This morning AT&T announced new data pricing for its mobile customers. Today's $30 per month unlimited use plan will be replaced by two plans:
- $15 per month for up to 200 megabytes of data, with additional blocks of 200 MB at $15 each.
- $25 per month for up to 2 gigabytes of data, with additional blocks of 1 GB at $10 each.
AT&T's CEO of Consumer, Ralph de la Vega, has publicly suggested on multiple occasions that network operators need to address the small percentage of subscribers that abuse unlimited usage plans and degrade the experience of others on the network. These suggestions have been met with howls by many, and I expect that we'll see similar reactions to this latest change. But will those reactions be justified? The answer depends on whether you believe AT&T's data on its current data users.
Mark Collins, AT&T's Senior VP of Data and Voice Products, told us that 65% of today's smartphone data users consume less than 200 MB of data per month, and 98% of them use less than 2 GB of data per month. These data plans then represent an opportunity for virtually all of AT&T's data customers to reduce their monthly data charges. For consumer product strategists, this change shows a remarkably (and, for some, surprisingly) customer-centric viewpoint. Why?
- AT&T provides tools for monitoring usage. AT&T realizes that US consumers despise limits and any sense that the clock is running when they initiate an activity on their phone. To mitigate this concern the carrier is providing historical usage views going back six months to let customers choose a new plan by examining their actual consumption (if they want — there's no requirement to change), as well as alerts as consumption reaches various levels during the month. (AT&T's not the first to do this, but that doesn't make it any less customer-friendly.)
- The new pricing is family-friendly. Today's unlimited plans are 'one size fits all' — but these plans don't fit family plan holders that want to allow their kids, spouse, or former college roommate who glommed on to their plan to access the Net, Facebook, or other data-hungry applications. The lower tier makes data a more palatable add-on, plus the consumption alerts go to the plan holder so they are able to decide whether to allow additional usage or put the brakes on until next month.
- Customers have more flexibility. It's not clear whether AT&T will promote this, but the company will allow customers to move freely between these plans during each month's billing period. That means that a 200 MB customer who is approaching his cap well before the month ends can simply go online and change to the 2 GB option for that month, saving himself $5 and getting a lot more data; similarly, a 2 GB customer who notices that her use is below 200 MB as the end of the month nears can decide to live with the 200 MB limit that month and save herself ten bucks. Granted this places the onus on the customer, but this level of control and flexibility is unheard of in the US wireless market.
All very nice, but it begs the question: Why is AT&T leaving money on the table? Can it be just to contend with the 2% of customers who are abusing the current plan. No. There are two reasons for this change:
- Data represents future average revenue per user (ARPU) growth. With voice ARPU declining, operators need more of their customers to opt for data plans in order to hold the revenue line. At $30 per month, the ceiling on adoption is much lower than at $15, and the tiered pricing provides some upside among the next wave of data adopters.
- Preparation for the future. As operators prepare to launch next generation networks that will deliver much faster data rates and enable users to consume significantly more data in a month than today's networks can deliver, they need a pricing strategy that will allow them to charge a premium and extract greater value from these networks. Flat-rate pricing will prevent them from realizing that value and limits their future data revenue. This is the real underlying rationale for these changes.
If you're an AT&T subscriber with an unlimited data plan, will you stick with your plan or take advantage of the savings opportunity?