Can AT&T Sneak In a Price Hike Here?
The news isn't good for penny-pinchers looking to make their first smartphone purchases through AT&T (NYS: T) .
Living up to a rumor that was broken earlier this month by tech blog The Verge, the country's second largest wireless carrier is shaking up its data plans come Sunday. AT&T is looking to charge $5 more a month for its three available tiers, though it's also bumping up the included data.
|Expensive||200 MB for $15||300 MB for $20|
|More Expensive||2 GB for $25||3 GB for $30|
|Way More Expensive||4 GB with tethering for $45||5 GB with tethering for $50|
Source: The Verge.
To be fair, customers will be getting more data for their dollars. The new pricing plans are also for new AT&T wireless customers. If you're a current AT&T customer and you're happy with any of the three old pricing plans -- or you're on the unlimited data plan that hasn't been offered since last year -- you don't have to switch to a new pricing plan even if you upgrade your phone within AT&T's network.
However, it's pretty sneaky how AT&T is trying to disguise this price hike as an upgrade. After all, if you want tethering -- allowing you to use your phone as a wireless hot spot for other Wi-Fi devices -- you have to go with what is now the $50 plan (or wait until the next time that a free tethering app sneaks through on your smartphone platform). The entry level plans simply start at $20 instead of $15, so you don't have much of a choice there either.
If you study the three plans, it's not as if there's a whole lot of wiggle room to downgrade a tier to actually save money. The person going through nearly 2 gigabytes of monthly data isn't going to last too long on the 300 megabyte plan that is $5 cheaper, so they have no choice but to pay up for the 3 gig plan that is $5 more expensive.
Ever since Verizon (NYS: VZ) and AT&T nixed their unlimited data plans, the two largest wireless carriers have been testing the pricing elasticity of their capped data plans. Phones get faster. Smartphone owners learn to do more on their devices. It all adds up to a great decision to subsidize a new purchase in order to lock users in for two years.
The rub here is that by offering more prohibitive data pricing to new users they are pricing late adopters out of smartphone ownership. Shouldn't it be the other way around? Shouldn't technology get cheaper as companies reach deeper into the mainstream masses?
Normally this would be a time to feast for Sprint (NYS: S) with its unlimited data plan, but the network's reputation is spotty. As an investor, I'm not sure how much faith one could have in a company to continue its consumer-friendly pricing and maintain its network while sporting massive losses.
Sooner or later new smartphone buyers or folks looking to switch carriers will balk at the higher prices. This is just getting ridiculous.
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At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.