There's something sleazy about AT&T capping data plans right after raising early termination fees

For iPhone users already loathing AT&T, the carrier has given them a new reason: New data-capped plans introduced in somewhat sneaky fashion. Starting June 7th, AT&T will do away with unlimited smartphone data plans. The announcement comes one day after the carrier nearly doubled early termination fees for smartphones. Now we know the reason why AT&T instituted the new termination fees, or at least the timing.

Before June 7th, new or existing customers can still snag an unlimited plan and keep it even after AT&T introduces 200MB and 2GB data caps. But if subscribers make account changes, including new activations, they get bumped into one of the new capped plans. AT&T also will offer iPhone tethering, which a customer service rep told me today will be supported by iPhone OS 4. But to get tethering, customers must sign up for or switch to the 2GB data-capped plan. AT&T won't let subscribers keep their unlimited plans and have tethering, too. AT&T also will impose data caps on iPad. A 2GB capped plan will replace the current unlimited option.

Data-Capped Scenarios

Family plan is one scenario where customers could see data cap on new activation. I say could because the AT&T customer reps I spoke to seemed sure but they also were trying to explain something just announced; they might not fully understand the new plans. I was told that even if someone has a family plan with unlimited data, new activations beyond the two lines already covered would be for one of the new data-capped plans.

AT&T customers can keep their unlimited plans when moving to new smartphones. But for new customers waiting for the new iPhone, there will be some tough choices. Signing up before June 7th would lock in unlimited data but prohibit the fully discounted, subsidized price on the new iPhone. Neither of the two AT&T customer service representatives I spoke with today could say if a customer could sign up for service before June 7th, return the iPhone 3GS during the buyer's remorse period, keep the unlimited plan and still purchase the new iPhone for fully subsidized price. My interpretation, based on timing: AT&T is purposely making such a scenario difficult to impossible.

Here's my reasoning: A number of existing AT&T customers have reported having their subsidized iPhone eligibility bumped up to June 21. Perhaps it's no coincidence that's 14 days after the new data plans come into effect. In most states, and California is not one of them, the buyer's remorse period is 14 days (Here it is 30 days). Phones can be returned during the 14-day period. By that reasoning, the new iPhone would be available for purchase as soon as June 22, just outside the zone where someone could easily sign up for new unlimited data service with iPhone 3GS but return the device in time to still qualify for subsidized pricing on the next Apple smartphone. The two-year contract is justification for the subsidy.

The timing seems deliberate for another reason: AT&T announcing data caps the day after raising smartphone early termination fees from $175 to $325. Customers looking for better data plans but still under contract would be less likely to jump to another carrier. I'm suddenly feeling quite good about T-Mobile; in October 2009 the carrier switched its main plans to unlimited data, phone and text. For 29 days in April and May, I switched back to AT&T and iPhone 3GS only to go back to T-Mobile and the Nexus One. Dropped calls and the $325 termination fee were major reasons for the switch back to T-Mobile. I would have been royally pissed if as a customer I learned about the new data-capped plans one day after AT&T raised termination fees by 86 percent.

What Price for Data?

Clearly AT&T is looking to reign in smartphone users. I assert this because of something that isn't changing. AT&T offers unlimited data plans for dumb phones, too. For example, there is a $10/month unlimited data option for dumb phones on family plans. An AT&T customer services rep told me that the new data-capped plans only apply to smartphones and PDAs. Subscribers can still get unlimited data for their dumb phones.

AT&T's press release is full of mumbo jumbo about how the new plans reflect the data usage of its smartphone subscribers. The carrier claims that "65 percent of AT&T smartphone customers use less than 200MB of data per month on average" and "98 percent of AT&T smartphone customers use less than 2GB of data a month." Really now? Then why cap their data usage and not that of dumb phone users, who assuredly use less? The answer isn't rocket science. Regardless of averages, in aggregate AT&T smartphone subscribers use more data than the network can handle.

People complain about dropped calls on AT&T even with four or five bars service strength. The calls drop not because of the signal strength, but network congestion. All that data consumption leads to call-failing congestion. Last night at the D8 conference, attendee David Roth told Apple CEO Steve Jobs that he and his wife love their iPhones and that they're satisfied with the speed of AT&T's data network. "Our concern is that we can't make a phone call on it." There was applause from the audience expressing similar sentiments. Roth lives in Houston. "The network has gotten so bad in the last year that we can't be on the phone for more than a minute without dropping a call." Jobs said that he had been told, presumably by AT&T, that technical changes, such as reallocating bandwidth, would ease the calling problems this summer.

But data capping could do lots more, particularly if smartphone usage is much higher than AT&T states. Something else: Because AT&T is letting subscribers keep existing unlimited plans, the carrier may be thinking more about the future. I must assume that AT&T expects the new iPhone will be a bigger seller, which would mean more activations and even greater strain on its network. The strange thing: I don't hear anyone complain about data speed. The problem is calling. So what does it say about the robustness of the 3G telephony network, if AT&T must cap data as a means of improving calling?

The real question: Will AT&T data subscribers be better off under the new plans? Perhaps you can answer the question. I would ask AT&T smartphone users to report their data usage in comments. If data usage really is as low as AT&T claims, on average, many subscribers will pay less. Whether or not customers pay less or more, AT&T collects less per month per activated line, while presumably paying Apple the same price per iPhone. That lesser amount is another explanation for AT&T raising smartphone early termination fees.

The 200MB DataPlus plan is $15/month and, for overages, $15 for another 200MB. So that's half the cost of the current $30, unlimited plan. The 2GB DataPro plan costs $25/month, and tethering will add 20 bucks but not increase the 2GB data cap. Additional data costs $10 for 1GB. For iPad, the new fee will be $25/month for 2GB data, or $5 less than the soon-to-be-retired $30 unlimited plan. If you use less data than these amounts, AT&T just lowered your monthly data fees. If you use more than 2GB, which I expect is the case for many iPhone users, Apple just jacked up your data fees -- or put limits on 3G network usage.