* Per gigabyte fee cheaper the more data is bought
* Plans seen increasing revenue long-term
* AT&T shares up 5 cents to $35.87
NEW YORK, July 18 AT&T Inc is following
bigger rival Verizon Wireless with a new type of family plan
that will significantly raise its fees for data services, such
as mobile Internet.
But, unlike its rival, AT&T said the plan will be an option,
rather than a requirement, for new customers. AT&T customers and
some Verizon customers upgrading to a new phone will also be
able to keep their old plans, the companies said.
Late in August, AT&T will launch the new offering, which
allows customers of the No. 2 U.S. mobile provider to buy a
single data plan for up to 10 devices, and includes unlimited
phone calls and text messages.
While some customers who talk and text a lot could save
money under the plan, others will end up paying quadruple their
current fee for data. For example AT&T will charge $40 for 1
gigabyte of data per month, compared with its current rate of
$30 for 3 gigabytes.
The hope is that the new plan, similar to one kicked off by
Verizon Wireless in June, will entice individuals and families
to connect more devices such as tablet computers to the AT&T
network because they will no longer have to buy a separate
monthly data allowance for each mobile device.
Since young consumers are making fewer phone calls in favor
of communicating via data services such as Skype or Facebook,
AT&T, like Verizon Wireless, is overhauling its pricing in a bid
to boost revenue from data services and to preempt a drop in
Pivotal Research analyst Steve Sweeney expects the
companies' plans to increase overall revenue over the long term,
though it may reduce average revenue per customer slightly in
the short term.
"AT&T and Verizon are both changing their pricing structures
to maximize their long-term revenue growth based on where the
highest growth in demand will be coming from," Sweeney said,
referring to growing demand for data services.
Analysts expect AT&T's offer of the new plan as an
additional choice will work in its favor.
"You really can't alienate people by giving them another
option," Pivotal's Sweeny said. "AT&T's approach is a little
In particular, Barclays analyst James Ratcliffe said in a
research note, AT&T wants to hold on to its 9 million customers
who bought the Apple Inc iPhone in the second half of
2010, when AT&T was still the only U.S. iPhone provider.
Since AT&T is letting them continue with their current data
plans, these customers, whose contracts will end this year, may
be less inclined to look at other providers such as Verizon
Wireless or Sprint when they buy their next iPhone.
BUYING IN BULK
AT&T hopes the new plan leads people to buy data in bulk
because the bigger the data plan, the cheaper the per-gigabyte
rate will be. A customer who wants 20 gigabytes of data, would
pay $200 every month, or $10 per gigabyte - level with its
current $30-for-3-gigabytes plan.
"We think there's really great flexibility for these plans,"
David Christopher, AT&T's chief marketing officer for mobile
For example, he said a customer could use more data on their
tablet one month and switch their heaviest usage to a smartphone
the next month without adjusting their plan.
Or if some family members tend to use less data than others,
the heavier users would be less likely to go over their limit
and incur hefty overage fees under the new plan.
But if the higher price for each gigabyte of data is
off-putting for some consumers, there is one key difference
between AT&T and Verizon Wireless. AT&T will keep offering its
existing plans whereas Verizon Wireless offers no choice to new
customers and customers upgrading to a subsidized phone.
"If shared data is not for you then we'd love for you to
stay on our existing plans. We know the existing plans make
sense for lots of situations," Christopher told Reuters in what
appeared to be a veiled dig at Verizon Wireless.
The executive declined to disclose the company's
expectations for the impact on revenue and customer growth.
When Verizon Wireless announced its data share plan on June
12, some customers complained that they did not want unlimited
phone calls or higher data fees.
Under the new plan, an AT&T customer with one smartphone
would pay a $45 monthly fee for unlimited calling and texting
and a $40 fee for one gigabyte of data. The voice and texting
fee per smartphone drops to $40 for customers who pay $70 a
month for 4 gigabytes of data.
An AT&T customer buying 20 gigabytes for $200 a month would
pay $30 for voice and texting for each smartphone, leading to a
total bill of $350 for a family of five.
In comparison, a Verizon Wireless customer would pay $150
for 20 gigabytes of data and $40 per smartphone, also leading to
a total bill of $350 for a family of five.
Smaller rival Sprint, the No. 3 U.S. mobile service, does
not offer family plans for data, but instead offers unlimited
data usage for a flat monthly fee. Sprint spokesman Scott Sloat
said that its pricing is easier for customers to understand.
"The concept of sharing a monthly data allowance across a
family of devices and people significantly increases the
potential of a surprise monthly bill," Sloat said.
Verizon spokeswoman Brenda Raney declined direct comment on
the AT&T plan but said: "Competition always benefits consumers."
Verizon Wireless is a venture of Verizon Communications Inc
and Vodafone Group Plc.
AT&T shares were up 5 cents at $35.87 in morning trading on
the New York Stock Exchange, while Verizon shares were down 8
cents at $45.58. Sprint shares rose a penny to $3.66.