Apple Says: "Thanks for Nothing, AT&T!"

Proving that its spine is as thin as its coverage map, AT&T (NYSE: T  ) will no longer sell unlimited data plans to new smartphone customers starting next week.

We may have seen this coming, given the carrier's notoriously strained wireless network. However, AT&T has the audacity to try to sugarcoat the bad news as a benefit for consumers.

This is the announcement's headline -- and I swear that I'm not making this up:

AT&T Announces New Lower-Priced Wireless Data Plans To Make Mobile Internet More Affordable To More People

Let's assess this from the perspective of Apple (Nasdaq: AAPL  ) iPhone owners. As of right now, 2G users pay $20 a month to AT&T for unlimited data. Owners of faster 3G and 3GS handsets pay $30 a month for the online usage smorgasbord.

Come June 7 -- the day that most expect will coincide with the debut of Apple's newest iPhone -- the only two plans available will be a $15 DataPlus plan (with a measly 200-megabyte monthly limit) and a $25 DataPro offering (with a better, yet still restrictive, 2-gigabyte cap).

There's a slap for that  
AT&T claims that 98% of its smartphone customers go through less than 2 gigs a month on average, but that metric smells fishy to me. It's lumping email-centric Research In Motion (Nasdaq: RIMM  ) devices and cheaper smartphones into the mix. I can guarantee you that more than 2% of AT&T's iPhone users are eating through more than two gigabytes of data month.

AT&T's announcement is also unintentionally funny. "Customers can also use unlimited Wi-Fi at home, in the office or elsewhere if available," it reads at one point. Really, AT&T? You're going to let me use my non-AT&T broadband provider's bandwidth without charging me? That's so sweet -- of me.

It's also introducing tethering -- the ability to use your smartphone as a modem to power connectivity for a secondary computing device -- for an additional $20 a month. Uh, what's the point in paying for tethering on a metered plan? If you're going to cap usage, tethering should be absolutely free. Tethering without an unlimited data plan is like taking a yacht out on a puddle, performing a hair transplant on a cadaver, or taking a Lamborghini on a test drive through a school speed zone.

The news gets worse for iPad owners who forked over an extra $130 for a 3G model. Come next week, the $29.99 unlimited 3G data plan will no longer be sold to new buyers. Those who haven't activated the $29.99 plan before Monday will have to settle for the $25 DataPro plan.

AT&T just sold you out, Apple. The iPad is made for heavy data usage. The two most popular non-Apple downloads at launch were video-streaming apps for Netflix (Nasdaq: NFLX  ) and Disney's (NYSE: DIS  ) ABC. Who will want to pay a premium for the 3G model that comes with a cab meter?

Opportunity knocks
There can't be losers without winners. AT&T's decision to shutter its unlimited buffet will be a dinner bell for other companies.

Verizon (NYSE: VZ  ) and smaller rival carriers? We have conflicting reports on the length of AT&T's iPhone exclusivity, but you just found a way to swipe gobs of AT&T's iPhone base, if you can step in with fair pricing and a handset that is compatible on your network .

Sirius XM Radio (Nasdaq: SIRI  ) ? Go ahead and silence the cynics who feel that Pandora and other web-based radio options will kill satellite radio in cars. Consumers will be less likely to plug their smartphones into their in-dash entertainment systems -- instead of subscribing to Sirius or XM -- if they know that every song or sound bite comes at a price.

In short, AT&T is killing the smartphone revolution before it really had a chance to get started, by tripping up its star player.

If you can hear me out there, Apple: Run!

Walt Disney is a Motley Fool Inside Value pick. Apple, Walt Disney, and Netflix are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz has an iPhone loaded with free apps, and maybe 4-5 that he has paid for. He does not own shares in any of the companies mentioned here, except for Disney and Netflix. He is also part of the   Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (30) | Recommend This Article (73)

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 June 02, 2010, at 4:17 PM, rep000 wrote:

    You're being too cruel on the issue of Wi-Fi. AT&T has over 20,000 hotspots and heading higher fast. These are NOT open to the general public, but provide unlimited access to AT&T smartphone, aircard, and pad customers.

  • Report this Comment On June 02, 2010, at 4:17 PM, GUAPOGREG1 wrote:

    FINALLY T IS BEING RUN FOR T SHAREHOLDERS AND NOT APPL SHAREHOLDERS. ALL T'S PROFITS HAVE BEEN GOING TO AAPL! YOU FOOL NOTICE THE RELATIVE STOCK PERFORMANCE OF T AND APPL! YOU FOOL MUST BE LONG APPL.

