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New iPhone, iPad limits: 2 GB won't get you far

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- AT&T's new pricing plans may save consumers money now, but new iPad and iPhone customers will likely wind up paying more down the road.

Starting June 7, new users will pay $25 a month for 2 gigabytes of data, plus $10 for each additional gigabyte.

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
New iPad plan
Data New Old
250 MB $15 $15
2 GB $25 $30
3 GB $35 $30

Since AT&T's old plan was $30 a month for unlimited data, customers will have to use less than 2 GB a month for the new plan to save them money.

So how much is 2 GB?

AT&T (T, Fortune 500) says 2 GB is the equivalent of 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.

At first glance, that looks like about a month's worth of data usage. But adding even a little more video to the equation shows how quickly the gigabytes can add up.

For example, Apple has used Netflix as one of its big selling points for the iPad. Though people looking to curl up in bed to watch a movie on their iPad will likely connect to their Wi-Fi rather than AT&T's 3G service, those who want to stream TV shows at the gym, on a train or on the go may be in for a little sticker shock.

For Netflix subscribers using the new iPad app, 2 GB of data will only get them between six and 12 hours of streaming movies and TV shows, depending on the bit rate Netflix used, said a source with knowledge of the partnership between Netflix (NFLX) and Apple (AAPL, Fortune 500). That works out to between three and six two-hour movies, or between four and eight one-and-a-half hour movies a month.

"It's a lot like the early days of cell phones, where 100-minute plans didn't get you too far," said Al Hilwa, analyst at IDC. "Video is an obvious data hog, and [AT&T's new plan] presents an opportunity for customer backlash."

Currently, only about 2% of AT&T's customers use more than 2 gigabytes, according to the company.

But that number could quickly change. Users of the feature-rich iPad and iPhone tend to consume more data than most other smart phone customers.

Demand for data is also rapidly increasing as mobile video use explodes. The average smart phone customer watched 3 hours and 15 minutes of mobile video each month last year, according to data tracker Nielsen. That's up 70% from 2008. And teenagers watched 6 hours and 30 seconds on their phones each month. (The annual survey was conducted before the iPad went on sale.)

"While AT&T asserts that its high-end 2 GB cap will only impact the heaviest users, the fact is that today's heavy user is tomorrow's average user," said Chris Riley, policy counsel for net neutrality advocate Free Press.

And analysts note that many of the apps being developed for Apple's devices are designed to feed on bandwidth, so the new pricing plan could hurt the developers' business models.

"If you're in the business of selling streaming video a la Hulu, streaming music a la Pandora, ... AT&T just changed consumer perceptions of those businesses for the worse," said Carl Howe, analyst at Yankee Group. "Now those consumers are going to have to pay bandwidth charges as well as whatever subscriptions they may have. And that's going to make those business leaders not very happy."

AT&T's customers largely jeered the new pricing models. The company attempted to demonstrate how its pricing changes are beneficial and cheaper for the majority of iPhone and iPad customers, and it will allow current AT&T customers to be grandfathered into the old data plan. Still, comments posted on CNNMoney.com's story on Wednesday were overwhelmingly negative. To top of page

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