An Engineer

ATT today announced the end of unlimited data plans for wireless customers. Why did they do it? It was not about revenue. They sat around the table at ATT and asked: What’s the number one issue with customer satisfaction today? And the universal answer is network performance. How do they fix it?

Well, they could add more capacity but that takes a long time and is very expensive. Instead, they decided to ration the scarce resource of the data network by offering tiered plans. When people pay for what they eat, they eat less and more efficiently. I remember my freshman year at Dartmouth we used to have all-you-can-eat-dining at “Full Fare.” In that dining hall, the trays would go to the dish room with food sculptures and uneaten desserts. Meanwhile, in the “A la Carte” dining room next door, where students paid for each item, trays would show up at the dish room with an empty plate and a fork. Really. It’s just human nature.

With tiered pricing, ATT’s network performance is going to improve in high congestion areas. 98% of their customers will see reduced costs and the top 2%, if they want to pay for extra data above 2GB, will get good download speeds on their additional usage. Plus, top 2% customers are no longer the enemy of ATT. They pay a fair rate and can do whatever they want.

It’s also good for consumers because you can now get a cheaper entry level data plan for $15/month, great for kids.

Alas, ATT could not help but throw in a few items that are not customer friendly or rational. I hope they rethink them:

• If you go over the 200MB in the entry level plan, they charge you an additional $15 for the next 200MB, effectively charging you $30 for 400MB when you could have purchased 2GB for $25 if you had planned better. This harkens back to the very consumer unfriendly practice of making consumers guess at their voice usage minutes per month and hitting them with unreasonable overage charges when they guess wrong.
• Tethering will cost $20 per month extra. This is a mistake. If I buy a 2GB package, they should be comfortable with my using that any way I see fit for personal use. After all, I am not likely going to be using my laptop simultaneously with my iPhone. This is ATT being greedy. They just want a per device charge, but a per-person charge is actually more rational and customer friendly. Tethering has enough shortcomings in battery life and convenience to be its own punishment relative to buying a separate data connection for a device.

Even with this nasty fine print, the move to tiered pricing is good for ATT customers. Sure, in a perfect world there would be enough capacity that everyone could just use as much as they want, but the reality is that wireless data is a scarce resource today for ATT, and by charging people for what they consume, they will better allocate their resources among their customers.

How does this affect photography? Cameras are used sporadically. Allowing consumers to pay for the data they use will allow cameras to get cellular data connections that don’t need to cost anything when you don’t use the camera. Today, some devices are already sold this way, like the Kindle. Of course, ATT is not selling iPhone data like that today. It’s use it or lose it, but maybe someday they will. This is what is needed to put cellular connections on every device on earth.