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Wi-Fi Usage Drives AT&T to Raise Prices

Sarah Thomas
1/25/2012
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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

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shygye75
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shygye75,
User Rank: Light Sabre
12/5/2012 | 5:44:22 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Wi-Fi is a Band-Aid that's already coming loose. Performance is only going to deteriorate, and fairly quickly given the popularity of bandwidth guzzlers (both apps and devices). Mobile bandwidth is becoming a precious (read costly) commodity. Once operators sort out the details, they should do well. "Should" is the operative word here, though.

dave@qwest
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dave@qwest,
User Rank: Light Beer
12/5/2012 | 5:44:29 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Well geez...AT&T had to fork over @ $4 Billion to Deutche Telcom---they need to recover somehow...:-)   The entire board needs to be fired!!!

^Eagle^
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^Eagle^,
User Rank: Light Beer
12/5/2012 | 5:44:30 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Sarah,


I disagree with your comment that creative pricing is good.  I think it is bad. 


I should also point out that wifi spectrum is free and unlicensed.  Should we allow ATT to convert that into a fully monetized asset that they paid nothing for?


sailboat

^Eagle^
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^Eagle^,
User Rank: Light Beer
12/5/2012 | 5:44:30 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Kaps,


What makes you think that we will actually have choice?  real competitive choice.  My bet is we end up with "the only game in town" scenario with price gouging to follow.  


Also, on a separate note: wifi is on free unlicensed spectrum.  The only "cost" for it is the cost of the wireless access node hardware (really cheap) and the backhaul link.  Given most wifi routers are connected to dsl links and given those links are powered over copper pairs that were long long long ago fully paid for, if ATT can monetize the wifi, then their ARPU should go up quite a bit!  zero cost for the spectrum.  fully depreciated written off cost of the physical plant.  Not bad.


However, I must point out that that rf spectrum does not belong to ATT.  It was intended to be a free band for anyone.  If ATT decides to really monetize it, shouldn't they be paying for that spectrum?  I'm just sayin.....


of course I know I might get spammed for my post.  


but I think the issue of us giving free spectrum to ATT to monetize is an interesting topic.


sailboat

VoiceOnTelecom
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VoiceOnTelecom,
User Rank: Light Beer
12/5/2012 | 5:44:30 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Regardless of the specifics of AT&T's moves here, I agree that the times are changing in WiFi.  You have Republic Wireless, with its niche market, which would be devastated by the loss of free WiFi.  But you've also got True Corp. in Thailand spending as much as anyone on the cellular/WiFi handoff.


Where does it all end?  I have no idea.  I'm not buying the "one spectrum" argument though.  Would consumers accept that?

gtchavan
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gtchavan,
User Rank: Light Beer
12/5/2012 | 5:44:31 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


These clowns just gave away 4.2 billion to competitors and are at least one year behind spending on their networks.  People are fleeing their 300kb DSL service in droves and when they lost Apple they have to share the lucrative Apple business with every other carrier.  The reason they are charging for thie WiFi is becasue they need to tap every possible revenue source to survivie or I should say to pay their executive salary and their union bosses and thier pensions.   ATT is over and done with, and interstingly their demise comes a time when the demand on data networks are exploding and more and more people are depending on networks for their daily lives and when networks is becoming the knowledge base of humanity.  Stick a fork in ATT, they just found another way to PO thier customers.

sarahthomas1011
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sarahthomas1011,
User Rank: Light Beer
12/5/2012 | 5:44:33 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Increasing prices like this already feels like charging extra for Wi-Fi; it's just subtle. I agree that they'll probably do both. And creative pricing is good, but I'm not exactly sure what that would look like - besides tacked-on charges.

ibarrera
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ibarrera,
User Rank: Light Beer
12/5/2012 | 5:44:33 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


So if it's WiFi usage why driving their prices up, instead of down to get people to use their plans.


The race to increase revenue from quarter to quarter has lead to this new mechanism where ISPs don't offer better services at the same price, but they force customers to move to another plan (a la Netflix), that will bring more money selling untangibles.


Who charges AT&T for ther data? Yet they will probably be forcing people with 200MB plans (which may not need 300MB) to pay $5 more a month. According to my calculations, spreading these plans evenly amonth a month doesn't give you even a net 1kbps service. I remember the times I had a 9.6kbps modem, this is even worse (but they allow the bursts) but people is paying already a lot for the "wireless" advantage.

kaps
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kaps,
User Rank: Light Beer
12/5/2012 | 5:44:33 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Sarah I am sure you and I both mentioned this before... the days of free Wi-Fi are probably numbered and it's not a big number. As soon as the roaming/authentication problem becomes less of a problem you can already hear the justification of "it's all one wireless network... and here's your bill for it."


Just like unlimited cell plans, unlimited Wi-Fi is essentially untenable. No part of access, other than unlicensed bandwidth, is free. I know editorius Phil has championed more pay-for-what-you-get plans based on the idea that -- you need to pay for what you use. Wi-Fi will go that direction as well, and when it does all we can hope is that there is enough competition (!) so that providers compete based on service quality and other features and not just because they are the only game in town.

kaps
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kaps,
User Rank: Light Beer
12/5/2012 | 5:44:33 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


Sarah I am sure you and I both mentioned this before... the days of free Wi-Fi are probably numbered and it's not a big number. As soon as the roaming/authentication problem becomes less of a problem you can already hear the justification of "it's all one wireless network... and here's your bill for it."


Just like unlimited cell plans, unlimited Wi-Fi is essentially untenable. No part of access, other than unlicensed bandwidth, is free. I know editorius Phil has championed more pay-for-what-you-get plans based on the idea that -- you need to pay for what you use. Wi-Fi will go that direction as well, and when it does all we can hope is that there is enough competition (!) so that providers compete based on service quality and other features and not just because they are the only game in town.

sarahthomas1011
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sarahthomas1011,
User Rank: Light Beer
12/5/2012 | 5:44:34 PM
re: Wi-Fi Usage Drives AT&T to Raise Prices


It's an interesting dynamic for AT&T because they have to encourage Wi-Fi use because their network can't handle all the traffic, but then they lose APRU because of it. And ARPU is such an important metric for them. We'll see what they report in terms of Wi-Fi and APRU tomorrow morning.

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