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Why an iPhone Tax Makes Sense

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If you're a smartphone user, and your network is AT&T (NYSE: T  ) , prepare to pay up.

Ma Bell will be charging you a mandatory $30 fee for data usage if you're using any smartphone on its network, not just the iPhone. Want a new BlackBerry? That'll be thirty bucks a month, pal.

But really, this is an iPhone tax. A research report released in June by mobile advertising network AdMob says that Apple (Nasdaq: AAPL  ) devices account for 47% of the world's smartphone traffic.

Nokia (NYSE: NOK  ) , the world's leader in terms of smartphone market share, was second at 33%. Research In Motion (Nasdaq: RIMM  ) placed third at 7%. Taiwan's HTC was fourth at 6%, and Palm (Nasdaq: PALM  ) trailed everyone with a 2% share.

For its part, AT&T said in a statement that it was serving customers with its pricing policy:

Smartphone users tend to consume a higher amount of data services, like advanced e-mail, mobile Web, applications and more. Being able to take full advantage of these features without having to worry about a fluctuating or unusually high bill generally leads to greater customer satisfaction, so effective Sept. 6, smartphone customers will need to subscribe to a data plan, as the vast majority of customers already do.


The key portion of that statement is "higher amount of data services." Apple's iPhone users place a great strain on AT&T's network via data requests. Requiring a flat data subscription should reduce risk and increase predictability as Ma Bell earns a few dollars more.

To be fair, AT&T isn't requiring longtime smartphone customers who don't have a data plan to transition to one, unless they upgrade their equipment or calling plan, trade magazine InformationWeek reports.

How about we confine this to iPhone users instead? The iPhone is what it is because of its App Store, and applications consume bandwidth. In this case, unprecedented amounts of bandwidth -- more than 47% of the world's traffic for a smartphone supplier that held 13% of the market in the second quarter, according to Gartner.

By requiring data subscriptions from all its customers, AT&T is asking others to subsidize its iPhoners. How is that fair? This is one time you don't want to be politically correct, sirs.

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Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is too tired to speak. (Yawwwwwnnnnnn.)

Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 26, 2009, at 12:50 PM, neyrinck wrote:

    If you could prove that costs for data usage have gone UP for other phones then you might have a point. And your logic falls apart if you consider market trends. Apple has started a trend that all other smartphone makers are working to emulate.

  • Report this Comment On August 26, 2009, at 12:53 PM, MaBellIsDead wrote:

    First off, AT&T Wireless is not Ma Bell. Why do you Fools persist in this smarmy slap?

    What other solutions are available for collecting a fee for data usage? Think on it.

    This would be fair: They could charge data usage against a customer's phone call contract. But to be fair to AT&T Wireless AND the customer, data bandwidth used vs time used divided by voice-call bandwidth would need to be used so there is realistic equivalence between voice and data usage.

    Your attempt to lay it all on the iPhone is Foolish.


  • Report this Comment On August 26, 2009, at 1:16 PM, danieleran wrote:

    AT&T requires a data plan with the iPhone, as it has since Apple released it in 2007.

    AT&T is now realizing that it can insist that other smartphones also buy a data plan, and that customers will have a better experience if their higher end phones actually have data features that work, something that really has nothing to do with the iPhone.

    Calling this an iPhone tax is just another example of a poor writer trolling for hits, and speaks poorly of the Fool website.

  • Report this Comment On August 26, 2009, at 2:53 PM, terder wrote:

    Let's run some numbers (just ATT). Data plan for iPhone, $30. Data plan for other family members with smartphone, $10. 13% of smartphone market for iPhone x factor of 3 = ~40% (iPhone users foot 40% of the bill for smartphone data). Now tell me this is fair. I can already envision a counter-article. It would seem like iPhone users are already carrying more than their weight in data fees.

    Also, this article makes no sense as the following statements do not compare the same thing:

    "...says that Apple (Nasdaq: AAPL) devices account for 47% of the world's smartphone traffic.

    Nokia (NYSE: NOK), the world's leader in terms of smartphone market share, was second at 33%. Research In Motion (Nasdaq: RIMM) placed third..."

    So are we comparing ~smartphone traffic~ (i.e. data) ? or are we comparing ~market share~ (sales). ? Jeesh.

    Sloppy, sloppy, sloppy. I guess in terms of a slow news day, as they say, idle hands are the devil's workshop.

  • Report this Comment On August 26, 2009, at 5:53 PM, ReadEmAnWeep wrote:

    "Calling this an iPhone tax is just another example of a poor writer trolling for hits, and speaks poorly of the Fool website."

    I have been tricked and disappointed by this kind of writing from fool as well...

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