AT&T's Bait And Switch On iPhone Unlimited Service: We Screwed Up, So Now You Have To Pay More

from the well,-that's-convincing dept

There’s lots of buzz going around concerning the news that an AT&T exec has admitted that to deal with the companies own inability to build out a strong cellular network (angering tons of iPhone users), that it’s planning to put in place caps and charge more to high-end users. Of course, this is pure bait and switch. The company sold people on an unlimited data plan, failed to invest in its network, and pushed high bandwidth apps on people. And, of course, it’s worth noting that while they now want to charge high bandwidth users more, they don’t say anything about the low bandwidth users. No one gets a discount. AT&T is making a ton of money off of the iPhone. It could have — and should have — invested more of that into network upgrades. Now it’s blaming its most loyal users — the same ones who it recommended high bandwidth apps to — and expecting that everyone will be happy with that? AT&T may discover that people start looking for other alternatives if they dump the unlimited data offering that they sold people.

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Comments on “AT&T's Bait And Switch On iPhone Unlimited Service: We Screwed Up, So Now You Have To Pay More”

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83 Comments
Pjerky (profile) says:

Re: Frakin' frakers!

Unfortunately I still have a year left on my contract. But once that is up I am out and going to get an Android phone. I have had it with the dropped calls and the difficultly making calls (from time to time).

If they do this to me (and I am definitely a heavy user, streaming Pandora all day) I won’t pay it and I will switch carriers in a heartbeat.

Derek Reed (profile) says:

Re: Re: Re: Frakin' frakers!

Did you sign a contract that says “AT&T will provide me with plan X that includes unlimited” or a contract that says “AT&T will provide me with ‘service'”?

I’m going to rip at least a few managers a new one if they do it of course, and I’m sure I’m not the *only* one. Not sure what the actual terms of my agreement was though.

Hephaestus (profile) says:

Re: Re: Okay they do have a we can change this anytime in the contract

CHANGES TO TERMS AND RATES
We may change any terms, conditions, rates, fees, expenses, or charges regarding your service at any time. We will provide you with notice of such changes (other than changes to governmental fees, proportional charges for governmental mandates, roaming rates or administrative charges) either in your monthly bill or separately. You understand and agree that State and Federal Universal Service fees and other governmentally imposed fees, whether or not assessed directly upon you, may be increased based upon the government’s or our calculations. IF WE INCREASE THE PRICE OF ANY OF THE SERVICES TO WHICH YOU SUBSCRIBE, BEYOND THE LIMITS SET FORTH IN YOUR RATE PLAN BROCHURE, OR IF WE MATERIALLY DECREASE THE GEOGRAPHICAL AREA IN WHICH YOUR AIRTIME RATE APPLIES (OTHER THAN A TEMPORARY DECREASE FOR REPAIRS OR MAINTENANCE), WE WILL DISCLOSE THE CHANGE AT LEAST ONE BILLING CYCLE IN ADVANCE (EITHER THROUGH A NOTICE WITH YOUR BILL, A TEXT MESSAGE TO YOUR DEVICE, OR OTHERWISE), AND YOU MAY TERMINATE THIS AGREEMENT WITHOUT PAYING AN EARLY TERMINATION FEE OR RETURNING OR PAYING FOR ANY PROMOTIONAL ITEMS, PROVIDED YOUR NOTICE OF TERMINATION IS DELIVERED TO US WITHIN THIRTY (30) DAYS AFTER THE FIRST BILL REFLECTING THE CHANGE. If you lose your eligibility for a particular rate plan, we may change your rate plan to one for which you qualify.

kirillian (profile) says:

Re: Re: Re: Okay they do have a we can change this anytime in the contract

I recall a lawsuit not too long ago that put the kabash on this kind of wording in a contract – the idea that one side can change the contract indiscriminately without any sort of penalty was kinda shot down…gonna have to go find that now……

nasch (profile) says:

Re: Re: Re:2 Okay they do have a we can change this anytime in the contract

It doesn’t sound that bad. The contract says 1) they have to notify you of changes and 2) if you don’t like the change, you can terminate the contract with no penalty. Having a clause that would require them to pay you a penalty in that case would be great, but obviously not going to happen.

