June 2, 2010 / 2:18 PM / in 7 years

AT&T to end unlimited use mobile data plan

NEW YORK (Reuters) - AT&T Inc will stop offering an unlimited pricing plan for new subscribers to its mobile data services, in a move it says will cut prices for as many as 98 percent of its customers.

The exclusive U.S. provider for Apple Inc’s iPhone said the new metered pricing, which takes effect June 7, means the more customers use their phones for web surfing the more they will have to pay.

While pricing for most data users will be $5 to $15 less than the current $30-a-month plan for unlimited usage, prices for AT&T’s heaviest will be at least $5 a month higher.

Analysts said the move would likely push bigger rival Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc, to follow suit shortly. Verizon Wireless declined to comment.

Bernstein analyst Craig Moffett said the lower fees for light users was an important step “for public relations” but he noted that this would not help the heaviest users.

“The low end price reduction for light users will reduce - but not eliminate - the inevitable firestorm of criticism from heavy users, who are certain to be the most vocal commentators,” Moffett said.

While some web commentators complained loudly about the new pricing, AT&T’s mobile chief Ralph de la Vega told Reuters, “It’s important we give customers the choice. There are some not signing up for smartphone data plans because they’re too expensive,” he said.

De la Vega said the new plans would have little impact on its average monthly revenue per user (ARPU), an important measurement for wireless operators.

Current customers can continue to use the company’s $29.99-a-month unlimited data plan, but new customers will be shunted to the new plan.

The new plans will start at $15 a month for downloads of 200 megabytes of data. That equals about 400 web pages, 1,000 e-mails with no attachments, posting 50 photos online or 20 minutes of video, according to AT&T.

But if users exceed the 200 megabytes usage they will automatically be charged another $15 for another 200 megabytes. The company said 65 percent of its users use less than 200 megabytes of data per month.

The next tier costs $25 for 2 gigabytes of data, which is ten times more downloads than the 200 megabytes plan. AT&T said 98 percent of its customers use less than 2 gigabytes of data today.

The $25-a-month customers will be charged another $10 for each extra gigabyte of data they download per month.

If the result is fewer downloads from very heavy users, the new pricing plan could potentially also ease capacity constraints that have caused network problems for the company in high usage areas such as New York.

But de la Vega said the new pricing would not change AT&T’s efforts to improve its network capacity.

Only a month after its launch the new pricing plans will also impact buyers of Apple’s iPad, for which AT&T is also the only U.S. service.

Users of iPad will now be offered $25-a-month plans for 2 gigabytes of data, replacing the current $29.99 unlimited plan for these customers.

AT&T shares were up 18 cents to $24.51 in morning trade on New York Stock Exchange.

Additional reporting by Ritsuko Ando and Franklin Paul; Editing by Derek Caney

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