Subs are using Wi-Fi to avoid fees as they reach the edges of their data plans, causing AT&T to boost its pricing plans, analysts suggest

Sarah Thomas, Director, Women in Comms

January 25, 2012

2 Min Read
Wi-Fi Usage Drives AT&T to Raise Prices

AT&T Inc. (NYSE: T) has been one of the most aggressive wireless operators when it comes to Wi-Fi offload, helping customers stay under their monthly consumption caps via the company's 30,000-hot-spot-wide network. But that strategy is now being viewed as a reason why AT&T decided to raise its mobile data prices. (See New Twists in Mobile Data Pricing .)

"AT&T said at a recent conference that they are seeing customers walk up to the edge of their tier and then use a lot of Wi-Fi to stay below the tier," Jefferies & Company Inc. equity analyst Thomas Seitz said Wednesday. "We think AT&T's new pricing plan is devised in part to monetize the traffic they've previously lost to Wi-Fi."

The new plans introduced last week range from $20 for 300MB to $50 for 5GB with a hot-spot feature, and they are all saddled with a policy that charges customers who go above those thresholds. Yet, even as AT&T encourages its customers to continue to use Wi-Fi, CFO John Stephens has admitted it's a reason consumers don't move to higher tiers, and Jefferies' Seitz believes the carrier is now making up for that lost ARPU.

AT&T became the most advanced wireless operator for Wi-Fi out of necessity to relieve network congestion. The carrier has the largest and most integrated network in the U.S. and much of the world. Jefferies point out that this architecture also gives it more flexibility than most carriers, too.

Rather than charge for Wi-Fi use directly, AT&T has the opportunity to add value in the form of security, proprietary services, parental controls and just garnering subscriber information -- all scenarios that Wi-Fi vendors are encouraging operators to pursue. (See Wave Goodbye to Free Wi-Fi and Wireless Operators Embrace Wi-Fi as Their Own.)

In a report Jefferies published Wednesday, the analysts concluded that how the Wi-Fi ecosystem develops could materially influence the pricing power of mobile operators. Either they'll raise prices and risk customers substituting wireless for Wi-Fi or they'll find a way for Wi-Fi to work for them.

"If more consumers begin using Wi-Fi as a wireless alternative, we see the potential for AT&T to monetize its Wi-Fi network in creative ways," the report finds.

AT&T announces its fourth-quarter earnings Thursday, at which time the carrier will release its latest Wi-Fi statistics.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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