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AT&T Moves Closer To Usage-Based Fees For Data

Posted by timothy on from the applied-price-theory dept.

CWmike writes "AT&T has moved closer to charging special usage fees to heavy data users, including those with iPhones and other smartphones. Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets, came close on Wednesday to warning about some kind of use-based pricing while speaking at a UBS conference. 'The first thing we need to do is educate customers about what represents a megabyte of data and...we're improving systems to give them real-time information about their data usage,' he said. 'Longer term, there's got to be some sort of pricing scheme that addresses the [heavy] users.' AT&T has found that only 3% of its smartphone users — primarily iPhone owners — are responsible for 40% of total data usage, largely for video and audio, de la Vega said. Educating that group about how much they are using could change that, as AT&T has found by informing wired Internet customers of such patterns. De la Vega's comments on data use were previewed in a keynote he gave in October at the CTIA, but he went beyond those comments on Wednesday: 'We are going to make sure incentives are in place to reduce or modify [data]uses so they don't crowd out others in the same cell sites.' Focus groups have been formed at AT&T to figure out how to proceed."

44 of 441 comments (clear)

  1. Time Machine by sopssa · · Score: 4, Insightful

    Welcome back to 2000. Data-usage fees per MB were common place back then. Now it's all based on the actual bandwidth, 512kbit/s, 1mbit/s and so on, like it really should be. Use how you want to. In Europe that is.

    It's funny to think that USA should be the best nation with technology and infrastructure, but still your internet connections suck this much.

    1. Re:Time Machine by Anonymous Coward · · Score: 3, Interesting

      Comcast was yelled at for throttling access to "heavy users," but slashdot linked an article where it proved that heavy users do not actually impact performance on the network for everyone else. (Hence, the throttling was a bogus move.) My question is does this extend to cell networks?

      It sounds like De La Vega is saying it's going to improve service when they educate smartphone users, and the users curb their heavy usage. Does heavy usage of a smartphone impact service for other phone users? Or is this another bunch of bunk?

    2. Re:Time Machine by MichaelSmith · · Score: 4, Insightful

      I suppose that would be possible if every part of the network could carry the maximum traffic of all the lines it feeds. But in practice that is not the case. For service delivery (lets say power) we pay a mixture of fixed costs for infrastructure and volume charges for the resource we use. I think that is the best way to go economically and it is fairer on all users as well.

      --
      http://michaelsmith.id.au
    3. Re:Time Machine by Trepidity · · Score: 4, Insightful

      As a technical reason, I'm not sure why charging based on the bandwidth is superior, if you know that the vast majority of customers don't max out the connection most of the time. Charging by usage seems a little closer to capturing the proportion of resources a customer uses in that case.

      There are other downsides to it, but they seem mostly like social ones, not technical ones. For example, people don't like feeling like they're being metered, and it has a chilling effect on a lot of online services if people have to worry about their bandwidth usage.

      --
      10 PRINT CHR$(205.5+RND(1)); : GOTO 10
    4. Re:Time Machine by interkin3tic · · Score: 4, Insightful

      Another sense of Deja vu: years ago AOL started offering unlimited connection, appearntly expecting people to not actually start using much more time.

      The results of ATT's experiment duplicate the results AOL got about 10 years ago. So obviously this is taking ATT by suprise. Different company. Different product: this is phones, not dialup! And of course they can't be expected to think about wheter or not they could meet demand before offering it.

    5. Re:Time Machine by elrous0 · · Score: 4, Funny

      Don't worry, AT&T's network coverage sucks so bad that no one will ever be ABLE to get close to the limit.

      --
      SJW: Someone who has run out of real oppression, and has to fake it.
    6. Re:Time Machine by Znork · · Score: 4, Insightful

      More like welcome to the telecom industry of the last century; an industry whose main product was a huge accounting system that also happened to include phone functionality.

      To discern the real intentions one does not need to look further than phone calls and SMS. They're metered. They deal with 'heavy users'. Are they cheaper per amount of data you transfer?

      Personally I'd rather sponsor some heavy users with a few percent of my bill than pay the thousands of times the actual cost that we somehow seem to end up with when having metered access.

    7. Re:Time Machine by PrescriptionWarning · · Score: 3, Informative

      I currently have a Palm Centro with AT&T and decided not to pay for the "unlimited" data plan which is about $30 per month I believe.

      However, I have on a couple occasions needed to use it to look up directions on google maps while in my parked car. A few minutes usage, and no more than about 1/2 a MB later I find a $5 charge added. Thats $10 per MB... RIP-OFF! If they did something like $10 per GB I'd be perfectly fine with that, since I wouldn't use the thing for video and music anyway, but to be able to occasionally check email or reviews on products before I purchase them that would be a reasonable amount.

