What AT&T's tiered pricing means for you (FAQ)

AT&T's smartphone pricing overhaul, announced earlier this week, has ignited a heated debate among consumers, causing many to scratch their heads and wonder just what the shift means for them.

In a nutshell, AT&T has done away with its unlimited data plan and will now offer two-tiered data plan pricing. Some people are praising the carrier for offering a plan that aligns costs with customer data usage, while others call the company greedy and criticize it for potentially stifling future mobile application usage and innovation.

While many consumers will likely benefit from the new plan, some of AT&T's most rabid data users will likely pay more. In an effort to better explain the new pricing structure and provide a clearer explanation of what it means to wireless customers, CNET has put together this list of frequently asked questions.

Let's start with the basics. What is the new pricing plan that will go into effect for all AT&T smartphones starting June 7?
For $15 a month, the DataPlus plan offers smartphone customers 200 megabytes of data. If customers exceed 200MB in a monthly billing cycle, they receive an additional 200MB of data for $15 until the end of that billing cycle. For $25 a month, consumers sign up for the DataPro plan and get 2 gigabytes of data. If subscribers exceed 2GB during a billing cycle, they will be charged $10 for an additional 1GB of data.

Who will be subject to the new pricing?
This plan will affect new AT&T smartphone subscribers who sign up for service on or after June 7. Current smartphone subscribers, including iPhone and iPad customers who have already signed up for the $30 unlimited data plans, are grandfathered in. They can continue to use those unlimited plans until their contracts run out. But if they want to switch their plans to either the $15 or the $25 plan they can.

Once subscribers switch to the new plan, however, they will not be able to go back to the $30 all-you-can-eat plan. Anyone buying the new iPhone that is supposed to be released this summer will have to sign up for one of the new plans. And if current iPhone users want to tether an existing iPhone and use it as a modem, they must sign up for the $25 DataPro plan, plus pay an additional $20.

What happens if I go over my limit?
If you have the lower-cost DataPlus plan, you will be charged $15 if you go over the 200MB allotted data limit for that month. This means that regardless of whether you exceed your limit by 1MB or 100MB, you will be charged $30 for that month. If you exceed 400MB, you will be charged another $15 and your bill for that month will be $45.

If you are signed up for the 2GB DataPro plan and exceed your monthly cap, you will be charged $10 extra for an additional 1GB of data. This means that if you use between 2GB and 3GB of data your bill will be $35. If you use 4GB of data that month, it will cost you $45. And 5GB of data usage in a month will set you back $55, and so on.

This sounds kind of screwy. With the DataPlus 200MB plan I could potentially pay more for the month but get less capacity than if I had the DataPro plan? Is there any way to adjust the plan if I know I am going over?
AT&T representatives say you can change your plan proactively. This means you can be signed up for the DataPlus service, and if you know you are going over that limit, you can adjust your service online to avoid overage fees. So let's say you are signed up for the DataPlus plan and you see you are about to exceed your limit the first week of the month; you can upgrade to the DataPro service without resetting your contract. And you can move back down to the DataPlus service the next month if you want. The only drawback is that you have to manage your account manually to switch the plans back and forth.

How can I tell how much data I'm using?
Subscribers will be able to log in to their accounts and check usage online. All smartphone subscribers who sign up will also get e-mail and text message warnings when they are approaching 60, 90, and 100 percent of data usage in their package. In addition, subscribers will get warnings about how much of their overage allotment they have used. For example, they'll get a warning when they've used 75 and 100 percent of the overage allotment.

How much data does the average smartphone user actually consume in a month?
According to Nielsen, the average iPhone subscriber uses 400MB of data per month. But all other smartphone users typically use between 40MB and 80MB of data per month. AT&T says that on average, 65 percent of its customers use less than 200MB per month, and it claims 98 percent of its smartphone customers use, on average, less than 2GB of data per month.

But data usage is increasing, correct? So isn't it true that what people use today may not be what they use tomorrow?
Yes, the amount of data smartphone users consume has been increasing. In fact, according to BillShrink, a company that analyzes cell phone bills and advises people on the best service for their usage patterns, data consumption on smartphones has increased 3.5 times in the past 18 months.

In February of 2009, BillShrink found that 92 percent of all smartphone users consumed less than 200MB of data per month, said Schwark Satyavolu, CEO of BillShrink. In May 2010, the percentage of people consuming less than 200MB of data per month was 68 percent. In February 2009, only 7 percent of wireless smartphone subscribers used between 200MB and 2GB of data. In May 2010, that figure jumped to 30 percent.

