Opinions are great, but let’s do the math on AT&T’s new pricing structure to see what kind of a deal it really is.
AT&T claims, and it appears to be backed up by customer reports, that 68% of their smartphone users use less then 200 MB per month and 98% use less then 2 GB per month. That’s smartphone users, not the general customer base. Let’s assume that all of them are paying $30/month for their data service.
For the sake of our calculations, let’s guess that AT&T has 20 million smartphone users.
20 million x $30 = $600 million a month from data fees
So 68% of the customers could switch to the new $15/mo plan. But let’s be realistic. Many won’t. Let’s guess that about 2/3 of the eligible smartphone users will downgrade.
9 million downgraders x $15 = $135 million in lost revenue per month
Now the 30% who use between 200 MB and 2 GB can switch to the new $25/mo plan. Again, not all of them will. Let’s say that 2/3 will.
4 million downgraders x $5 = $20 million in lost revenue per month
That leaves the 2% who use above 2 GB. Let’s assume that none of them will switch to the $25/mo plan.
0 downgraders = no lost revenue
From this vastly simplified calculation it looks like AT&T’s new pricing plan will result in $155 million in lost revenue each month. And that no one will be adversely affected by it. In this rosy view the customers have a lot to look forward to.
9 million people save $180 a year 4 million people save $60 a year 7 million people see no change
But AT&T isn’t known for being generous. What they’re looking for is new subscribers and overage charges. They know that usage levels are rising and will continue to do so. They want to get in the business of having high-usage customers pay more. This will drive users to reduce usage or pay for the privilege.
What will it take to offset the $155 million in lost revenue and then add revenue? Any one of these options:
15.5 million $25 a month customers paying an overage fee 10 million $15 a month customers paying an overage fee 8 million $25 a month customers paying double overage fees 5 million $15 a month customers paying double overage fees
But, of course, it will be some combination of these. To begin with, a small percentage of the over 2 GB users will pay single, double and even triple overage fees per month. A larger percentage of the just under 2 GB users will pay a single, and rarely, a double overage fee. And an even larger percentage of under 200 MB users will pay single, double, triple and quadruple overage fees.
At the start of this new plan most people will see their bills drop. AT&T will have reduced revenues. It won’t be $155 million, thanks to overage fees, but there will be a drop. Long-term however this will result in higher revenues for AT&T. They will get more customers picking up data plans. That’s at least an additional $15 a month where they’re getting $0 a month now. And they’re setting the ground work for tiered pricing so that high-bandwidth users will pay high fees. They’re betting that this will become the accepted norm, even as bandwidth usage rises. And that’s where this is really going.