  • Report this Comment On June 02, 2010, at 4:21 PM, GUAPOGREG1 wrote:

    AND THIS PAY FOR USE WILL KILL THE SMARTPHONE MARKET ! WIRELESS NETWORKS ARE TECHNOLOGICALLY DIFFERENT THAN HARDLINE AND TRILLIONS WOULD HAVE TO BE SPEND TO SUPPORT EVER MORE POWERFUL DEVICES! TELL JOBS TO PAY THE TRILLIONS FOR NETWORK ENHANCEMENTS TO SUPPORT THESE BANDWITH PIGS! YOU ARE A FOOL!

  • Report this Comment On June 02, 2010, at 4:22 PM, GeezerPlus wrote:

    Please include ClearWire in your list of carriers. The service, which runs on the Sprint network, provides high speed 4G WiMax access.

    It's rolling out service gradually and is now in about a dozen or so cities, including Chicago.

  • Report this Comment On June 02, 2010, at 4:26 PM, millsbob wrote:

    " I can guarantee you that more than 2% of AT&T's iPhone users are eating through more than two gigabytes of data month."

    oh, really? i'm a pretty heavy data user on my iPhone 3g, so is my geek girlfriend. we average less than 25mb per month, most of our usage coming from (non-AT&T) wifi.

    i don't think you can guarantee anything about this. it IS going to save a lot of us money.

  • Report this Comment On June 02, 2010, at 4:28 PM, Rondan wrote:

    "Apple Says: "Thanks for Nothing, AT&T!""

    You show no such comment by Apple in this blog post!

    This makes you totally inaccurate or a liar!

    I guess the rule is get hits-the truth be damned!

  • Report this Comment On June 02, 2010, at 4:30 PM, BioBat wrote:

    What's the best way to alienate your customer base? Give them something they love (iPhone, iPad, mobile movies) and then tell them they can't use it. Way to go T, I can't wait for the uptick in VZ customers.

  • Report this Comment On June 02, 2010, at 4:30 PM, schwell wrote:

    Based my usage and my wifes for the past 6 months these plans are a beneft to us. We will switch and save $20 per month ($5 on my plan and $15 on her plan).

    Does your gas company or electric company offer an unlimited plan? Of course not. The supply of cellular wireless spectrum is also a limited resource.

  • Report this Comment On June 02, 2010, at 4:42 PM, jkinorlando wrote:

    AT&T claims that 98% of its smartphone customers go through less than 2 gigs a month on average, but that metric smells fishy to me. It's lumping email-centric Research In Motion (Nasdaq: RIMM) devices and cheaper smartphones into the mix. I can guarantee you that more than 2% of AT&T's iPhone users are eating through more than two gigabytes of data month.

    Hey Rick Aristotle Munarriz, did you read what you typed before you posted it? Since when RIMM devices and cheaper SMARTphones not smartphones? Think before you post. Make sure you actually read what you typed.

  • Report this Comment On June 02, 2010, at 4:47 PM, Toaddrives wrote:

    Apple has got to be a little bit T'd off by this news. However the iPhone "cracks" are out there so people can in theory open their phones to other carriers.

    The end of the article made a great point about Sirius dancing in the streets. Internet radio sites Huge (Pandora) and Small (WestSideWill) are probably more than a little mad that their tech savy, artsy (read: iPhone owners), visitors/listeners will no longer be willing to access their sites due to the huge data strain that will be showing up on their newly limited packages.

    But let's all be honest with each other, when the very first iPhone came out didn't we all figure that AT&T wasn't the best fit for Apple?

  • Report this Comment On June 02, 2010, at 4:49 PM, jadrake75 wrote:

    I think this is great! I have a non-apple smart phone (and HTC phone) which I love and get all of my email, stock quotes, latest news etc. on. I looked at my data history which AT&T provides and my max was 70MB in a month. Oh yeah, that was when I was tethered to my laptop for 4 days while at a customer site unable to access their wi-fi due to security concerns, with a remote desktop to a PC nearly 900 miles away.

  • Report this Comment On June 02, 2010, at 4:51 PM, mgreen2528 wrote:

    I hope the other carriers do not follow AT & T. As soon as the iPhone is available on Verizon I am going to drop AT & T and I am going to let AT & T know they are not doing me any favors by changing the price plan.

    As consumers we need to let the phone carriers know we are not happy with any changes to unlimited access. I can get faster Internet access in merging markets like China, for a cheaper price.

  • Report this Comment On June 02, 2010, at 5:01 PM, beerman53 wrote:

    Sirius wins on two fronts here

    first they are commercial free

    second Pandora is already slipping in the ad's and that will push the data dollar cost for heavy users.

