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