AT&T Institutes Wireless Data Cap

AT&T has a new pricing plan for iPhone and iPad users. It changes the way the phone company has charged people for downloading data from their mobile devices. Matt Buchanan, of the technology blog Gizmodo.com, talks to Steve Inskeep about AT&T's pricing shift, which could influence other companies.

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STEVE INSKEEP, host:

Today, AT&T is making available a new pricing plan for iPhone and iPad users. It's a shift in the way that phone companies have previously charged people for the downloaded data for their mobile devices, and it could influence other companies, as well.

To find out more, we've reached out to Matt Buchanan. He's with the technology blog Gizmodo.com.

Welcome to the program.

Mr. MATT BUCHANAN (Associate Editor, Gizmodo.com): Thanks for having me.

INSKEEP: I'm not sure that most of us, even those of us who may have a mobile phone with data, understand how exactly we're being charged for it. What is it that AT&T has been doing with iPhone users and iPad users?

Mr. BUCHANAN: So what they've been doing and what most carriers have been doing in the U.S., anyway, is you'll pay around $30 a month for an unlimited amount of data. You can download as much as you want and you can upload as much data as you want.

INSKEEP: Even if I'm totally obsessed and on this 12 hours a day, it's still just $30 a month?

Mr. BUCHANAN: Yup. I've heard of people going crazy downloading 20 gigabytes of data over their phone, which is a lot of data in a month. So - and that's part of the reason they're moving to these new pricing plans is because their network is kind of strained by all these phones. So what they're trying to do - what AT&T says is that 98 percent of users use less than two gigabytes of data a month. So what they're aiming at is this top 2 percent of users who use a disproportionate amount of data.

The top 10 percent of users use around 50 percent of all bandwidth on the network, and so that's who they're really targeting. Most people, though, probably use under a couple of hundred megabytes a month. For those people, the argument is that they'll be saving five bucks a month on the new data because...

INSKEEP: Because it goes down to $25 from $30, is that right?

Mr. BUCHANAN: Right. There's two new options coming up.

INSKEEP: Mm-hmm.

Mr. BUCHANAN: There is a 200 megabyte plan for $15 a month. And then there is a two gigabyte plan for $25 a month.

INSKEEP: Okay.

Mr. BUCHANAN: If you go over, you can get another gigabyte of data for another $10, which is actually a fairly reasonable overage fee.

INSKEEP: What happens if I'm one of these super, super users who is downloading music videos all the time and using tons of things and reading books on my iPad and doing a million other things at once? Maybe even, who knows...

Mr. BUCHANAN: You'll be...

INSKEEP: Using the NPR app - any kind of thing like that?

Mr. BUCHANAN: You'll be paying more for that data. The point is that you're going to be paying for all of the data you use. It's not an all-you-can-eat buffet anymore.

INSKEEP: And so, what's wrong with that?

Mr. BUCHANAN: Well, there's nothing wrong with that, actually, because network capacity is a finite resource. And so, when you have a small number of users responsible for people maybe dropping calls at certain areas and this sort of thing, you'll understand why there's an incentive to have people use less of the network and less bandwidth when you have these phones that can do so much.

But there are a couple of things going on here. If you look at the way that the pricing structure is laid out under the new plan, you're actually paying more per megabyte of data. Like, if you break out how much you're paying for each byte of data, people getting the $15 a month plan are paying a lot more per byte than people on the two-gigabyte plan and people obviously, under the unlimited plan.

INSKEEP: The bottom line is, rather than a flat fee, you're getting charged a range of fees by AT&T. Other companies could plausibly follow this. And I suppose that you're reporting follows on the suspicion that most of us would have. When a company goes to the trouble of messing with its price structure like this, one way or another, they're going to get more money out of us. That's why they do it, right?

Mr. BUCHANAN: Yes. A lot of people will save money initially. But the issue for me is in six months, two gigabytes of data, which for now is a lot of data for most people, may not seem to be that much data, especially when you have the new iPhone coming out that can stream Pandora or NPR in the background. You'll be able to stream...

INSKEEP: Use it as a full-service radio basically, a music service.

Mr. BUCHANAN: Right. The amount of data that doesn't seem - that seems like a lot today may not seem like so much tomorrow.

INSKEEP: So basically, AT&T is setting us all up to profit later from our crack addiction.

Mr. BUCHANAN: Yes. Well, and I mean, you know, this model in some ways was sort of inevitable. The all-you-can-eat buffet can only last so long because, you know, when you're talking about millions of phones downloading gigabytes of data a month, that's a huge infrastructure problem. And AT&T has just been hit the hardest by it because they've had the phone that's been most attractive for this kind of thing.

You know, right now, other carriers so far are sticking with the all-you-can-eat plan. But typically, in the phone industry, at least in the U.S., when one carrier makes a big move, the others follow in due time. So AT&T is really the first to move from this all-you-can-eat to paying for every pound that you eat.

INSKEEP: Matt Buchanan writes for Gizmodo.com. Matt, thanks very much.

Mr. BUCHANAN: Yup, thanks for having me.

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