  • Report this Comment On June 02, 2010, at 5:17 PM, schwell wrote:

    The article headline should read:

    Rick Aristotle Munarriz says: "Thanks for Nothing AT&T"

  • Report this Comment On June 02, 2010, at 5:49 PM, grangerfx wrote:

    Apple got unlimited data for its iPhone by agreeing to an exclusive deal with AT&T. Three versions of the iPhone and the iPad all had unlimited data. Now suddenly on the day that the iPhone 4G is released, Apple loses the unlimited data. So guess what AT&T loses? Come on, guess! Exclusivity! So if you read between the lines, Apple is going to announce one or more additional carriers on Monday. Who? It is going to be Verizon, Sprint or T-Mobile. To that end, I bought shares in all three of those companies today. Seems obvious to me. I could be wrong but seems like a good bet with two of those three at near 52 week low prices.

  • Report this Comment On June 02, 2010, at 6:40 PM, mdlr2us wrote:

    "I'm no dummy. I realize that Apple is way ahead of the pack in design and brand cachet. That will protect Apple in the near term. However, anyone who believes that Apple will maintain its gargantuan share of the digital-music world in a year or two has been resting on the mute button for too long."

    Rick Aristotle Munarriz

    September 26, 2007

  • Report this Comment On June 03, 2010, at 12:37 AM, oliverkaine wrote:

    I see a lot of comments talking about how most people barely use 2 gigs. That's great that T gives them the option to have a lower price with lower usage, however, why is the unlimited option going away. You people seriously think it's because most people actually need less data?

  • Report this Comment On June 03, 2010, at 1:32 PM, talotu wrote:

    As long as there is an unlimited option, people with lower data usage will have to subsidize people with higher data usage. Should there be an unlimited water plan? Then you can pay a little bit more when your neighbor uses his hose to "sweep" his driveway instead of using a broom.

    I think I am a typical iPhone user, but certainly not a power user. 200 Mb would cover my largest 3 months in 2010 combined. Given that I would pay the same amount as I'm paying now if I used 400M (close to a year's worth of my usage) in a single month I'll be downgrading immediately.

  • Report this Comment On June 04, 2010, at 12:59 PM, RatherBeSurfing wrote:

    Interesting reaction. I'm glad not be be supplementing the few data hogs. You can check your data usage. I was surprised at how little I use each month with my iPhone, which my wife says I "play with" way too much. I fit into the lowest usage tier so will save 50%. For a much more balanced assessment I recommend Foolish readers go to http://blog.connectedplanetonline.com/unfiltered/2010/06/02/....

  • Report this Comment On June 04, 2010, at 1:03 PM, gusset wrote:

    I have an iPhone 3GS and have averaged around 40MB/mon over the last six months. Several others have chimed in to report similar. I know many other cases as well.

    Also, the people using more are typically people who are streaming: Pandora and the like.

    Well, if people want to stream data through existing cellular networks which were never designed for that load, they can pay for the privilege IMO. Why should they be allowed unfettered ability to turn a smartphone into a radio, if it means I can't even make a phone call? This idea that the world somehow owes people unlimited bandwidth is strange to me.

    The networks are being upgraded and at some point everyone can have 5GB/mon and it won't be a problem, but we're not there yet. People need to realize the technical limitations.

  • Report this Comment On June 04, 2010, at 1:43 PM, JayrodPhil wrote:

    I consider myself a pretty heavy daily data user: Pandora and youtube; investing, trading and following stocks and mutual funds; considerable internet usage with blogs, social networking, separate email accounts not linked to my iphone, and just general surfing at work; 4000+ txts a month; and almost always use it for weather and directions anywhere i go. that being said, the most ive used in one month over the last 6 month span was 494MB. since i have an original 2G model it would actually cost me $5 more a month to get the 2GB. but the 2GB would still suffice for my "heavy" usage

  • Report this Comment On June 05, 2010, at 9:23 PM, Jazmyne wrote:

    I cannot imagine that AT&T didn't do their homework before making this decision. I upgraded to the iphone 3GS a mere two weeks ago. I've been glued to it since then. I listen to pandora for about 15 hours a week and I'm constantly checking email, facebook, ebay, myspace, cragislist, msnbc and texting. I also keep my schedule online and update it through my phone. After reading this article and comments, I checked my own usage. I was suprised to find that I've used only 156MB in two weeks. After looking at that, I don't think AT&Ts move is such a big deal. After everything I've done on my iphone in the past two weeks, I know I can easily stay within the 2GB limit - should I choose to downgrade from my unlimited data connection.

    I also see how ipad users who are streaming data to watch movies and heavier data loads will find the new options a little limiting. But the next question is - how many of those people are really using this device off of a wi-fi network?

    I don't think this is going to kill AT&T in the marketplace. If anything is going to hurt AT&T's marketshare, it's going to be their infrastructure, NOT their phone/data plans.

