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Last updated on April 19, 2014 at 7:35 EDT

AT&T Likely To Add Data-Usage Based Fees

December 10, 2009

People spending hours watching video on their iPhones will soon find themselves being charged by AT&T for their heavy usage.

CEO Ralph de la Vega of AT&T Mobility and Consumer Markets came very close to admitting the plan to institute such fees yesterday when he spoke to attendees at a UBS conference in New York about some kind of use-based pricing.

“The first thing we need to do is educate customers about what represents a megabyte of data and…we’re improving systems to give them real-time information about their data usage,” he said. “Longer term, there’s got to be some sort of pricing scheme that addresses the [heavy] users.”

AT&T found that only 3% of its smartphone users, mainly iPhone owners, are responsible for 40% of total data usage, mostly for video and audio, de la Vega said.
 
AT&T has seen that alerting wired Internet customers to such patterns could curb their usages.

“With landline capabilities, we used that concept and customers didn’t know how much data they were using — including parents who didn’t know how their children were using [video and audio],” he said.

“Once alerted, they reduced their consumption without anything other than being told that data was being used in an inordinate fashion,” de la Vega added.

His comments on data use were previewed in a keynote speech he delivered in October at the CTIA. However, he went beyond the previous comments today when he said, “We are going to make sure incentives are in place to reduce or modify [data] uses so they don’t crowd out others in the same cell sites.”

AT&T has formed focus groups to determine the next step, and AT&T is already setting up its systems to give smartphone users real-time data on their data patterns, he said.

“What’s driving [high] usage are things like video or audio that plays around the clock,” he added. “We have to get to those customers and get them to recognize they have to change their patterns, or there are things we will do to change those patterns.”

De la Vega also said he believes that whatever AT&T decides to do will conform with Net neutrality regulations already in place or under consideration by federal regulators, including the Federal Communications Commission.

He also took the opportunity to defend AT&T’s network, though he did not mention a series of TV ads used to counter those from Verizon Wireless. He also did not comment on a lawsuit filed and dropped by AT&T on the matter.

He mentioned a recent third-party study using driving tests that reveal how AT&T’s network outperforms Verizon’s on throughput speeds. The study also found that AT&T had only slightly more dropped calls than Verizon, with just two additional dropped calls per 1,000 than Verizon.

The prime focus of his speech was on network improvements that are currently being made, such as an 850MHz spectrum overlay and installation of HSPA 7.2 software. The HSPA 7.2 improvement will double network throughput speeds with a theoretical maximum download speed of 7.2 Mbit/sec, which will be finished in six cities by the end of this year, with 25 cities online by mid-2010, according to de la Vega.

The six cities were not named, and a spokesman wouldn’t list them either in a follow-up question, but it was said that faster HSPA 7.2 speeds would be noticed “immediately” by iPhone 3GS users.

It “…will be smoking,” he said.

De la Vega did admit to slow network issues for AT&T users in Manhattan and the financial district of San Francisco, which are problems already noted by many analysts.

He said that networks in both areas have performed “below standards”.

In Manhattan, the use of a new 850Mhz channel has helped AT&T “turn the corner…and you’ll see gradual improvements,” he said. “You’ll see this is going to be fixed. We’ll do a lot better.” The signal on that 850Mhz spectrum travels further than on some other channels and penetrates buildings better, he said.

De la Vega also conceded that cell tower antennas “need to be replaced” in the financial area of San Francisco, since they were originally designed for older networks. That particular upgrade has “gone slower than we wanted.”

Meanwhile, using HSPA 7.2 will be a good step for data customers until LTE technology is installed, de la Vega said. While Verizon moves forward with some rollouts of LTE in 2010, de la Vega argued that that coverage will only be in pockets, while AT&T customers will have broader access to HSPA 7.2 technology.

AT&T has scheduled LTE trials to start in 2010 and commercial availability in 2011, he said.

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