Satyovolu said data usage is expected to continue to grow as more streaming applications become available. For example, Netflix and Skype are two applications that were recently approved for the iTunes App Store, and they consume a lot of data. He also said that devices like the iPad, which have bigger screens and more processing power, are expected to have increased data usage compared with smartphones.

So should average iPhone users be worried?
Not necessarily. Satyavolu thinks most iPhone users will still fall under the 2GB mark, at least for now. This means that if current users choose to switch to the 2GB plan or if they are just signing up for a new iPhone, they will likely save money over the previous pricing model.

"The vast majority of AT&T smartphone consumers will benefit from the new plans," Satyavolu said. "Most consumers will either get a small break or a big break on their data bill depending on their usage. But heavy users will be penalized."

Who will feel the most pain from these changes?
Those most affected by the change are the 3 percent of customers who AT&T says are using 40 percent of the network assets. These are heavy data users. It will also likely affect iPad users and customers who want to use their iPhone or smartphone as a modem to connect to the Internet wirelessly.

What kinds of applications would I be running and how often would I have to use them to reach the 2GB cap on my iPhone?
Any kind of streaming service consumes a lot of data. This includes music services such as Pandora and movie applications, like Netflix. Other applications that must be refreshed regularly, such as Google Maps, also eat up a lot of bandwidth. Skype, which allows for voice over IP calling, is another application that consumes a lot of bandwidth.

Satyavolu said that any of these applications in excess could get users close to the 2GB limit. For example, listening to Pandora for three to five hours at a time could be a problem. Watching one or two movies a day could also get your monthly usage close to the 2GB mark. Using Google Maps several hours a day every day could also almost reach that limit. Using Skype as the primary way to call people will also get consumers close to their data limit.

But Satyavolu emphasized that occasional use of these applications is all right.

"I wouldn't use Google Maps as my GPS for my delivery truck," he said. "And I wouldn't use Skype all the time to call all my friends, but using these applications in moderation is fine and most people won't have to worry about going over their 2GB limit."

Still, he admits that each of these services in moderation can also add up quickly.

"Most people won't have to worry about their usage much under current usage levels," he added. "But you have to remember that the average usage has gone up 3.5 times in the past year and a half. So if things continue on that path, then these limits could be an issue in the future."

If I am worried about my data usage, what can I do to make sure I don't go over my data limit?
The first thing you can do is surf the Web and use Internet-based applications in a Wi-Fi hot spot. AT&T has more than 20,000 public hot spots in places like Starbucks. Accessing these hot spots is free for all AT&T smartphone subscribers. You can also use Wi-Fi in your home or office. The service is faster and usage on these networks does not count toward your monthly 3G data consumption total.

Another strategy is to not download songs or applications on the 3G network. A song from iTunes, for example, can be anywhere between 1MB and 5MB. Applications also generally range between 2MB and 5MB. Whether users are buying apps for the first time or updating them, Satyavolu recommends not doing that over the 3G network where it counts against data usage.

What is the deal with tethering or using a smartphone as a modem?
For some time now, AT&T has allowed smartphone users, except those with iPhones, to use their phones as a modem to connect laptops to the Internet. AT&T charged an extra fee for this capability, and it capped the services at 5GB per month, which is the same limit it puts on its wireless Internet service that uses a device that plugs in to a laptop.

Under the new plan, AT&T is allowing tethering for the iPhone, in addition to other smartphones. But it has lowered the usage cap. Starting June 7, subscribers will pay $20 for the right to tether (even the iPhone), but they must also sign up for a $25 DataPro plan that is limited to 2GB of data per month. This usage is shared between the smartphone and the laptop.

That sounds like a pretty lousy deal. Am I missing something?
Yes, it's actually a terrible deal for consumers. It looks like AT&T is trying to discourage customers, especially iPhone users, from using their phones as modems. This is likely because laptops consume far more data on a wireless network than even an iPhone. And because AT&T is already having a difficult time keeping up with demand on its network, it makes sense that the company would want to curb usage before it even begins.

If most customers will actually benefit from this new pricing scheme, why are so many people angry?
Satyavolu believes people are so worked up about the new pricing plans because it reminds them what they hated about managing their cell phone bills when they only had to worry about voice minutes and roaming.

"We started our service to help people figure out how many voice minutes they needed," he said. "Now the unlimited plans are getting cheaper, but data is moving more toward being usage based. People remember this frustration and it just feels like the cell phone industry is after them."