Can AT&T tame Apple iPhone data hogs with tiered-pricing?

Apple Online Store“Pity poor AT&T. The wireless operator with exclusive rights to sell the iPhone in the U.S. is bashed incessantly for service that rarely lives up to the elegant promise of Apple’s sleek device. Now, when many consumers feel they should be receiving rebates, the company is getting lambasted for hinting it might take measures to rein in the heaviest iPhone users. Some customers even planned to crash the company’s wireless network on Dec. 18 in protest,” Peter Burrows and Olga Kharif report for BusinessWeek.

“Yet Ma Bell, for all her shortcomings, has a point. With the smartphone fast replacing the PC as the center of many consumers’ digital lives, changes in the way people use mobile computing are inevitable,” Burrows and Kharif report. “Analysts and other experts say wireless operators need to train American consumers that bandwidth isn’t unlimited. That won’t just be good for phone companies; it’ll be good for virtually all mobile phone users. Today, AT&T says 3% of iPhone users account for 40% of the traffic on its data network. The other 97% may get better, cheaper service if YouTube video and online radio addicts paid more for the network upgrades required to support their habits. ‘It’s not a question of if this changes, it’s a question of when,’ says analyst Charles S. Golvin of Forrester Research.”

Burrows and Kharif report, “In the three years since the iPhone’s debut, data traffic on AT&T’s network has soared 5,000%. De la Vega is certain it’s just the beginning. Tens of thousands of software developers are dreaming up applications to run on the iPhone and devices from Research In Motion, Motorola, and Nokia. Several apps already use unprecedented amounts of bandwidth: Ustream allows people (like actor Ashton Kutcher) to broadcast live video to millions of fans over the iPhone. ‘Other carriers are just getting a glimpse of what’s coming,’ says de la Vega.”

“AT&T, meanwhile, is racing to improve,” Burrows and Kharif report. “It’s upgrading software that should double the speed at which bits move from a phone to the nearest cell tower and digging trenches to add 100,000 fiber-optic lines to connect cell towers back to the Internet. Overall, the company is expected to invest $7.5 billion in its wireless network this year, says market research firm Ovum, slightly more than Verizon.”

Full article here.

[Thanks to MacDailyNews Reader “James W.” for the heads up.]


  1. No, we won’t get better or even cheaper service. We will get more restricted service for higher costs. Same old story. If AT&T;and others cannot build a network large enough, then I say it’s time to call in the Obama administration and let’s put people to work building the next great public works project, the great American digital highway of the 21st century. Turn it all over to the government. That’s how sick I am of all these Balkanized crappy over priced bandwidth services from cable to wireless. He’ll, make the “highway” free so people can get some freAking work done.

  2. If you tag the few that use the most and frees the rest from network issues-Good for ATT. Just allow our phone to have real time data tracking. I have no problem with the few using gobs of data. Just allow them to pay there fair share. But it does create a bad slope for the general consumer, that I have concerns about.

  3. When Steve P. Jobs return to apple in 1997 he said: “We need Office in the Mac, so we better treat well the company that put it there” (microsoft).

    AT&T;should do the same, they are making a lot of profits and getting a lot of new customers thanks to the iPhone, so they better treat very well the company that put it there.

  4. @theIoniousMac
    there SHOULD be one unified network in the united states. wireless communication has become a necessity and its clear that independent providers cant get the job done.

  5. If spending 7.5 bil a year is not treating costumers well, what is? Do you realize that fiber optical lines and cell towers are real physical things, not just some software. They cannot just wave a wand and increase capacity. It is taking 13 years to build a new bridge accross the San Francisco bay. Commuters know there is not enough capacity now but can actually see that it takes time to fix things. Go to Verizon if you are not happy. You can do that in a new york minute. I for one have three iPhones and would prefer a pay per use program. If that did not reduce my rates I would be very surprised.

  6. Data hogs spoil it for everyone else.

    No doubt some ATnT iPhone customers are using the data service in place of home internet access. That is cheating. It hurts every other ATnT customer.

    Weed them out without hurting most users and you have a win-win situation.

  7. I think some sort of tiered pricing is not only unavoidable, it’s probably a good thing. I use my iPhone a lot, but I’m certainly not in the top 3 percent tier (I don’t stream video or watch hours of video a day). My utility company has a tiered pricing, where the marginal cost for additional watts gets higher and higher, but basic usage is pretty affordable. That way, I can choose to power a huge Christmas light display, but I know I’ll have to pay for it (and not expect my neighbor to absorb the expense).

    There’s no reason why digital data can’t be priced the same way. Frankly, the top 10 percent of users SHOULD be paying extra for their bandwidth. And either normal users like me will pay a little less, or have a slightly speedier Internet.

    It’s like email: everyone demands email should always be free, but if you charged one cent to send each email, spam would disappear overnight and my costs wouldn’t amount to very much.

    New technologies demand new ways of thinking, and new ways of pricing. The iPhone is no different.

  8. How about two tiers of pricing. One that will cover 97% of the users, and a higher tier for the 3%.

    This will result in some of the 3% curtailing their high use of data, and some of the others will continue to use more — and will pay more. And there will be some extra revenue to use for expanding the network.

    Keep on expanding the network and revise the cut-off for the higher tier periodically so that it only affects about 3% of the users.

  9. They will. Handle data similar to voice, in that there is tiered pricing, and the middle-of-the-road user should not see a price difference. Don’t forget rollover megabytes. If you use a lot one month and not much another, thats where the frustration with teired pricing: everyone wants to get their value without getting reamed for going over a little on rare occasion. As long as they aren’t seen as hostile to consumers, its fine. Realistically, those who use a lot should expect this. Starting out unlimited I see as a way to both promote its use, and seed a pool of statistics for when tiered pricing is neccessary. the iPhone was different enough that using the existing statistics would have been trouble.

  10. “then I say it’s time to call in the Obama administration and let’s put people to work building the next great public works project, the great American digital highway of the 21st century. Turn it all over to the government.”

    Oh, really? Do you understand that the government has NO money of its own, only that which it would take via taxation from non-owners of iPhones?

    We could “pay” for it via printed Monopoly money which we are doing now at the rate of 50 cents on the dollar. For every dollar that we “borrow” (Borrow from what?) 50 cents is unaccounted for. By the year 2023, public debt will be 100% of GDP.

    When Medicare was first proposed, it was projected that the total cost roughly 20 years later would be ONE TENTH of what it actually came to be in the year 1993.

    Tell me exactly why this would be different.

    Not gonna happen!

    If you suck up the band width, pay the price. Simple and fair.

  11. Oh they’re going to do this, alright. It’s the only way to moderate bandwidth usage. Pay to play is the capitalistic way.

    Caps and limits is the American way.

  12. “AT&T;says 3% of iPhone users account for 40% of the traffic on its data network.”

    What percentage of PRE users are using what percentage of the traffic on Sprint’s data network?

    What percentage of G1 users are using what percentage of the traffic on T-Moblile’s data network?

    What percentage of Droid users are using what percentage of the traffic on Verizon’s data network?

    Does anyone know?

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