I have long said that the current unlimited pricing on full browser smartphones is not sustainable. Over the last couple of years, I have written and talked extensively about the problem and solutions needed to address this issue (some thoughts were discussed with Business Week, GigaOM, NYTimes and others) and then in more detail in the Yottabyte whitepaper). Looks like industry is coming around to that realization and we might see some pricing structure changes in Q1 2010. Glad to see the industry is moving in the right direction by acknowledging the issues and coming up with relevant technical and business solutions. We still need a more holistic approach but at least this is a start. Some of the things Mr. De La Vega said yesterday at the UBS conference were straight from our whitepaper recommendations. Much more to come on the subject and this topic will stay in the news in 2010.

AT&T to Urge Customers to Use Less Wireless Data

By JENNA WORTHAM

Published: December 9, 2009

AT&T is considering ways to encourage customers to use less wireless data as its network struggles to keep up with demand, a company executive said Wednesday.

“What we are seeing in the U.S. today in terms of smartphone penetration, 3G data, nobody else is seeing in the rest of the planet,” Ralph de la Vega, president and chief executive for mobility and consumer markets at AT&T, told analysts at a conference in New York. “The amount of growth and data that we are seeing in wireless data is unprecedented.”

AT&T is the exclusive United States carrier for the iPhone, whose owners are big users of network capacity as they surf the Web and download videos.

The company has been criticized by owners of the phone for delayed text and voice messages, sluggish download speeds and other network problems.

Mr. de la Vega cited the heaviest data users, saying that 40 percent of AT&T’s data traffic came from just 3 percent of its smartphone customers.

But he emphasized that the company would first focus on educating consumers about their data consumption in the hope that doing so would encourage them to cut back, even though they are paying for unlimited data use.

“We’re going to try to focus on making sure we give incentives to those small percentages to either reduce or modify their usage, so they don’t crowd out the customers on those same cell sites,” he said.

The company might consider a “pricing scheme that addresses the usage,” Mr. de la Vega said. But he said that would be determined by regulatory factors and industry competition, among other issues.

Although the company declined to provide further details, analysts speculated that AT&T could be talking about a tiered pricing structure, not unlike a voice plan.

“You use more minutes, you pay more,” said Chetan Sharma, an independent wireless analyst. Mr. Sharma pointed out that carriers in other countries put data-use limits on iPhone customers to manage demand.

Still, Mr. Sharma said pricing plans based on use were only part of the answer to AT&T’s network congestion.

“They still have to improve things on the back end so they can deal with the issues of multiple users on the network at the same time,” he said.

AT&T has announced a goal of adding 2,000 cell sites to improve its network this year. And this week it released an iPhone application called Mark the Spot that lets users report data problems, dropped calls and spotty coverage.

All wireless carriers are preparing for growth in the use of smartphones and mobile computers that will place high data demands on their networks, said James Brehm, a senior mobile consultant with market research firm Frost & Sullivan.

“AT&T and other service providers want to be smarter about how they bill customers and maximize all streams of revenue, while growing the number of connected devices and data traffic at the same time,” Mr. Brehm said.

Mr. de la Vega acknowledged the company’s difficulties in meeting the demands of its customers, but said things were improving in some areas. “In New York, I think we’ve turned a corner,” he said.