  • Report this Comment On June 06, 2010, at 8:30 AM, gregrules wrote:

    If only 2% of AT&Ts customers use more than 2 Gb per month, why bother with the change ? Seems like limiting bandwidth has a very small impact to their business. Of couse anyone can skew the stats to their advantage. How much more than 2 Gb per month could they be using ?

    Iphone is nice but over blown. Apple (and AT&T) has too much control. GO ANDROID !

    Android will reach Apple's market penetration in about a year or two at a MUCH CHEAPER rate. How many of those Apple apps (and how often) do you use them to really make it worthwhile to spend that much more money per month ?

  • Report this Comment On June 06, 2010, at 10:40 AM, ficklevoter wrote:

    I checked with my daughters who polled their friends, all constant iPhone users. It was unanimous, all will save money under the new plans with many megabytes to spare. If you buy an iPad and stream movies you will probably have to pay more than with the previous plan. I never thought I would write an email defending a mobile phone company but this one does, I suppose.

  • Report this Comment On June 07, 2010, at 1:29 AM, Philyogy wrote:

    2 gig cap?? The iPad and Netflix is a one- two knockout. With the cap, that will more than likely limit you to only 1 full length Netflix streaming movie, before you run out of bandwidth... Think about it..... Your 1 movie just cost you $30.. What a rip.. An example... AVATAR... Try and stream that, and you may not get to finish the movie, before you have run out of your bandwidth limit.. add to it, the web based ads that are on 99% of the web pages you browse, and then you have all the other bells and whistles.. Now for the iPhone, I can see 2 gig as a nice limit, but with the iPad.. this is just plain STUPID on At&T part... This is the quickest way to see your ship sink... ADD a HUGE HOLE... I can see people drifting past the AT&T booth, and possibly hitting, (gulp) Cricket.. ;)

  • Report this Comment On June 07, 2010, at 7:53 PM, thisislabor wrote:

    it's just for the people who spend all day long on Youtube.

  • Report this Comment On June 08, 2010, at 2:47 AM, Zangeith15 wrote:

    I left AT&T for Sprint and I'm loving it with my moment.

  • Report this Comment On June 09, 2010, at 4:20 PM, Darwood11 wrote:

    The internet may be "free" but the technology to access it is not. That includes smart phones and computers both large and small.

    I seldom hear anyone complaining about the lack of "free" Apple "appliances". So why "free" bandwidth? The argument seems to be this: If I purchase an automobile, the gasoline should be free. Likewise, the communications technology which "powers" my smartphone should be free. Really?

    For anyone who doubts this, what good is a laptop with browser or an iphone, without the communications system that supports it?

    AT&T, or Sprint or Verizon or whomever can fight for the AAPL market. That's their choice. How much they want to give away to have access to that market is also their choice. With competition, iphone users will have the freedom to move from carrier to carrier. True, there will be "cancellation": clauses, but big deal, most cellphone users in the U.S. probably have such clauses in their existing service plan, unless they have a card phone.

    When I read the comments, some of which seem to be knee-jerk reactions, I feel that I'm listening to addicts who are concerned about withdrawal symptoms.

    Get a life beyond being plugged in. I have and use technology which allows access to me 24/7. That means I can be available and can work 24/7. Wonderful!

  • Report this Comment On June 19, 2010, at 11:12 PM, slider12 wrote:

    I'm having a difficult time trying to understand where all this "T" love is coming from. I am forced to use T for my DSL and landline services for the past 10 years (Comcast is not an option) and there is something wrong when every simple little change takes "10 hours in a week" to resolve. 2 hours a call, 5 days a week. I usually get transferred 4 times per call and start in India or SE Asia, to fix my landline/DSL service in California and ALWAYS get someone the barley understands English and speaks to me like they are reading out of a manual. If you think making customers happy is an important part of business, then T is the wrong company to "be in bed with" in the first place. For everything.

  • Report this Comment On July 13, 2010, at 1:34 AM, slider12 wrote:

    AT&T gave them something, horrendous customer service, spotty coverage in most cities and employment increases from outsourcing to India, and SE Asia, for US callers. I love it when they read directly out of the manual to me, and then after 45 minutes they realize "Hey, let me transfer you to someone that (translated: "knows what they're doing"). But, quite frankly, I don't believe that type of person exists in the T universe. Not yet at least.

    Things have been way too easy for T. Maybe once they lose control of the Apple monster, they will reassess what it is to run an honest, well trained staff and listen to what people are begging for, a company that needs to work hard to make money.

    Losing 100% of the Apple market might be the best thing that happens to them. If they don't go under before they "get it".

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