    8. Re:Time Machine by MichaelSmith · · Score: 3, Insightful

      Say I build a house and rent it out. Once the house is built it doesn't really cost me anything from month to month So the rent must be almost zero right?. Of course I had to borrow to pay for the house (the infrastructure) and I need to make monthly payments on top of the small costs involved with repairs, council fees, etc.

      --
      http://michaelsmith.id.au
    9. Re:Time Machine by KefabiMe · · Score: 4, Insightful

      It's fact that the US is falling behind techonolgy wise and infrastructure wise. We don't have the best cell phones, or good internet access, or a highway system that's in good shape. Most of our energy is from coal and oil. Compare to ther counties that have modern nuclear power plants. Hell, we quit our own particle accelerated program and now cutting edge science is done at the LHC. I don't need the US to be the best, but I don't want the country to seem run down after a couple of decades of not moving forward.

    10. Re:Time Machine by swb · · Score: 4, Insightful

      Shock avoidance pricing.

      Most people, even though they don't use data much, would much prefer to pay a fixed $30/mo and have no surprises than to pay as they go and end up with $150 in data usage some month.

      By providing piecemeal pricing that's so high, almost everybody is herded into the fixed rate pricing to avoid surprises, even though if they did the math over a two year period they'd be better off with a couple of $150 "surprise" months and a few piecemeal months (say, $450) than had they paid the higher "unlimited" monthly plan ($720 for 2 years).

    11. Re:Time Machine by IndustrialComplex · · Score: 3, Interesting

      Say I build a house and rent it out. Once the house is built it doesn't really cost me anything from month to month So the rent must be almost zero right?. Of course I had to borrow to pay for the house (the infrastructure) and I need to make monthly payments on top of the small costs involved with repairs, council fees, etc.

      You missed his point.

      Let's say your house costs $500/month in upkeep/taxes/overhead. and another $500 in lost investment opportunity (interest on the value of the home). A reasonable rent would be somewhere along the lines of $1100/month. At that rate, you would be making 10% profit, which is a good target to shoot for in almost any business.

      If you were to charge rates similar to what the phone companies are trying to charge for overage, then you would be charging $10,000/month.

      Of course, since we are talking about the rental market, which is competitive, there is no way that you would ever be able to charge that as people would flock to your competition. However in the data market, all the companies have somehow and independantly stumbled onto this extremely inflated cost. They get away with it for two reasons, their product isn't a major life need, and people aren't yet used to using services which make use of the connnections which these companies were selling them.

      --
      Out of modpoints but really liked a post? 1BDkF6TtmmeZ3yqXbz9yhdYVqRYnwFoXDj
    12. Re:Time Machine by DisKurzion · · Score: 4, Insightful

      This doesn't really work though. The infrastructure was built using government funds. It has already been paid for. Any usage fees are upkeep and profit. Guess which one is the reason the fees keep going up?

    13. Re:Time Machine by peragrin · · Score: 5, Insightful

      I use some 300-500mb a month of 3G data on my iphone.

      The big question I have to ask if they charge per meg. can they block advertisers So I don't have to pay for things I don't want? Usage based billing will kill the web advertising business. As 30-40% of a web sites download size is images and flash related to advertising if I am paying per meg i am not dbouleing my bill just for crap I am not interested in.

      --
      i thought once I was found, but it was only a dream.
    14. Re:Time Machine by davester666 · · Score: 5, Insightful

      Dammit! Would you mind not actually using your phone the way we show you how to use it in our commercials!

      --
      Sleep your way to a whiter smile...date a dentist!
    15. Re:Time Machine by Sir_Lewk · · Score: 3, Funny

      I'm sorry, I'm just not getting this. You're going to have to put this in the form of a car analogy.

      --
      "linux is just DOS with a UNIX like syntax" -- Galactic Dominator (944134)
    16. Re:Time Machine by Grishnakh · · Score: 4, Funny

      This just reinforces why Europe sucks compared to the USA. How are your cellular companies supposed to realize giant profits for shareholders if they can't charge by the megabyte, and use a low-profit flat fee model instead? Even worse, your companies don't lock customers in with long contracts the way ours do. Things like these are why your companies' CEOs get paid so much worse than ours. Go USA!!!

