’s iPhone and HTC Corp.’s Evo offering more applications and faster downloads, phone users are sucking up more data watching smoother YouTube videos and “Iron Man” films.

“The devices are getting much, much better so the opportunities to multitask are more attractive,” said Sharma, who has written five books on mobile technologies and consulted for companies such as Motorola Inc. and Qualcomm Inc.

The new pricing plans may help boost AT&T’s revenue, as its traditional landline voice business shrinks. Wireless data revenue increased 30 percent in the first quarter, while landline voice revenue fell 12 percent.

Mark Siegel, a spokesman for Dallas-based AT&T, declined to comment on the potential costs of its service in the future.

“The vast majority of users will benefit from our new plans,” he said. “You can switch between plans even in the middle of a month, and we let you know if you’re getting near your plan limit.”

‘Not Unreasonable’

Under AT&T’s new plans, users can select either a $15 monthly charge for 200 megabytes of data or a 2 gigabyte plan for $25 per month, the carrier said. Users who exceed the 2-gigabyte level pay an additional $10 per month for an additional 1 gigabyte of service.

It’s not only heavy data users who may be affected, Sharma said. By year’s end, the average AT&T customer will have doubled their data consumption from 2009 to 320 megabytes, according to his estimates. Only 35 percent of AT&T’s smartphone customers use 200 megabytes of data or more, the company said.

Sharma’s forecast that half of AT&T’s smartphone customers will use more than 2 gigabytes of data is “not unreasonable,” said Christopher King, a Stifel Nicolaus & Co. analyst in Baltimore, though he said it’s difficult to predict such trends because they depend on the introduction of new phones, applications and wireless technologies.

Future Pricing

AT&T, the second-largest U.S. mobile-phone carrier, may also adjust its prices in the future, potentially lowering costs for heavy data users, said King.

“There’s no way that AT&T is going to maintain their tiered pricing as they do today,” he said. “They’ll have to raise the caps on data usage.”

Verizon Wireless, the largest U.S. mobile-phone carrier, may follow AT&T in eliminating unlimited wireless data plans and introducing tiered pricing, John Killian, chief financial officer of Verizon Communications Inc., said in an interview last week. Sprint Nextel Corp., the third-largest U.S. wireless carrier, said it has no immediate plans to change its pricing.

AT&T’s pricing in the future will depend in part on how rivals react to its new plans, Sharma said.

“Clearly AT&T will have to continuously monitor their own network and potentially keep on adjusting these caps,” he said.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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