Hephaestus (profile) says:

Re: Re: Re:3 Okay they do have a we can change this anytime in the contract

You can get out of an early termination by contacting them with in the predefined time period. Which is good.

On another note ….

I believe in coincidence I dont trust it …. I feel Verizon had inside information on this. The whole “Theres a Map for that” ad campaign seems to coincidental looking back.

ChurchHatesTucker (profile) says:

Re: Announcement?

“Hey, Mike, can you point me to the AT&T announcement that backs up your claims that this will apply to all existing customers and that the lightest users won’t play less than they do now?”

There’s little in the way of details (yet) but that cuts both ways. They’re saying that “incentives” to not actually use the network in the manner that you’ve paid for will continue, but neither is there any indication that using less of it is going to be a boon for you.

tl;dr Lesser is better.

Brooks (profile) says:

Re: Re: Announcement?

Actually, all there is so far is a guy at a conference saying they’re looking at charging for data usage to disincent the heaviest users. You’re right that there’s no indication that using less will be a boon — because there’s no indication of any specifics whatsoever. You might as well say there’s no indication that they won’t hold your elderly grandparents hostage and demand your net worth in ransom.

In fact, there’s nothing at all about whether this will only apply to new users or whether they’re looking at applying it to existing users who signed up with the “unlimited” promise (and who therefore would be free to walk from the contract with their free iPhone, since this would clearly be a “material” change in terms).

Sadly, this seems to be a case of Mike speculating about what the news might be and then having a very strong editorial reaction. It’s all good, but he framed his assertions as fact, and after doing a lot of digging, it seems pretty clear they’re just his imaginings, based on a couple of sentences from an executive at a conference.

nasch (profile) says:

Re: Re: Re: Announcement?

You might as well say there’s no indication that they won’t hold your elderly grandparents hostage and demand your net worth in ransom.

Why doesn’t AT&T confirm that they are not going to hold your grandparents hostage and demand your net worth in ransom? Just a simple press release is all it would take to quash these rumors… yet all we get is silence.

Jim says:

AT&T the worst?

Clearly there are coverage areas (or lack thereof) on which AT&T is screwing the pooch, so people who bought iPhones in those areas (e.g., New York City, San Francisco) are rightfully pissed. But I gotta say that in my area (greater Boston), the coverage is great, I never drop into Edge anymore, it’s always 3G, and it’s always two to five bars. I’ve experienced one dropped call in my year of usage, and life is good. The iPhone is simply awesome when you don’t have to fret about coverage. Now, as for AT&T changing the terms of service, I don’t think they can do that mid-contract, so if you have a two-year agreement, you’re good until that’s up, I’m sure. Afterwards, who knows? But, let’s face it, nothing’s free anymore, and if you’re a bandwidth hog, you will eventually pay for it. I’m certainly not apologizing for AT&T, but the best way to tell them what you think is through your wallet. Trouble is, I can’t imagine a scenario where I want to be without my iPhone, so… As for switching to Droid, I’ll reserve judgment for now, but looking at it from a distance, it just doesn’t seem to measure up to the iPhone user experience. Still, a real competitor to iPhone is a good thing, so I hope they do well. But, really, those commercials just serve to remind people what the best smartphone is…and it ain’t Droid.

Michael (profile) says:

Re: Re: Re: I called it.

Apple signed a contract with AT&T at which time was the only only provider that would go with Apple and that was sufficient enough to handle the future growth of the iPhone, in Apple’s eyes. So they didn’t have much of a choice, as Verizon basically laughed in their faces at the very idea that none of the phone’s features could be controlled by Verizon.

While Apple makes retardedly frustrating decisions, this was not one that had much involvement by them, I’m certain. In fact, that would be a really poor move on their part as this decision is going to put a serious dent in iPhone sales growth and their app store. Which is probably why there are a lot of rumors flying that Apple and Verizon are going to team up.

