If Flat-Rate Mobile Data Plans Are So Bad, Why Do Operators Keep Launching New Ones?

from the playing-both-sides dept

Thu, Apr 22nd 2010 5:57am — Carlo Longino

On its quarterly conference call, AT&T's CFO once again talked up how the company needed to move away from flat-rate mobile data plans because its networks are being overwhelmed by traffic from a small percentage of its users. This rhetoric -- which is really just trying to warm up the market for future price increases -- comes despite figures showing that AT&T's data revenues are increasing, while its network investment is decreasing. On some level, if an operator like AT&T wants to try to force through higher prices by increased flat rates or usage-based pricing, go right ahead; we'll see just how the market reacts. But all of their talk about their poor overwhelmed networks would go down a little bit better if they wouldn't decry flat-rate plans in situations like this, while they launch cheap flat-rate unlimited plans at the same time, as AT&T has done for the iPad 3G. If AT&T's network is already taxed and cheap data plans are to blame, why launch another one on a device that's built to consume data?

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Filed Under: data plans, flat rate
Companies: at&t

23 Comments

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Anonymous Coward, 22 Apr 2010 @ 6:24am

one of those simple business things. offer a flat rate plan at a fairly high rate. hope like hell that the vast majority of users pay for it but dont use it. hope that only a few people are online or on the phone 24/7. consider it a calculated risk in return for a strong market position.
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ITrush, 22 Apr 2010 @ 6:31am

Hmm, let's just see how the market will react on this one..
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James (profile), 22 Apr 2010 @ 6:31am

World of Warcraft
I all of the World of Warcraft subscribers played eight to ten hours a day, like the heavy gamers, then Blizzard would not be able to pay the crushing bandwidth bills of 14.95 a month. In the same way gyms hope 80 percent of their members do not ever cross the door.
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Dark Helmet (profile), 22 Apr 2010 @ 6:37am

Re: World of Warcraft
"In the same way gyms hope 80 percent of their members do not ever cross the door."

MOST gyms operate that way, but not all of them. Visit any major city and you'll find a couple of gyms that are absolutely packed a large percentage of the time. You'll also notice that these packed gyms seem to have the most ancilliary(sp?) offerings to sell to their customers, i.e. clothing shops, juice bars, extra activity rooms, etc.

There are two ways to go about this, in the gym arena AND in the mobile device/network arena:

1. Do as you say, oversell your network/gym (only a maybe in this case) and hope that your customers don't use what you offer to full capacity.

2. Sell the network/gym at a level consistent with your capability to serve, give them a great experience, and monetize the shit out of the increased load. Then use the revenue to slowly expand, get more load, monetize more. And so on, and so on, and so on.
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Mystic Kitsune, 22 Apr 2010 @ 6:42am

AT&T can blame 3g open PPTPP
AT&T and Boost mobile share one thing in common: both can be used as wireless tunneling servers without any authentication, the majority of DATA is going through encrypted pipelines owned by both businesses and public. and the tunnelers are mostly gamers or hackers, causing data usage to skyrocket. 4G will/is seeing the exact same dilemma... Verizon is the only one to really tighten security on their airwaves. partially through proprietorial means, but mainly with proper security planning.. I'm not endorsing Verizon, or agree with their practices. bit I just thought that this hitch needed too be poked at.
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Hulser (profile), 22 Apr 2010 @ 6:52am

Re: World of Warcraft
In the same way gyms hope 80 percent of their members do not ever cross the door.

I think the point of Carlo's post isn't that operators sell a product that they hope most people won't use to its maximum. That's a normal part of many business models, including gyms. The point is that the operators sell this product and then bitch when some people use it to its maximum. If the operators have done a poor job of estimating how many customers are going to be "bandwidth hogs" and have to change their prices accordingly, then fine...go ahead. Shit or get off the pot. Either raise your prices or shut the hell up about it already.
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NullOp, 22 Apr 2010 @ 7:16am

Plans
Flat rate plans get customers but tiered plans make the $$$. And, lord knows, it's always better to nickle-and-dime the customer!
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P3T3R5ON (profile), 22 Apr 2010 @ 7:21am

Between my wife and I we average over 300mb a month on our two iPhones. We use the unlimited data plan and I have every intention of using that open bandwidth because I am paying for it. Same thing for texting, unlimited and we text our thumbs off... she's better at it but we average over 1500 texts a month. Again, paying for it.... going to use as much as I can. On the other hand we use maybe 100min a month of our 1400min outside of our calling circle and in network calls. I'm slowly lowering the amount of minuets we have on our plan....not going to use it...not going to pay for it.

This is why I DON'T have a gym membership, I'd almost never use it, not to mention parking farther away in the parking lot, taking the stairs, and living on the third floor... why should I go to the gym. Excercise is free, I even got paid to do it when I was in the Army. Besides I have an equivelent gym at work and apartment... both are free!

