AT&T: Industry must reassess mobile data billing models

AT&T (NYSE:T) today made its best case for its eventual shift from all-you-can eat smartphone data plans to a tiered or usage-based models that more closely align customers data bills to the amount they consume. Though AT&T gave no timeline on when it would make such a shift or how such plans would be implemented, chief financial officer Rick Lindner said the emergence of new data-focused devices and the growing disparity in the amount of data customers consume will force not just AT&T, but the industry as a whole, to move away toward billing models that are much more equitable to the way individual consumers behave.

Responding to an analyst’s question late in AT&T’s Q1 earnings call today about the possibility of tiered data billing models, Lindner said, “I won’t get into thoughts and strategies about making potential changes in the future on pricing for any products, but I think your question is a good one. It’s one not just for AT&T, but it’s one for the industry overall because we’re dealing a few factors that you have to just step back and just think about. One, in wireless you’re dealing with some real limitations, both from a technology standpoint and more importantly from a spectrum standpoint on capacity. Secondly, you’re dealing with an overall trend of devices and applications and services moving toward a wireless environment. That’s creating a tremendous amount of demand for wireless data. And the third factor is when you look at your customer base, even customers that are using similar devices, there’s a huge disparity in the amount of data that they use and the amount of capacity that they consume. When you look at all of those things as an industry, I think it will influence how in the future pricing models develop.”

The industry, however, just can’t turn on metered billing or institute opaque billing models that won’t allow customers to accurately gauge how much data they’re consuming. The plans have to be fair and equitable to customers, but most importantly they have to be easy to understand, Lindner said. “It will evolve as we go forward in the industry, and it will evolve as applications and devices continue to evolve and data traffic continues to grow,” Lindner said.

AT&T and other operators already offer tiered billing in their laptop data plans, capping data consumption anywhere from 250 MB to 5 GB, depending on the plan. Smartphones and other handsets have been largely immune from those caps, as their initial impact on the data was network was small, compared to that of a full-fledged PC. But after the introduction of the Apple (NYSE:AAPL) iPhone, data consumption spiked, leading to a 5000% increase in traffic on AT&T’s network in just three years, which wasn’t reflected in a corresponding increase in data revenues. Furthermore, the most hardcore smartphone users tend to consume far disproportionate amounts of capacity. AT&T has estimated that 3% of smartphone users eat up 40% of its 3G network capacity.