    17. Re:Time Machine by EastCoastSurfer · · Score: 5, Interesting

      The problem is that ATT doesn't really want metered access either. Based on the statistics they are putting out, a huge majority of the iPhone users end up using very little of their data connection. If ATT moved to a metered access they would lose money because people would end up not using enough to add up to $30/month unless ATT priced the data at some astronomical rates. If they did that, they would simply be shooting themselves in the foot because people would quit using data (that's one way to fix the network problems lol).

      So, the solution is to keep everyone on 'unlimited' at $30/month and issue press releases blaming these 'heavy users' for the network problems without actually doing anything to fix the issue. It's not really ATTs fault, it's these mysterious heavy users fault. Don't blame us, blame them while we keep laughing all the way to the bank and you (att users) keep dropping calls and getting crappy service. Brilliant plan actually.

    18. Re:Time Machine by VisceralLogic · · Score: 4, Funny

      OK, so it's like your phone company says it's going to give you a Lamborghini, but only charge you for a Kia. Then, you get the car, and discover it's actually a Kia with a Lamborghini body kit. Then you get your first bill, and discover they're still charging you for a Lamborghini... actually, for 10 Lamborghinis.

      --
      Stop! Dremel time!
    19. Re:Time Machine by Mike+Buddha · · Score: 4, Funny

      Then you get your first bill, and discover they're still charging you for a Lamborghini... actually, for 10 Lamborghinis.

      You've pretty much described the purchase of every Apple product.

      --
      by Mike Buddha -- Someday the mountain might get him, but the law never will.
    20. Re:Time Machine by Shakrai · · Score: 3, Informative

      Sure they can. Build more towers.

      The tower isn't the major limitation. The amount of frequency space that they have licensed is going to be the major limitation in many areas.

      --
      I want peace on earth and goodwill toward man.
      We are the United States Government! We don't do that sort of thing.
    21. Re:Time Machine by ChefInnocent · · Score: 5, Informative

      Here on Slashdot, we really like our car analogies; it's a long held tradition. However, for your benefit:

      Say a pizza company comes up with a plan where you pay $300 per month for as many pizzas as you'd want with unlimited toppings. The company goes and advertises young people calling everyday to order a new variant of pizza, all smiling, happy, little pizza consumers. The advertising is effective, and the plan takes off; people everywhere are signing up for the $300 pizza deal. But instead of ordering Pizza the way the company wants/expected of 1 pizza a week (usually single pepperoni topping), college students actually order a fully loaded pizza every day. So now, the company is trying to tell people this small number of people are making it hard to do business because of a fringe group. In reality, the company is probably still doing well because the $300 covers the actual costs, plus they have all the people who aren't ordering pizza every day, but the profit margin just isn't enough. So now, some spokesperson is saying that in light of this fringe group, they might have to add a per pizza fee for each order on top of the $300/month.

      I hope this helps and functions as a reasonable analogy of the problem.

    22. Re:Time Machine by Shakrai · · Score: 5, Insightful

      Comcast was yelled at for throttling access to "heavy users," but slashdot linked an article where it proved that heavy users do not actually impact performance on the network for everyone else. (Hence, the throttling was a bogus move.) My question is does this extend to cell networks?

      It doesn't. Cell networks are an entirely different animal. Comcast can add more bandwidth by allocating more channels on the cable plant to DOCSIS service and/or splitting your neighborhood into different coax nodes so fewer homes/businesses share the same bandwidth pool.

      Wireless companies have a much harder time adding more channels. Spectrum licenses cost billions of dollars and oftentimes will come in an entirely different frequency plan that isn't compatible with existing devices (see T-Mobile's AWS purchase for a good example). Up to a certain point they can add more towers to make the footprint served by each tower smaller (analogous to Comcast splitting the node in your neighborhood) but this isn't always feasible. Community opposition and zoning requirements are often major stumbling blocks to building more cell sites. Interference from other cell sites is also a factor.

      The wireless data network was never intended to be used for large sustained transfers. It was intended to be used for remote productivity, light web browsing and other intermittent uses. Some of the engineers I've talked to at Verizon are even honest enough to admit this. This whole problem could have been avoided if the carriers had been honest in their marketing when they were rolling out data services.

      --
      I want peace on earth and goodwill toward man.
      We are the United States Government! We don't do that sort of thing.
  2. The classic double speak by pixelpusher220 · · Score: 4, Informative

    Claim: 3% of users consume 40% of bandwidth

    Telco solution: We must charge everyone based on usage!

    If they can identify 3% of people are using 40%, then by all means put a 'cap' on the fixed price service that *doesn't* affect the 97% of normal users. Charge for extra service for the offending 3%. They just use this as an excuse to slap everyone with higher rates.

