AT&T Inc. (NYSE:T)
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AT&T Inc. (T) is raising the ante again on data.
When customers sign up for a new plan starting Sunday, they will have to pay as much as 33% more each month, part of a strategy by the telecommunications giant to compensate for the 40% annual increase in wireless data use on its networks and to capitalize on consumers' tastes for data-hungry devices like the Apple Inc. (AAPL) iPhone.
AT&T noted under its new pricing structure, consumers will be able to use more data; however, they also will have to pay a higher bill, a continuing trend in the wireless industry. Since 2007, when the wildly popular iPhone debuted, AT&T has more than doubled average monthly data revenue per user to $25.14 in last year's third quarter from $12.01.
The wireless carrier has relied heavily on data to boost profits in recent years, as the market for new customers dries up. Data accounted for 39% of AT&T's revenue from wireless customers through the third quarter, up from just 20% in 2007.
AT&T and others have argued they need to carefully manage usage on their networks in the face of a coming shortage of available wireless airwaves, known as spectrum. The carrier is on the hunt for more spectrum following its failed $39 billion bid for T-Mobile, which it had said would bolster its network and ease capacity constraints.
Under the new plans, users will pay $5 more per month, though their monthly data allotment will rise. The least-expensive smartphone data plan, for instance, will jump to $20 for 300 megabytes of data--about an hour and a half of streaming video--from $15 for 200 megabytes.
The average monthly user, though, consumes more than twice as much data as AT&T's cheapest plan. Smartphone users on average downloaded 606 megabytes of Lady Gaga songs and episodes of "The Office" in last year's third quarter, up from 338 megabytes a year earlier, according to data tracker Nielsen.
Though existing customers can keep their plans, including a previous $30 monthly unlimited offering, the price changes upset some who said AT&T was simply trying to wring more out of their users.
"It seems like they are going to just keep raising prices; and for what?" said Kamille Cooper, 22, an iPhone 4 user who has maintained her $30 unlimited AT&T data plan for about four years. "It makes you wonder when they are going to come after the people like me."
AT&T introduced the first data caps in 2010, arguing consumers who traded down to lower-priced plans could save money. The move pitted it against rivals Sprint Nextel Corp. (S) and T-Mobile USA, which have maintained unlimited offers, while Verizon Wireless also rolled out tiered pricing plans.
"We think it made sense to give customers more data upfront and to give them more value," an AT&T spokesman said. "Data usage continues to increase."
New AT&T smartphone and tablet customers needing more data will pay $30 for three gigabytes of data, up from $25 for two gigabytes, and $50 for five gigabytes, from $45 for four gigabytes. That compares with Verizon Wireless's two-gigabyte and five-gigabyte plans for $30 and $50 per month, respectively.
Raising prices on new customers also could have the effect of lowering customer turnover, a closely watched industry metric, said Robert Cross, chief executive of Revenue Analytics, which advises companies on pricing strategy. "This certainly could help them retain customers who are worried that they'll lose their unlimited plans on another carrier."
However, AT&T risks riling its light-data users who aren't much of a drain on network capacity, Cross said.
"You have to reward customers for low use too," he said.
-By Greg Bensinger, Dow Jones Newswires; 212-416-4676; firstname.lastname@example.org