How in the hell do these things devolve into Mac vs PC debates? This story briefly mentions the iPhone being the leading cause of data use on AT&T’s network, but has everything to do with AT&T’s ridiculous policy changes. Can we not get past that phase? They’re practically the same thing anymore.

McBeese says:

Has there ever been a company that has screwed up as much as at&t in recent memory? Everyone with an iPhone is chomping at the bit to get off of at&t as soon as possible. Doesn’t really matter which network, they just want off.

Now this new move looks to be even more customer unfriendly. Damn.

U-N-B-E-L-I-E-V-A-B-L-E.

Marcus Carab (profile) says:

Whether some Google seer foresaw this, or it was just dumb luck, this bodes ridiculously well for Android phones (as the link points out) – especially the Droid. Between their awesome Times Square marketing for Voice Search, and now the release of Goggles (and I’m sure they won’t be in *too* much of a hurry to bring that to other platforms) they are already snagging customers from the iPhone.

Now if only they would bring the Droid to Canada.

Doctor Strange says:

How is this a “bait and switch?” AT&T and Apple offered me a two-year contract and a phone with unlimited bandwidth, and I got it. A whole bunch of other people did too. I don’t recall anything in the contract I signed that obligated AT&T to provide me unlimited bandwidth at the same terms in perpetuity.

There is no evidence at all that they are going to change the terms of pre-existing contracts. The (scant) evidence is to the contrary:

Longer-term, he said, a pricing scheme based on usage is likely… (emphasis mine)

It’s unlikely that they would be able to change this on people with existing contracts, so much so that they probably won’t even try. It’s likely that they would just stop offering it on new contracts. If they did want to modify existing contracts, they’d probably either exercise the option to terminate early without fees or buy out existing high-bandwidth users.

If you don’t like the new contract terms, go get a different phone on a different carrier when your existing contract expires. That’s how the market works: AT&T offers you a deal, and you either take it or leave it.

Hey, the pizza guy down the street used to sell me pizzas for $14.95 each and now he wants $18.95. Do I blog an article about how he bait-and-switched me for building up my loyalty and then raising his prices? The nerve of that guy!

Oh Please says:

Re: Re:

“It’s unlikely that they would be able to change this on people with existing contracts”
“It’s likely that they would just stop offering it on new contracts.”
“If they did want to modify existing contracts, they’d probably “

– Seems you do not have any facts, just supposition.

“the pizza guy down the street used to sell me pizzas for $14.95 each and now he wants $18.95.”

– Did you sign a multiyear contract with the pizza guy where you both agreed upon a set rate for unlimited pizza ?

Derek Kerton (profile) says:

Re: Re: Re:

“- Seems you do not have any facts, just supposition.”

Yeah, but Dr. Strange is still right. There are very few facts *at all* at this point. Few facts for or against ATT. In fact, Dr. Strange’s comment is among the least filled with supposition on this thread.

We don’t know if ATT is planning on applying caps to new customers only, or if they are planning on applying that to existing customers.

I would expect them to apply it to new customers, and possibly to customers if they renew their contracts or upgrade their phones.

So everyone should relax until some more facts come down the pipe. Mike wrote the post largely because he is against all bandwidth caps. Perhaps most of you are, too. But don’t be pissed about “retroactively applied caps” unless there is some actual indication that this will happen.

Anonymous Coward says:

Re: Re:

To finish the quote from the fine article:


Longer-term, he said, a pricing scheme based on usage is likely, though it will be determined by industry competition and regulatory guidelines.


I agree that to alter the agreement in the middle of the 2-year contract is lunacy for regulatory reasons. I suppose it’s more reasonable would be to let these unlimited contracts expire and then only allow renewals with contracts with limited data usage. It’s kinda legal that way– although we are talking about AT&T…

If/when they do roll out the new limited contracts, it’d be interesting what their competition will say through their ads.

Derek Kerton (profile) says:

Re: Re: Re:

Perspective?

This isn’t the SS. It’s a cellular carrier. There are *ahem* subtle differences.