If I'm going to pay for something, I'm going to use it to it's fullest extent, otherwise I'm not buying it. Then it's up to the seller to make it more marketable/reasonable to attract my purchase.
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P3T3R5ON (profile), 22 Apr 2010 @ 7:22am

Re: Plans
The airlines know this too.... paying for carry on luggage? Thats beyond nickles and dimes!
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Joel (profile), 22 Apr 2010 @ 8:07am

Because...
People are scared of overages that is the reason they launch these plans, people thinking that they talk/text/browse so much that they jump on these plans. There is also the competition from smaller carriers like MetroPCS and others.
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P3T3R5ON (profile), 22 Apr 2010 @ 8:37am

Re: Because...
True, but how long can the little carriers last, standing arpart when the big guys can come in and buy them or push into their core network area and provide proprietary service items like iPhone or Droid where as your little guy just has the typical Samsung or Motorla phone. When you're not guarenteed 3G coverage or you are paying higher prices because when you travel your not roaming but running on leased lines from the big carriers.
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Joel (profile), 22 Apr 2010 @ 9:06am

Re: Re: Because...
People that go to the little carriers are most likely not looking for advanced phones and now for example MetroPCS is unlocking CDMA phones so the person that wants a nice phone can just buy that phone from Sprint or Verizon and bring it to them. Also I have noticed that a lot of the people who go to the little carriers are not traveling much and are just looking to save money. Most of my friends are split between MetroPCS and T-Mobile.
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P3T3R5ON (profile), 22 Apr 2010 @ 9:27am

True, the smaller carriers are bringing in all the people who just want a home phone replacement... i.e. my parents. I'm so proud of them, land line free for 6yrs now! Plus phones for kids ... they don't need frills on their phone it will just get them in trouble.... like oh idk.. sexting... stupid kids.
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brink, 22 Apr 2010 @ 10:01am

Re: AT&T can blame 3g open PPTPP
Not really sure if gamers are rushing to run their dedicated boxes on a cell signal, unless they're truly desperate. Hackers I would believe more readily that it's probably a tad easier to purchase a cell with a stolen CC# to do your illegal trade. Seriously gaming on a cell network with the latency that entrails it is just dumb.
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Derek Bredensteiner (profile), 22 Apr 2010 @ 10:03am

On the iPad 3G
"while they launch cheap flat-rate unlimited plans at the same time, as AT&T has done for the iPad 3G. If AT&T's network is already taxed and cheap data plans are to blame, why launch another one on a device that's built to consume data?"

A couple of theories I've heard on this:
(1) AT&T is convinced that iPad users will primarily use WiFi, perhaps due to the device being used frequently in the home and at the coffee shop and at the office where WiFi is readily available.
(2) It's another device. AT&T wants to get their customers deeper into this "pay a monthly fee per device" concept. Increasing that ARPU (Average Revenue Per User), even if those new customers aren't using AT&T for their other data services yet. I'm willing to bet very few customers are using this data plan to replace any other they currently have (such as home internet or mobile internet).
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Jon B. (profile), 22 Apr 2010 @ 10:45am

Re: AT&T can blame 3g open PPTPP
Verizon's agreement assumes that if you go over 5GB then you must be violating the TOS of your unlimited plan. I'm curious what you mean by "Verizon is the only one to really tighten security on their airwaves. partially through proprietorial means" other than just counting bytes.
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John Fenderson (profile), 22 Apr 2010 @ 11:22am

I strongly prefer flat-rate plans
With flat-rate plans, I don't have to worry about keeping track of my usage. It's also much easier to compare various plans and to know what they actually cost. I like it plain and simple!
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Alan Gerow (profile), 22 Apr 2010 @ 1:25pm

Another point to consider is that a large majority of the iPad subscribers also own iPhones. So, some logic could attribute data usage from an iPhone owner over 3G will go down being replaced by the iPad. So, they'll get the users to pay for the data usage by getting them to spread it over several devices with separate data plans hoping the data usage on any single device will go down.

Instead of 1 $70/month iPhone data account using all 3G data ... it's 2 devices at $70+30/month (iPhone + iPad) ... with a calculated hope that it won't increase overall data usage, but transfer some from one account to another.
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Derek Kerton (profile), 22 Apr 2010 @ 2:26pm

Re: Re: World of Warcraft
The carriers also do the myopic thing of basing their pricing and estimates on CURRENT data use patterns. They don't do enough to predict what kinds of new apps will emerge, whether people will change their data consumption, and the impact this will have on their pricing and "unlimited" marketing.

They should have never started with "unlimited data". The consumer naturally wants it, and they've trained consumers to expect it. A problem of their own making.
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Allen (profile), 22 Apr 2010 @ 7:26pm

Why Do Operators Keep Launching New Ones?
Competition?

/obvious
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Wes, 24 Apr 2010 @ 12:36pm

Re: AT&T can blame 3g open PPTPP
sprint blocked all phone as modem access on 2-14-10 because of this issue, and they monitor usage for hacks now, they know what kinda packets aka torrents ect, cannot pass ona phone and they look for a pattern
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daemian2k, 5 May 2010 @ 2:48pm

Flat rate plans
this is so retarded it actually qualifies them for handicapped parking. if their bandwidth is so taxed then why spend the resources to have another one at a higher price. Sounds like a way for them to try and justify themselves and charge for bandwith usage if you ask me, why not spend the resources and repair the infrastructure that they already have instead of creating newer ones that fail, att u-verse anyone?,
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Replicon Timesheet (profile), 17 May 2012 @ 12:41pm

Companies may give these kinda report but flat rate plans are always good sources of money and will always be the same. Even if the subscriptions reduce, this particular plan gets new customers often, i believe. Employee Time Clock
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