AT&T Data Plan Changes Are Bad News for Apple
Today AT&T announced new smartphone data plans (http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=30854) that are bad news for Apple and its line of iPhone smartphones and the recently released iPad. The new plans eliminate the unlimited data previously enjoyed by iPhone and iPad customers and replaces them with limited data plans of 200 MB on the low end and 2 GB on the high end.
AT&T Mobility CEO Ralph de la Vega, in one of the most oblivious statements to date, said “AT&T helps mobilize everything on the Internet – your favorite web sites, TV shows, music, games and social networks. Virtually everything previously done while sitting at a computer can now be done on the go.” With the unlimited plan everything you previously did on the computer could be done on the phone, but the new data limits take several of the items in his list off the table entirely and raises doubts about the rest.
According to AT&T’s press release the 200 MB plan will let you watch about 20 minutes of video. That might sound good, but that’s not even the length of an average American sitcom. So if by “TV shows” de la Vega means almost a whole show, then sure, but that’s not going to work for most. The 2 GB plan will only let you watch 200 minutes, or just about 1 weekly hour long drama. Television might be possible, but these new plans make it utterly impractical.
Streaming music isn’t going to fare much better, even at highly compressed rates the 200 MB plan won’t give you but a few hours of listening pleasure and the larger plan, while 10 times larger, isn’t going to give you more than a few work days of musical bliss. I don’t think games, email, social networking (Flickr and Facebook photos will eat your cap in no time) are going to fare any better.
“To give more people the opportunity to experience these benefits, 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. This would be good news for many people, but the problem is that they are making it affordable by raising the rates on the people who already enjoy these benefits. Heavy data users (that’s us iPhone owners, and if you have an iPad you’re even worse) will end up spending more money because of the extra $10 per GB fee AT&T has cooked up.
In the last 24 hours I consumed about 105 MB of data on AT&T’s network with my iPhone (WiFi only iPad for now, and now, probably forever). That didn’t include a single photo upload or watching even 1 second of video. On a weekday when I am not out killing time and have to do work. Multiply that out over 30 days and I will exceed the 2 GB limit, in fact I will probably exceed 1 extra GB bucket, so I’d be charged for two. Total price? $25+$10+$10=$45. That’s $15 more (plus tax) than I spend right now. Where exactly are my savings again?
From the press release: “The new AT&T plans provide large amounts of data to enable people to enjoy their favorite online activities”. I don’t know about you but 200 MB of data doesn’t even come close to my definition of large, though it is nearly identical to my definition of paltry. The original iPod Shuffle holds half of the data AT&T will so begrudgingly allow me. My cable company caps me at 250 GB and with streaming video content that can get tight. I believe the PR folks over at AT&T could use a dictionary to look up the meaning of “large”.
So, how does this all translate into bad news for Apple?
A portion of Apple’s revenue stream comes from selling content over AT&T’s network. If you’ve ever purchased an App while standing in line or bought a song you just heard on the radio while around town, you’ve given Apple money through AT&T’s network. Recently there was a big change to the App Store allowing the download of apps up to 20 MB in size over the 3G network (for those doing the math at home, that’s a whole 10 apps on the 200 MB plan). Apple is going to lose a lot of impulse buyers when the purchase comes with saddled with a data surcharge. The app store isn’t set up to handle find now, buy later transactions. The bottom line is this is going to hurt Apple’s bottom line.
The newly announced iAds advertising network presents a similar problem for Apple (as does the entire ad supported app economy). Will anyone want to use apps that eat their precious bandwidth to bombard them with products while lining someone’s pocket? In-App purchases fall into this category as well. If everything I want to put on my phone might cost me a data surcharge, I am going to be very careful with what I buy and when. If that 99 cent app is going to push me over my limit, it might become $10.99 or even $15.99. The last thing Apple needs is consumers weighing the pros and cons of each and every app purchase. The App Store flourished with the impulse buy and this new data pricing puts a serious damper on the party.
Beyond the direct hits to revenue the new data plans will also push down the enthusiasm for the iPad. One of the best examples of the iPad’s promise is in the Netflix app. Well, I should say it was one of the best examples, now, it comes at too high a price. Who is going to stream movies over 3G when the bandwidth cap is so low that you’ll run out before finishing the first chapter of The Lord of the Rings. MLB at Bat, Slingbox, Orb Live, the list goes on and on of apps that won’t be useful on the go.
The iPhone isn’t going to get out unscathed either. One of the strengths (some would say weaknesses, but they aren’t taking to consumer view) of the iPhone has been its relative stability and reliability. The original iPhone had no App Store because Apple was worried that loading up the device with a bunch of apps would create an unstable (I’m looking at you Treo 650) platform and terrible user experience. Eventually they relented and through the vetting of apps via the App Store, the iPhone performs well and is pretty reliable. One of the ways to keep a platform stable and reliable is to push updates out to the end user as often as you can, making sure any bugs that pop up are quickly gone. In the few cases where I have had an app go haywire it was an easy fix. Either I downloaded an update or deleted the app and redownloaded a fresh copy from the App Store over the 3G network. Easy, simple. No more. Now I will have to wait until I can find a WiFi access point to get things back to normal because the data charges aren’t worth it.
Hopefully, Apple won’t see droves of customers demanding refunds on the 3G iPad but I wouldn’t blame those customers for asking for their money back. The iPad 3G was touted with an unlimited data plan that you could add and drop at will, as needed. Now, a few weeks after launch, that’s all out the window. Sure, there was no guarantee, but even in the fast paced world of technology, weeks is a little but too fast for the carpet to disappear from under your feet.
At the end of the day, this is just a little bump under the grinding treads of the Apple juggernaut, but let’s hope that somewhere along the way Apple figures out how to drop AT&T and get on board with additional US carriers so that competition can reign in the customer hating beast that we’re currently stuck with.