    --
    People in cars cause accidents....accidents in cars cause people :-D
    1. Re:The classic double speak by Glendale2x · · Score: 4, Interesting

      Sounds like they're targeting the iPhone, only from AT&T.

      Company with fanatical users (Apple) creates a product that is data-heavy. AT&T must have seriously botched their usage projections, not bothered to do any, or figured they're just foist extra fees on their customers when it started to be a problem because they know anyone wanting an iPhone can't jump ship to a competitor.

      --
      this is my sig
    2. Re:The classic double speak by interkin3tic · · Score: 3, Interesting

      I'm really suprised they didn't try to blame this on jailbroken Iphones using tethering. It seems exactly like the type of thing they would scapegoat it on. They're trying to discouage both, and I could -actually- believe that's a -part- of it.

      I'm guessing they so misjudged usage that even if they stamped out tethering they still would be over, so they're trying to charge even people who aren't tethering.

  3. Corporations are people too by interkin3tic · · Score: 4, Insightful

    Corporate America: our mistakes are our customers' fault and they need to pay through the nose or else they'll never learn.

    Maybe with all the extra money they'll be getting with this, they'll upgrade their network so they can actually give people what they said they would give them at the price they said they would!

  4. Wrong story label by onyxruby · · Score: 5, Insightful

    This story should have been declared "AT&T Declares war on customers". For reasons unknown, AT&T just doesn't grasp the idea of upgrading their network. So they provide shoddy service and blame their users instead. They do everything except take care of their network and their customers. Why do they insist on infrastructure upgrades as a last result? How can they grow when they can't handle what they have now?

    They recently ranked dead last on a major US survey of cell phone providers for every single category. In all seriousness, what are they going to do when they are no longer the exclusive Jesus phone provider? People put up with for lack of an alternative network for their Jesus phone, without that exclusive they would start hemorrhaging customers.

    1. Re:Wrong story label by david_thornley · · Score: 3, Insightful

      Jesus phone? God only thinks he's Steve Jobs.

      Seriously, this is not the sort of thing Apple can ignore. Metering by the megabyte makes the iPhone less fun. It cuts into the experience. This is a serious threat to the iPhone and Apple's profit margin, and I really don't think Steve is going to take this lying down. No matter how many livers he has to go through.

      --
      "When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
  5. Dear AT&T by prockcore · · Score: 4, Informative

    Dear AT&T,

    The only way to fix your problems is to upgrade your network. Stop trying to punish users. Stop neglecting your network. Stop paying Luke Wilson to beat up strawmen on TV.

    If you don't get your shit together, I will be switching over to Verizon's Droid when my iPhone's contract is up.

  6. well by nomadic · · Score: 3, Funny

    As an iphone user, I say good. If the extra fees force those 3% to cut down a little, maybe my connection won't be so slow all the time.

  7. AT&T Then and Now by sycodon · · Score: 5, Insightful

    Then : Use AT&T and download video and songs faster!

    Now: Too many people are downloading video and songs!

    --
    When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
  8. False Advertising by Azureflare · · Score: 4, Interesting

    Does this mean I can get out of my 2 year contract then? This is blatant false advertising and breach of contract. I did not get an iPhone to have stone-age metered internet access.

  9. What's this line on my iPhone bill? by llamalad · · Score: 5, Insightful

    Dear AT&T,

    I could've sworn I remembered seeing something on my monthly iPhone bill... Ah, there it is.

    " DATA PLAN IPHONE 12/02-01/01 30.00 30.00
        Data Unlimited 12/02-01/01 0.00 0.00
            Includes:
            DATA ACCESS "

    See, AT&T? It's right where you printed it. Unlimited data for a predetermined cost.

    Now, AT&T, if you would please GTFO of here with this talk about billing me based on usage or prepare for me to take advantage of change in ToS so I can get out of my contract without penalty.

    Best regards,
    A guy who's looking forward to his contract ending so he can get an Android on a network that hopefully sucks less.

  10. Re:Profit by sarahbau · · Score: 4, Insightful

    I'd say greedy is luring in customers by advertising unlimited access, requiring them to pay $30 every month for two years for that access whether they need unlimited or not, and then deciding that they're using too much of their "unlimited" connection. I still don't understand how it's not illegal to advertise something as unlimited, and then limit it.

