AT&T’s pricing change – Much to do about nothing…unless you own an iPad


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This past Wednesday, AT&T announced that they were going to end their unlimited 3G data plan for smart phone users. Starting later this month, AT&T will offer three tiers of pricing. A limited 200MB version for $15, a more powerful 2GB version for $25 and a premium version that is priced based each GB used.  While some have speculated that the change was purely a pricing strategy play, the real reason for the change is because of the introduction of Apple’s iPad.

With heavy iPhone usage beginning to bog down their network in a number of different cities, AT&T anticipated that iPad usage would increase usage to a point that serious disruptions would occur without significant infrastructure improvements. And the heavy users of iPhones currently do not generate enough revenue to justify the cost of these improvements. With the introduction of the  iPad, things will only get worse.

Most users will be fine with the mid-level 2GB service. Heavy iPhone / iPad users will require the premium plan. Despite the negative feedback from these heavy users, AT&T was smart to initiate these changes. Charging more for heavy usage will ease demands on their existing infrastructure and generate added revenue that can be used to beef-up their infrastructure to support better service.

Here’s the takeaway. Pricing changes are necessary for a number of different reasons. Sometimes it’s purely a revenue generation tool; other times it can be used to limit usage when infrastructure constraints are present.

Republished with author's permission from original post.

Patrick Lefler
Patrick Lefler is the founder of The Spruance Group -- a management consultancy that helps growing companies grow faster by providing unique value at the product level: specifically product marketing, pricing, and innovation. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.


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