AT&T Drops Unlimited Data Plan, Impacts iPhone Owners

New iPhone owners might be unpleasantly surprised by a massive phone bill chock full of overage charges, says one analyst.

AT&T's decision to end all-you-can-eat data plans for smartphones (as well as devices such as the Apple iPad) doesn't bode well for newbie owners of the iconic iPhone, says Rob Enderle, analyst at the Enderle Group. Make no mistake: The iPhone is at the core of AT&T's change of heart, he adds.

Previously, AT&T offered an unlimited data plan for new subscribers for $30 a month. But this week the phone company announced it will end its unlimited data plan on June 7.

Now AT&T will offer two data packages: $15 a month for up to 200MB (plus $15 for each additional 200MB) and $25 a month for 2GB (plus $10 for each additional 1GB). Tethering will cost an additional $20 per month; tethering for the iPhone will be available with iPhone OS 4.0, expected to be released to the public this summer.

"I expect there are going to be some really pissed off iPhone users who don't anticipate the impact [of the new data plans] and will get one hell of a surprise when that first invoice bill shows up," Enderle says.

With the new, usage-based data plans, AT&T hopes to stem the tide of data usage flooding its wireless data network. AT&T has had trouble dealing with the unexpected and meteoric rise in data transfers caused by the iPhone and has invested billions of dollars to shore up its network infrastructure in heavy-use locations such as the San Francisco Bay Area and New York City.

"Remember, they're handling way more data traffic than all of their other competitors combined," Apple CEO Steve Jobs said of AT&T earlier this week at the AllThingsD conference. He added that any carrier faced with having to support the iPhone would run into the same problems.

AT&T's usage-based data plans are a pre-emptive strike against the next-gen iPhone, which is possibly coming this summer, and the recently released iPad, sez who. Both are expected to be data hogs. The iPhone 4G reportedly will have mobile video chat functionality, and the iPad is positioned as a multi-media device.

"AT&T will attempt to push as much of media downloads and video conferencing to Wi-Fi networks, as they did with the iPad, as possible," Enderle says. AT&T has more than 20,000 Wi-Fi hot spots in the United States.

Spinning usage-based pricing as a cost saver for customers, AT&T says that 98 percent of its smartphone customers use less than 2GB per month on average and 65 percent use less than 200MB. This means that many AT&T customers can take advantage of the cheaper data plans.

In contrast to iPhone users, BlackBerry owners stand to benefit from these usage-based data plans, according to CIO.com Senior Writer Al Sacco. In a statement, RIM says: "RIM welcomes this news since these new pricing plans will translate to savings for BlackBerry customers ... the BlackBerry platform is significantly more efficient than other mobile platforms and this leads to a major advantage for users with tiered pricing plans."

Given that the iPhone spurred mobile data downloads, it's a good bet that the two percent of AT&T smartphone customers using 2GB or more per month are mostly iPhone owners, says Enderle, probably younger users exploring the iPhone's new features and pushing the data limits. Analyst Drake Johnstone of Davenport & Company estimates AT&T has 15 million iPhone customers.

Are you one of the two percent? Current iPhone owners on the unlimited data plan for $30 a month and iPad owners on the unlimited data plan for $25 a month won't have to switch to one of the usage-based data plans, according to AT&T . But they can choose to switch to a cheaper plan if they don't use much data (and iPhone owners won't be penalized with a contract extension).

Of course, it would be good to know how much data you're using in a given month before deciding on a usage-based data plan. Tracking your usage is a simple process: On your iPhone, go to settings, general and usage, then reset statistics. The iPhone will keep tabs on data sent and received over the cellular network.

The alternative is to jump to a usage-based plan and hope you won't get surprised by the bill. "I doubt most realize how expensive this will be," Enderle says.

Tom Kaneshige is a senior writer for CIO.com in Silicon Valley. Send him an email at tkaneshige@cio.com. Or follow him on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline.

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This story, "AT&T Drops Unlimited Data Plan, Impacts iPhone Owners" was originally published by CIO.

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