  11. Sigh by Locke2005 · · Score: 4, Insightful

    I keep predicting some sort of per-byte fees are inevitable, and people keep arguing with me. "It's not the tragedy of the commons because they can always build more bandwidth." No, wireless bandwidth is regulated by the FCC and finite. Why some people are so violently opposed to using simple economics to keep a few users from adversely affecting everyone else's user experience is beyond me. Sure, AT&T could build a better 3G network, but if you expect that grandma (that only uses a data connection to check her email once a day) should be subsidizing your addiction to streaming porn videos, you are one selfish son of a bitch.

    --
    I've abandoned my search for truth; now I'm just looking for some useful delusions.
  12. Re:DRM doesn't enter into it by CannonballHead · · Score: 3, Informative

    music you buy from iTunes has been DRM free.

    And yet, they want me to pay $100 to "upgrade" my iTunes store-bought music (the worst mistake in my online purchasing history...) to the DRM free version. Sounds like it was just another way for Apple to make more money. ;)

  13. Why is this a problem? by TRRosen · · Score: 4, Interesting

    Data has shown that iPhone users average 400MB/month. This is far and away the most by any group. AT&T charges $30/month for the iPhone data plan. That equates to over $60/GB but AT&T and just about every other carrier charge that amount for 5GB/month data plans. Doesn't make sense does it. Carriers are claiming they can't make money at $60/GB data while they charge only $12/GB on data only plans.

    I think we would all be giddy as school girls if they just charged everyone $12/GB for data making the average cost for data for iPhone user drop from $30 to $6. But for some reason I doubt that will happen.

  14. Funny, I read this... by Talonius · · Score: 3, Insightful

    ...and all I see are the same types of statistics that are strolled out by the ISPs when network usage and congestion become a problem. "Blame the top 3%!" "Bandwidth hogs!" "Piracy accounts for 75% of lost revenue!" Whoops, that last one slipped in but I think you get the point.

    There are always going to be maximum and minimum users - the whole idea is that, on average, you can handle the load. If you can't handle the load the problem is not the end user - it's you.

    AT&T has received plenty of money with which it could expand it's infrastructure. It could relieve the bandwidth bottleneck by releasing the iPhone exclusivity. It could have realized that unlimited users are going to consume as much as they can. Now they're on the hook and they want to blame the user? No, that doesn't float.

    (And if I see one more "unlimited*" notation I'm going to scream. When did unlimited get redefined as "limited to ..."? Why is that not false advertising?)

    --
    My reality check bounced.
  15. 3% use 40% ? by IGnatius+T+Foobar · · Score: 5, Insightful

    "AT&T has found that only 3% of its smartphone users -- primarily iPhone owners -- are responsible for 40% of total data usage"

    Or, put another way: AT&T has found that 97% of its smartphone users are not using anywhere close to the amount of bandwidth they are paying for.

    As a result, they should have plenty of extra capacity and plenty of extra cash for network upgrades, right?

    --
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  16. Pot calling the kettle black, non? by otter42 · · Score: 5, Insightful

    'The first thing we need to do is educate customers about what represents a megabyte of data...

    Excuse me, but aren't you the people who charge me for 1MB if I download 1byte?

    --
    www.eissq.com/BandP.html Ball and Plate System. Amuse your friends. Crush your enemies.
  17. Looking at it wrong by SolusSD · · Score: 4, Informative

    It would be just as correct to say that they found that 97% of their users are not properly taking advantage of their *unlimited* data plans. I've heard their argument with regard to home cable internet service. "1% of users are responsible for 90% of bandwidth usage". Well, when 99% of your users don't really need 6Mbps, but are paying for it anyway, they're being oversold. Those that take advantage of what they pay for are making good use of it. We need to turn this problem on it's head. Maybe automatic tiered pricing up to the unlimited plan. That would be more fair to light users. Of course, in that case, it is in AT&T's best interest to do nothing.

  18. AT&T needs to learn how society needs them by Whuffo · · Score: 3, Insightful
    Rather than try to find ways to charge users more for increased data transfers, AT&T needs to improve their infrastructure to support these needs. Those heavy users that they want to penalize are the vanguard of the future - everyone will be using more bandwidth as web pages get more complex and video / audio streaming becomes even more common.

    Increasing fees per MB now will provide a short-term increase in revenue - but it'll also open a window of opportunity for their competitors. Does AT&T want to be part of the future or would they prefer to be a "has been" on the sidelines as progress marches on?

  19. The beauty of percentages by DJRumpy · · Score: 3, Insightful

    I've said this before in other forums. The beauty of this idea is that there will ALWAYS be a top 3% list of of abusers. This is just a scam by AT&T to get more money. If/When Verizon get's the iPhone, people will bail on AT&T in droves. This will have the effect of reducing AT&T's overloaded network, but it will still leave the users with the bill...