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AT&T tiered data plan and questions about regulatory oversight

Thanks to reader bitter_bill for asking how a previous post on AT&T data pricing relates to tech policy.

Good question. There's lots of interest in Washington about consumer billing practices. There are also questions about the Federal Communications Commission’s push for better authority to regulate broadband services that could affect the wireless mobile broadband industry.

Rebecca Arbogast, a tech policy analyst at Stifel Nicolaus, said she believes the FCC will continue to allow wireless providers to experiment with different business models, including tiered pricing like that announced by AT&T. The FCC has said it is debating whether to include wireless services in its push to redefine broadband as a telecommunications service. The biggest concern by investors is that the move would -- particularly down the road -- lead to price regulation of broadband and a requirement for network operators to share their Internet lines with competitors.

Regulators will like how AT&T’s plan allows for a lower entry point for Internet users and is designed to clearly inform users when they go over their allotted amount of data for the month, Arbogast said.

But she noted that such pricing models would get greater scrutiny for broadband providers who also produce content. Time Warner Cable scrapped tiered pricing plans after pressure by public interest groups and lawmakers who feared those that models would allow the broadband and cable company to favor its own content.

“The analysis of caps and tiers may ultimately be different for companies that are both broadband providers and content owners, if the caps or tiered pricing apply onto broadband service in a way that makes Internet video a less effective competitor to subscription video,” she said. (Read: Comcast-NBC Universal merger.)

Check out this guest op-ed on CNET by Robert Hahn, an economist professor at Manchester University, and Peter Passell, an economics professor at Columbia University. They say the FCC shouldn't regulate prices on wireless services.

But you can bet there will be pressure on the FCC by consumer groups to scrutinize tiered pricing.

Free Press, a public interest group, said the move is an “overcharge scheme” and will deter consumers from using mobile broadband services. The iPad and other mobile devices and tables geared for Internet use will only lead people to watch more video and use more bandwidth-intensive applications in the future.

“The fact is that today’s heavy user is tomorrow’s average user,” said M. Chris Riley, Free Press policy counsel.

That said, AT&T’s new wireless data pricing plan – the end of all-you-can-eat flat rates for new customers – has drawn mixed and many positive reviews.

Check out David Pogue’s review of the plan in the New York Times, which he said is consumer-friendly and fair. The Post’s Rob Pegoraro said most people don’t blow past the limits set by AT&T – in other words, they probably wouldn’t be dinged with overcharges.

By Cecilia Kang  |  June 4, 2010; 9:30 AM ET
Categories:  AT&T , Broadband , FCC  
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Comments

I join others who hope the FCC leaves the wireless operators alone, unless there is a major market failure, and I don't see one.

I'm disappointed in the very weak statement by Free Press, which I found on its web site. First, Free Press says "the company’s investments as a percentage of its revenues are steadily declining." Wireless equipment investment has its ups and downs. With LTE on the horizon, it makes no sense to beef up the previous-generation system -- except there there are coverage problems -- when it is going to be replaced in a few years.

Now, on to the Free Press criticism of AT&T's new tiered rate scheme. It is clear Free Press does not like it, but it does not suggest an alternative. I presume it would rather the current flat rate remain in place. If it does, and if data usage increases as Free Press and others suggest, the flat rate will merely be increased. Those low-data users will be subsidizing the higher-data users even more.

Free Press criticizes the $20 tethering fee. On the Faster Forward piece on this I have attempted to provide justification for the fee. I will not go over it again here. I seem to be the only one in the world defending AT&T on this, so I am done for now. AT&T needs to get its PR act together and get going on some of this.

Posted by: Bob_Dobbs | June 4, 2010 12:00 PM | Report abuse

Oh, one more thing. Unlimited plans aren't really unlimited. The fine print lets them cut you off for what is, in their view, excessive usage.

Posted by: Bob_Dobbs | June 4, 2010 1:22 PM | Report abuse

Hasn't AT&T already said that with the tiered plans they will provide some sort of notification that one is approaching the usage cap?

I'm with BobDobbs--unlimited is great, but it's expensive especially for someone who doesn't have limitless use. If anything, a low-cost tier may increase usage of those for whom $30/month is difficult to justify. Half that is a lot easier to swallow.

Posted by: ah___ | June 4, 2010 2:22 PM | Report abuse

I live in a rural area and do NOT have access to high speed internet, at least at a reasonable price (have you ever checked out the cost of satellite ISPs?). For a short while I had some hope that I would be able to use an IPAD 3G for internet access,we do have AT&T 3G coverage (and ONLY AT&T) at least although it's spotty, but now, with the tiered plans it once again becomes too expensive. All this talk of people not needing the bandwidth assumes that there are plentiful WI-FI hotspots and of course your home internet. Well in my community the only open access WI-FI is the town library and that is 10 miles from my home. I understand that if you already have an IPAD you can just keep your $30/mo unlimited plan but I wasn't quick enough I guess. So now I will NOT be buying one. BTW I'm writing this from the front porch of the library, they are only open 3 days a week. Oh, and it's raining. Sucks to be me LOL.

Posted by: curt551 | June 4, 2010 4:02 PM | Report abuse

Like curt, I have been waiting ten years for broadband, and my phone company refuses to put it in. Satelite is limited in usage, unreliable, and comparatively slow. We need the Gov. to make broadband available everywhere, not just the most profitable areas. It should be like electricity and regular phone service. In todays world we need it. It takes all day just to download the latest windows updates.

Posted by: jimbobkalina | June 5, 2010 2:51 AM | Report abuse

I have a problem with this tiered pricing as well. I to live in a rural community with 1 reasonable option for broadband. That is Verizon wireless, who will be moving to a tiered plan in the near future. AT&T has said that broadband was comparable to electric or water, as you use more the more you should pay. Electric and water do not compare with broadband. When you pay for water that is what you get, water. When you pay for broadband by the megabyte, you get other things you may not want. For example: advertisements, junk mail, unsolicited songs, or heavy flash websites. All of these will add to your monthly alottment of megabytes. Essentially paying for ads and junk mail.

Posted by: Shaneo13 | June 9, 2010 7:24 PM | Report abuse

I have a problem with this tiered pricing as well. I to live in a rural community with 1 reasonable option for broadband. That is Verizon wireless, who will be moving to a tiered plan in the near future. AT&T has said that broadband was comparable to electric or water, as you use more the more you should pay. Electric and water do not compare with broadband. When you pay for water that is what you get, water. When you pay for broadband by the megabyte, you get other things you may not want. For example: advertisements, junk mail, unsolicited songs, or heavy flash websites. All of these will take away from your monthly alottment of megabytes. Essentially making you pay for ads and junk mail.
Bob says the Free Press needs a better subscription plan for data. How about this. Why do people need to sign in on an agreement that they won't go over 200 megabytes or they are penalized double of the price they start with. Which so happens to equal the same price as the all-you-can-eat plan it used to have: meaning your paying 30 dollars for 201 megabytes instead of 30 dollars for even 5 gigabytes. You don't think that AT&T would not hope you might go over, do you? What about a plan that is a little more fair. Like one that you don't have to sign into. 10 dollars a gigabyte sounds fair. You use less than a gig it's 10 dollars. You use 3 gigs it's 30 dollars and so on. I really hate the scam and price gouging these guys put us through. It is something I can't stomach, but am forced to deal with. Because for me it is a monopoly.

P.s. Bob you didn't justify tethering because there is no justification for charging people 20 dollars for the same network and same amount of data they have already paid for.

Posted by: Shaneo13 | June 9, 2010 7:59 PM | Report abuse

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