AT&T is whining about the iPhone
There is an article in the Wall Street Journal that has AT&T whining about the cost of supporting the data plans for the iPhone. Seems that with all of the really cool apps that the iPhone has, they tend to load up on the data! I suppose AT&T’s complaints are so that they can keep offering affordable phone data packages on sites like Raise as Cricket Wireless, one of their phone package brands, is selling like hot cakes for data hungry customers.
But AT&T will just have to deal with it as the iPhone is by far the coolest product in the mobile world. It has also set the standard for all other phone developers and networks to aspire to. No surprise, the quality of the apps is excellent (check out this site that reviews iPhone apps). Because of this, there is no way that we are going to roll back time and start to use a less flexible and featured product.
AT&T may not like it but Apple and it’s iPhone have given them first mover advantage in mobile computers. Everyone else is trying to play catch up. If AT&T screws it up, the competition will be all over them.
Here are portions of their article “Demands on Network Are an iPhone Hang-Up”
Users of iPhone download games, video and other Web data at two to four times the rate of other smartphone users, according to comScore. Yet AT&T charges iPhone subscribers the same fee of $30 a month for data that it levies on other smartphone customers. And aside from restricting certain activities, like file sharing, AT&T doesn’t limit how much data can be downloaded.
But Web applications popular with iPhone customers are bandwidth hogs. A recent analysis by Alcatel-Lucent of North American wireless network use during the midday hour on one day found Web browsing was consuming 32% of data-related airtime but 69% of bandwidth, while email used 30% of data airtime but only 4% of bandwidth. Email taxes network resources but in a different way.
As the proportion of customers with iPhones grows — 5.9 million 3G iPhones were activated in the last three quarters, 7.5% of AT&T’s total subscribers — the resulting growth in downloading and Web browsing will strain AT&T’s network. AT&T will need to add cell towers and spend more on the back-haul lines that connect the towers to the rest of the network.
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The falling cost of voice minutes and additions of lower-end customer has offset growth of text messaging and other data services. Voice and texting use little bandwidth and are lucrative.
Now, new customers are harder to come by. The question is whether new data revenues the industry is banking on — from Web-browsing and entertainment services — will be as profitable, at least as measured by return on invested capital. That looks doubtful. To ensure networks have the capacity to offer these services, particularly bandwidth-heavy offerings like video streaming, carriers will have to make heavy capital investment. Both AT&T and Verizon are building the next-generation 4G network, each spending more than $9 billion last year on new wireless spectrum, as well as $6 billion annually on overall capacity.
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In the short term, carriers should abandon unlimited data pricing plans. Both AT&T and Verizon Wireless already charge extra for heavy users with wirelessly connected laptops. They will have to contemplate similar strategies for smartphone users.
Setting the right price won’t be easy. With competition, the temptation to discount will be hard to avoid. And there’s no guarantee that customers will pay as much for entertainment as for voice-calling and email.