by Bill Snyder

Mobile Phone Data Plans: New Gotchas

Feb 07, 2011
CarriersMobileSmall and Medium Business

A class-action lawsuit alleges that AT&T systematically overcharged iPhone and iPad customers. Do you understand the issues -- and the other money traps that are popping up in smartphone data plans?

Ah, the good old days. Of last year. When nearly all wireless data plans were of the all-you-can-eat variety and you could download your fingers off with nary a care. That’s not the case any more.

Sure, AT&T hasn’t yet forced existing customers onto a metered plan, though new users have no choice. And Verizon is offering unlimited teaser plans that will quickly convert to metered. Exceptions aside, we’ve got to live in the metered world, and it ain’t pretty.

Consumers shopping for wireless plans now face a bewildering menu of charges that vary widely from provider to provider.

[ For more background on costs from the big two carriers, see “AT&T and Verizon iPhone Plans Compared”. ]

Even within the pricing universe of a single wireless company, there are some startling gotchas. AT&T and Verizon, for example, charge users of corporate email services, such as Exchange and Notes, more than users of Web mail. And AT&T charges more per megabyte on its Mi-Fi service than for the exact same content via 3G. (For more comparison data, see this article by InfoWorld. )

That’s bad enough. But now there are allegations, contained in a class-action lawsuit, that AT&T’s bills “systematically overstate the amount of data used on each data transaction involving an iPhone or iPad account.”

I’ll get into the details in a just a bit, but first I should remind you that these are simply allegations. AT&T hasn’t commented directly on the suit, but has said it will contest it “vigorously” and that the company’s pricing methodology is fair and honest.

It’s also important to note that AT&T is not the only carrier accused of bilking wireless customers.

Echoes of Verizon Complaints

AT&T’s chief rival, Verizon, last year agreed to pay a $25 million fine and at least $52.8 million in refunds to customers who inadvertently racked up data charges on their phones during the last three years. Verizon charged customers without monthly data plans $1.99 per megabyte for data access in several circumstances, according to the Federal Communications Commission. Customers were charged when they accidentally launched Web applications, when they accessed some Web pages that were supposed to be free, and when they made successful attempts to access data when there was insufficient network bandwidth, the FCC said.

Some of those charges are echoed in the suit against AT&T, which was filed in federal court in San Francisco in late January. (Read the complaint here.) Citing evidence obtained by a consulting firm hired by attorneys for plaintiff Patrick Henricks, the lawsuit said that a phone it tested was billed for data charges that couldn’t possibly have been valid. That’s because the testers said they disabled all push notifications and location services and let the phone sit “untouched” for 10 days. At the end of that period it was billed for just under 2.3GB of data.

AT&T, the complaint says, regularly overstates incoming data between 7% and 14%, and in some cases by as much as 300%. “AT&T’s billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car’s tank,” the complaint read.

Fine Print Can Cost You

It seems to me that when a company sets a price for service, it should be clear and consistent. But Verizon and AT&T are constantly citing fine print and using sometimes obscure provisions of their service agreements to ding customers.

A colleague uses Exchange Mail, one of the most common enterprise-oriented mail services in use. His agreement with Verizon called for a $30 fee for 2 GB of data. But when he called Verizon support and the techie found out that he uses Exchange, he told him that from now on his data plan would cost an additional $15 a month.

AT&T has a similar provision, though the additional fee is less. At the time my colleague had the unexpected tangle with Verizon, those surcharges were difficult to spot in a service agreement. They’re more prominent now; be sure you look for them if you use Exchange or Notes Mail. I suppose you could simply not tell your provider you use one of those packages, but that could leave you open to some sort of retaliation by the wireless company.

I see the logic behind this practice, and for AT&T’s practice of charging more per megabyte for data downloaded on Mi-Fi than on 3G. The providers figure that most users are unlikely to exceed, or even use up, all of their allotted bits. But users of corporate mail services and devices like the Mi-Fi will probably use most, if not all, of their allotted downloads. So the profit margin derived from the average user is greater than that of the heavier user.

You can judge for yourself if this is fair; I’ll just say that there should be much better disclosure of those practices. That would be true in any event, but it’s particularly important in the U.S. where wireless service, at least when smartphones are the issue, is pretty close to an oligopoly, that is a market with only a few significant players. Once you get past AT&T and Verizon the pickings are pretty slim. T-Mobile, is a non-starter, in my opinion, and while Sprint has decent services, its network is not nearly as extensive as that of the big two.

Given their commanding position in the market, it’s not surprising that Verizon and AT&T are raising prices and imposing new conditions. Verizon, for example, says it is going to slow down data speeds for customers it considers heavy users and will also utilize “optimization” techniques including “caching less data, using less capacity, and sizing the video more appropriately for the device.” In other words, video and pictures may not look so good on your handset if you are a heavy user. (Read the company memo here.)

One last bit of advice: No matter which provider you subscribe to, find out if it will send you a notification that you are about to exceed your allotted bits, or automatically bump you up to the next service tier without an undue penalty. That’s become a fairly hot issue on the voice side, and will surely be significant as more consumers are pushed on to measure data service.

San Francisco journalist Bill Snyder writes frequently about business and technology. He welcomes your comments and suggestions. Reach him at

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