AT&T's tiered pricing monetizes mobile data usage

Jessica Scarpati
02 Jul 2010

Smartphone users are gluttonous data consumers, and wireless carriers have been eager to put them on a diet. Replacing all-you-can-eat data plans with tiered pricing -- such as the strategy AT&T announced last week -- offers operators a way to monetize surging mobile data usage. But carriers must balance the desire to up average revenue per user (ARPU) with the risk of more "bill shock" cases if customers don't have proper visibility into their data usage.

Subscribers understand how many minutes a 10-minute call deducts from their voice plan, and monthly billing statements itemize each call. Text messages carry a flat rate. But existing service plans must offer comparable insight into how many megabytes subscribers consume when loading a website or using a third-party smartphone application.

"It's definitely in the interest of the operators to become more consumer-friendly when it comes to pricing and awareness," said wireless consultant Chetan Sharma. "There are two factors that come into play. One is bad PR -- somebody ends up with an $18,000 bill, and those cases don't look good for the carriers. The second is that the FCC is taking a look into this issue anyway."

AT&T intends to purge its unlimited data plans and replace them with two tiered-pricing models -- DataPlus and DataPro -- which offer 200 MB and 2 GB caps, respectively. When customers' data usage exceeds their plans' caps during a billing cycle, AT&T will charge them a flat fee to add more capacity. The plans cost $15 and $25 per month, down from the $30 per month for the now-extinct unlimited plans. Subscribers can move between the plans without incurring fees.

As part of the tiered pricing announcement, AT&T said 65% of smartphone users currently do not use more than 200 MB a month; it said 98% of smartphone customers don't exceed 2 GB monthly.

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