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?
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!