AT&T's new iPhone, iPad plan: Cheaper but limited

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- AT&T announced new 3G pricing plans Wednesday that will make iPhone and iPad bills less expensive for most customers, but will also put a stop to unlimited data plans.

Under the new pricing scheme, 3G data service for AT&T smart phones (including the iPhone) will cost $15 a month for 200 megabytes. If customers download more than 200 MB, they will be charged an additional $15 for each subsequent 200 MB that they download.

New iPhone plan
Data New Old
200 MB $15 $30
400 MB $30 $30
600 MB $45 $30
2 GB $25 $30
3 GB $35 $30
Source:AT&T
New iPad plan
Data New Old
250 MB $15 $15
2 GB $25 $30
3 GB $35 $30
Source:AT&T

For iPad customers and heavier smart phone users, AT&T will start offering a $25-per-month plan for 2 gigabytes of data. Under that plan, if customers exceed their allotment, they will be charged $10 a month for each additional gigabyte of data that they use.

Previously, AT&T charged a $30-per-month flat fee for unlimited data for both the iPhone and the iPad, as well as their other smart phones. AT&T will continue to offer a $15-a-month 250 MB plan for iPad users. The new pricing schemes will begin June 7.

The end result? Most customers will reap monthly savings of $5 to $15.

Roughly 65% of AT&T's smart phone customers use less than 200 MB of data per month and 98% use less than 2 GB, according to the company. Those percentages are likely a bit lower for iPhone and iPad users who tend to be heavier downloaders than other smart phone users.

"We're breaking free from the traditional 'one-size-fits-all' pricing model and making the mobile Internet more affordable to a greater number of people," said Ralph de la Vega, president of AT&T's mobile unit, in a statement.

Analysts say said the lower pricing tiers could help bring in new customers.

"We could be looking at a lot more people adopting the iPhone because of a much lower total cost of ownership," said Hugues De La Vergne, principal research analyst at Gartner.

End of unlimited

But the announcement also means the end of unlimited data, a move that was not unexpected but dreaded by many heavy data users.

Since the iPhone debuted in the summer of 2007, AT&T's data service has grown by a staggering 5,000%, far exceeding the company's forecasts by several orders of magnitude, according to AT&T. Though AT&T has largely been able to manage that growth by making billions of dollars of network improvements across the nation, 3G service in New York and San Francisco is notoriously touch and go.

Analysts said it was just a matter of time before the company unveiled a tiered data plan that would force the small number users at the high end to pay more for the data that they download. Some experts have speculated that ending unlimited fees would reign in some data use to help AT&T unclog its network. And other networks will likely follow suit soon.

"The problems AT&T had with its network will soon be seen on other networks with unlimited plans. Those other networks will have to do something to cap the usage of people who are using the highest amounts of data," said De La Vergne.

Some customers won't like the new changes, especially iPhone users who love to get the full use out of their devices. For many cell phone users, 200 MB sounds like a lot: According to AT&T, 200 MB equals about 1,000 emails without attachments, 150 emails with attachments, 400 Web pages, posting 50 photos to social media sites, and 20 minutes of streaming video combined. But for heavier iPhone users, that's just days worth of data.

It will be harder for most iPad users to exceed 2 GB of data in a month: 2 GB is 10,000 emails without attachments, 1,500 emails with attachments, 4,000 Web pages, posting 500 photos to social media sites, and 200 minutes of streaming video combined.

There's good news for existing iPad and iPhone users who feel that the new plans will cost them more: AT&T said existing AT&T customers -- including the 50 million iPhone and iPad users in the United States -- have the option of sticking with their old $30 unlimited plan.

For those who want to use AT&T's 3G network on other devices like netbooks and laptops, AT&T will also offer data tethering for iPhone and other smart phone customers for $20 a month -- but only if they subscribe to one of the new price plans. Tethering will be available for the iPhone when Apple releases iPhone OS 4 this summer.

Shares of AT&T (T, Fortune 500) and Apple (AAPL, Fortune 500) rose less than 1% Wednesday. To top of page

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