AT&T CEO may be proposing data caps for Apple iPhone

Is AT&T CEO Ralph De la Vega hinting at data caps?

Since its release, the iPhone has been both a blessing and a curse for AT&T. Millions of subscribers flocked to the carrier since it is the exclusive provider of the iPhone in the U.S., but AT&T’s network has been suffering under the strain of those users. AT&T has become the butt of so many jokes when it comes to network reliability and 3G coverage and speed, but this could have happened to any other carrier if the iPhone landed elsewhere. AT&T even went as far as making a video explaining its shortcomings and the reason why it often doesn’t perform as well as it should. Still, consumers don’t really care about what goes on behind the scenes, they just want their phones to work. What good is having a feature phone if it can’t access the network to make phone calls, send and receive emails or use applications that require network data? For some, having their cake and eating it, too just isn’t enough: they want second and third helpings.

Unfortunately, the relatively small number of iPhone users who hog up data are ruining the experience for everyone else. According to PC World:

But all that data usage is not evenly spread across AT&T’s wireless customer base, De la Vega says–far from it. He cited AT&T research showing that just 3 percent of AT&T’s smartphone customers [read iPhone users] use 40 percent of all smartphone data, that they consume 13 times the data of “the average smartphone customer,” yet represent less than 1 percent of AT&T’s total postpaid customer base.

In addition to that statement, AT&T CEO Ralph De la Vega says that proper management of the network is of crucial importance to making sure the crowding of the network by certain users doesn’t happen. This can be achieved in several ways: expanding the network, gaining more spectrum, throttling data usage, implementing data caps or two or more of those options. The first two aren’t going to happen any time soon, so when De la Vega mentions managing crowding, he may be referring to any one of the latter options.

5MB of data in just 7 hours! Courtesy of The iPhone Blog

Is it a good idea? Well, for the users who are accustomed to eating up heavy amounts of data each month, it’s probably not – even though they are the problem. After a few years of unlimited, all-you-can-eat data, being cut off or limited could have the same effects as being weaned or cut from any other addiction. Moreover, iPhone users can claim a breach of contract and argue their way out of AT&T’s agreement if data throttling or data caps are put into effect.

Another option is tiered data packages. In Canada, Rogers Wireless offers tiered data pricing; the more data a customer wants to use, the more he or she has to pay. There is no unlimited data offering on Rogers, and in addition to its strong network, there have been almost no issues reported for the iPhone. Perhaps its time AT&T follows suit.

Since AT&T offers unlimited data for its smartphones, including the data-hogging iPhone, consumers never check or monitor their usage. What they don’t realize is that it is very easy to eat up 1GB of data per month or more with regular browsing, video streaming and using data-intensive applications. A tiered plan with limitations would cause iPhone users to be more judicious with their overall usage, especially if the penalty for going over one’s data plan is high (around $0.03 per MB, just like Rogers). The end result could possibly be a better overall experience for all iPhone users.

Ultimately, AT&T needs to continue investing in expanding and strengthening its network, but doing so will be costly. The carrier has already announced its plans to pump its 850MHz band, which penetrates more than the more ubiquitous 1900MHz band. AT&T is investing somewhere around $17 billion to improve its network and prep itself for future technologies, but until more spectrum is opened up by the government, its options are limited. As a power user myself, I have no problems with tiered or capped data options. It’s the only reasonable choice for AT&T at the moment.