dslreports logo

story category
Slate Still Thinks Overpaying For Wireless Data Is Nifty
Paying $10 Per Gigabyte 'Feels So Fair' Insists Author
by Karl Bode 03:24PM Friday Jan 21 2011
In 2009, Slate author Farhad Manjoo penned an article insisting AT&T should ditch their $30, unlimited data plan. At the time we pointed out how like many people, Manjoo was confusing reasonable per-byte pricing (paying for what you use) with what carriers really are interested in -- which is flat rate pricing with low caps and high per byte overages. Regardless, in June of last year Manjoo (and the investment communty) got what they wanted, when AT&T introduced caps as low as 200 MB and per gig overages as high as $10, some of the most restrictive plans in the industry.

Some people (like Manjoo) applauded the shift, not quite understanding they were applauding an entirely new overpriced data paradigm. While some variety of reasonable caps, throttling and/or network management are certainly necessary on wireless networks, AT&T's 200 MB cap was simply absurd in the age of wireless video. Fast forward to 2011 -- a month before the Verizon iPhone launch -- and Manjoo is back with a new piece again attacking the concept of unlimited data, insisting that flat rate unlimited pricing not only raises prices but "ruins the network." Manjoo goes on to insist that because the world so far hasn't shuddered to a digital halt, AT&T's ultra-low wireless caps must have been a good idea:
If you're worried about a world without unlimited plans, consider that it's been more than six months since AT&T imposed an iPhone usage cap, and so far the service is working really well. AT&T alerts you by text and e-mail when you're nearing your monthly cap, and surpassing the cap doesn't result in onerous fees. If you go over your 200 MB plan, AT&T charges you $15 for 200 more megabytes, and if you blow by the 2 GB plan, you're charged $10 for 1 GB more. Those are reasonable rates; indeed, because the prices feel so fair, I wonder if many people even notice that their plans are limited in any way. The caps are there, but in practice, AT&T's iPhone plan feels unlimited.
Those are reasonable rates; indeed, because the prices feel so fair.
-Slate, on AT&T's 200MB caps and $10 per gigabyte overages
One, it's not clear on which planet paying $10 per gigabyte is "reasonable." It's also not quite clear how you can claim in one sentence that the system "doesn't result in onerous fees," only to proceed to note in the next sentence that AT&T's overages are a whopping $10 per gigabyte. Granted what "feels fair" depends on your disposable income level, but for most AT&T users, AT&T's pricing "feels like having the ever-loving crap beaten out of you in a Detroit alley." As long as we're talking candidly about feelings, anyway.

Two, left unmentioned by Manjoo is the fact the majority of AT&T users were grandfathered on their unlimited plans. While AT&T required many users shift to the 2GB plan if they wanted to tether, smart AT&T users simply jailbroke their iPhone, tethered without AT&T's approval, and remained on their unlimited plans. It was telling that it wasn't until December that AT&T released any real data on their pricing shift, at which point they simply declared the pricing change was a smashing success because 7 million of AT&T's 93 million wireless users were now metered, with the "vast majority" of those on AT&T's "top shelf" 2GB plan.

Obviously that's a "success" for AT&T, as the entire point of their pricing plan was to drive the majority of users toward higher monthly bills under the guise of cost savings. With the vast majority of smartphone users consuming well in excess of 200 MB each month (and growing very quickly), they're all herded to the higher 2 GB tier. The actual choice in this regard is an illusion, and AT&T's absurdly-low 2 GB cap then shoves consumers head first into AT&T's $10 per gigabyte overage wall. As wireless video use evolves and average usage grows, AT&T then reaps the reward by imposing unreasonably high per gig charges on subscribers. Again, that's a success for AT&T, but not for the wireless user of 2015.

What's interesting is how people like Manjoo continue to accept the carrier claim that flat-rate unlimited data (terrestrial or wireless) is simply not possible, despite not one shred of raw network performance data from AT&T. With ever-evolving intelligent network gear, unlimited data absolutely is possible without "ruining the network," but only if you keep your networks upgraded in line with demand (you'll perhaps recall AT&T failing utterly in this regard in 2009). Consumers also like the simplicity of flat-rate unlimited, and continue to show they're willing to pay a premium for it. Others are ok with caps or even throttling, but they want the restrictions to be clear and reasonable.

So what's really AT&T's problem with unlimited? It's not congestion. Carriers AT&T's size have made a professional habit of using the congestion bogeyman to justify anti-competitive behavior and higher prices over the last decade -- amazingly without real supporting evidence. The reality is that when AT&T's network hasn't kept up with user demand, it has been AT&T's fault -- given they're sitting on $10 billion in unused spectrum and have repeatedly placed short-term investor satisfaction over consumer welfare or network performance on both the terrestrial and wireless fronts. Look at any number of consumer satisfaction studies, and you'll find the vast majority rate AT&T dead last. There's a reason for that, and it's not unlimited pricing.

The reality is that unlimited broadband doesn't allow a bloated, government-pampered giant like AT&T to artificially constrict the pipe. Artificially constricting the pipe is important to AT&T because in the age of open networks, AT&T executives realize market evolution could erode their gatekeeper power. In the era of Google voice, Skype and smartphones, SMS and voice revenues will continue to decline as everything becomes data, and all services (from voicemail to messaging) are developed by companies far more innovative than AT&T. That ultimately leaves AT&T as simply a network operator (gasp), jacking up data rates to unreasonable levels in the hopes of retaining something close to the level of cash cow comfort and market power they're used to.

Obviously AT&T's in the business to make money, and adjusting your business model to counter predicted losses is natural. But it needs to be remembered that as a company grafted to the bones of our intelligence apparatus protected by well-lobbied regulators, AT&T doesn't have to adhere to free market principles that punish anti-consumer pricing. As this pricing experimentation continues, consumers should be fighting vehemently to ensure caps and overages are reasonable, since nobody else will. Consumer groups are underfunded and forcefully marginalized, politicians and regulators treat such punitive pricing models as borderline patriotic, and the press apparently believes that $10 per gigabyte just "feels so fair."

If, like Slate, you're cheering wildly in blind support of unreasonably-low caps and ridiculously-high per byte overages in the age of HD video, you're cheering against our collective self-interests as consumers. We'll have to remember to thank you and Mr. Manjoo in 2015 when we have to take out a second mortgage just to watch a high definition film on our smartphones.

94 comments .. click to read