AT&T dumps iPhone unlimited data plan, adds tethering

New capped data plans go into effect June 7; advocacy group sees 'price gouging'

AT&T today announced that it is dropping its unlimited data plan for new iPhones as of June 7, and said would also offer tethering to iPhone customers for an extra $20 per month.

Rather than offer new iPhone customers its current unlimited data plan, which costs $30 per month, AT&T will provide a pair of plans that cap the amount of data users can consume before paying additional fees.

AT&T characterized the move as a win for consumers. "We're breaking free from the traditional 'one-size-fits-all' pricing model and making the mobile Internet more affordable to a greater number of people," said Ralph de la Vega, AT&T Mobility CEO, in a statement today.

But the advocacy group Free Press said AT&T's new plans are anti-consumer. "While AT&T asserts that its high-end 2GB cap will only impact the heaviest users, the fact is that today's heavy user is tomorrow's average user," warned M. Chris Riley, the organization's policy counsel, in a statement. "It is price gouging for AT&T to charge the low-end users $15 per 200MB, and to charge $20 for tethering capability even if no additional capacity is used."

AT&T will kick off the new capped plans next Monday, the opening day of Apple's Worldwide Developers Conference, where Apple CEO Steve Jobs is expected to unveil the next iPhone as he touts the iPhone OS 4 operating system.

The new $15-per-month DataPlus plan limits monthly data consumption to 200MB, with each additional 200MB running $15. Data Plan Pro, on the other hand, costs $25 per month and caps data at 2GB, with each 1GB beyond that priced at $10.

AT&T's unlimited data plan for the iPhone has been a hallmark of the U.S. carrier's partnership with Apple , but AT&T has regularly complained that iPhone customers consume the bulk of its data capacity, and have hinted that caps might be coming.

"This was inevitable," said Jack Gold, an analyst at J. Gold Associates. "Unlimited was unsustainable. This isn't like your cable modem."

Philip Redman, an analyst with Gartner, echoed Gold. "This was expected. Carriers have to come to a reckoning of cost and usage, and unlimited data plans were experimental," said Redman. "I see it as a win-win."

In Redman's eyes, AT&T's new $15 and $25 plans means a price cut of at least $5 for 98% of iPhone owners, the number Gartner estimates consume 2GB or less of data each month. "I've been a pretty negative voice on what AT&T has done in the past, but I really think this is a win-win for both AT&T and consumers."

Gold wasn't so sure. "How do they really know that?" he asked, referring to Gartner's estimate. "Only AT&T knows what their subscribers consume. So the big question is how many people is this going to effect? How many will go beyond the cap?"

If AT&T manages to squelch the heaviest users' consumption, and thus improve the overall performance of its network -- a sore spot with iPhone owners almost since the day Apple introduced the device three years ago -- almost everyone will be happy, said Gold. "One hopes [AT&T] was smart about the pricing of those plans," he added.

Apple has regularly defended AT&T , although it has acknowledged performance problems and said it has worked with its partner to address the issues. Yesterday, Jobs stuck up for AT&T, although his support sounded lukewarm. "[They're doing] pretty good actually," he said during an interview at the D: All Things Digital conference.

But when asked whether there would be advantages to having two carriers handle the iPhone in the U.S., Jobs' reply -- "There might be" -- added to the already-intense speculation that Verizon will get its hands on the iPhone .

"Actually, I'm surprised it took this long," Gold said about the new capped plans. "Bandwidth is limited and as more heavy-use devices, like the iPhone and the iPad , come on line, people are going to use more and more data. One of the major incentives [for customers] is 'What is this going to cost me?' If some decide not to watch YouTube on their iPhones because of the caps, maybe performance will get better in the major cities."

Both Gold and Redman expect other carriers to quickly follow AT&T's lead by capping their data plans. "This breaks the ice," said Gold. "Verizon will be next, maybe Sprint and T-Mobile will do it a little later because they have fewer subscribers, but everyone will do this. It has to happen."

AT&T also said it would introduce iPhone tethering June 7, a move the carrier has been saying would come "soon" for more than two years. As recently as mid-May, AT&T said it had "nothing new" to report on tethering.

When iPhone OS 4 launches -- that, too is expected to debut next week -- iPhone owners can tether their smartphones to a laptop or other device for $20 additional per month, turning the phone into a mobile hotspot that the laptop can use to connect to the Internet.

"A small but vocal minority wanted tethering," said Gold. "This will be a convenience for them. But it really doesn't cost AT&T anything, because the tethering is still capped."

Only customers who sign up for the $25 per month DataPlus are eligible for tethering, said AT&T today. And as Gold noted, any data received or transmitted by the iPhone during tethering counts against the plan's 2GB cap.

"What people forget is that it takes a lot more data to browse the Internet on a laptop than a smart phone because of the larger screen," said Gold.

Current AT&T subscribers with an iPhone can retain their $30 per month unlimited plan, the company said, but can switch to one of the new lower-priced plans if they want. iPhone owners will receive text messages as their data supply dwindles to warn them that they're approaching the cap limit, AT&T added.

More information about the plans can be found on AT&T's site.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld . Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed . His e-mail address is .

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