The butcher charges me more than the guy ahead of me in line because I bought 2lbs of ground beef, and the guy in front bought 1lb. Oh!! Look out! The butcher is “coming for me”. The nerve of charging me more for using more. Look out gays, jews, and blacks…he’ll come for you next…um…if you buy more beef. Scary stuff.

In other news: the electric company, gas station, Natural gas utility, subway operator, all “came after me” to pay more for using more. Crazy world.

AJB says:

Not AT&T

I don’t think its AT&T who’s making a killing here. In order to get the license for the iPhone, they had to give up something like 30% of there revenue to Apple. If you look at what they paid Apple last year, it was a small fortune. Verizon was criticized at passing up the initial iPhone deal with Apple, but it looks like they were very smart. And, YES, those coverage ads are true, Consumer Reports puts Verizon at the top of every city it surveyed and AT&T at the bottom of most. Their coverage stinks, their customer service is horrible, and their coverage is lame. But they have a cool phone you can no longer use. Oh, and I *LOVE* my Droid… best phone yet!!

Derek Kerton (profile) says:

Re: In Praise of Verizon...But Not Too Much, Please

“YES, those coverage ads are true.”

Correct, but the impact is way exaggerated in the public consciousness, which really just indicates the massive success of Verizon marketing.

You see, in the simplest of terms, Verizon does have the “best” network. But when you get in to the details, it depends region by region, and even house by house. But far more important, for those willing to actually understand, rather than those just interested in parroting the VZW marketing campaign, is that THE DIFFERENCE BETWEEN BEST AND WORST IS TRIVIAL. That’s right, basically the carriers are all the same…but most people have bought the VZW marketing message, and interpreted the results to mean VZW is great, and all else sucks.

Don’t take my word for it: I mean, I’m just some telecom industry analyst! Here’s what J.D. Power said in their most recent survey that put VZW on top:

“The study finds that the differentiation in call quality performance among wireless carriers at the industry level is particularly small in 2009. While call quality performance among carriers still varies at the regional level, the gap between the highest- and lowest-ranked carriers for the overall industry has decreased from 8 PP100 [problems per 100 calls] in the 2008 Vol. 2 study to only 5 PP100 in the 2009 Vol. 1 study.
http://www.jdpower.com/corporate/news/releases/pressrelease.aspx?ID=2009041

The Consumer Reports data are similar. Although VZW sits squarely on the top of the quality heap, the reality is that the spread is relatively small. Out of a score of 100, the results are Verizon 75, T-Mobile 70, Sprint 67, AT&T 66 (http://bit.ly/7GveUJ). So Kudos to VZW are definitely in order.

But I can’t believe how strongly the average person has over-interpreted the results, and locked on to the message of “Verizon has the best network, AT&T sucks!” People, it’s just not that big a difference. In reality, they both could stand to improve.

Now, factor in the sudden, and incredible effects of the iPhone on AT&T’s network since launch in 2007. AT&T won’t admit to this, but of course AT&T was caught off guard. And of course they owe it to their customers to improve the network to deliver quality service. And a look at their 2008 Annual Report shows they, in fact, ARE responding, having spent $20B on network upgrades in that single year. To act like they are sitting idle and screwing people over is to ignore the facts. Maybe $20B isn’t enough, maybe it’s adequate, but it sure as heck isn’t nothing.

ARE YOU BEING PLAYED?
Don’t fall for the marketing. VZW has spent an estimated $300M/year on marketing the “best network” message in their ads. Can you remember how long they have marketed the “Best network” angle? Well, Paul Marcarelli, the actor who plays the VZW Test Guy, has been appearing on your TV since 2002! http://bit.ly/zi8gL

Do you really think that you are immune to that kind of repeated, relentless assault of a specific talking point? The VZW campaign has been remarkably successful because it deals with something that really matters (network quality), and it has the advantage of being true. And because money talks. Political campaigns are won and lost on the spending of a few million dollars at the right time to sway hearts and minds. What effect does $300M/year for 7+ years have? Are people being played to over-interpret the difference in network quality? My answer is a definite “yes”.

So if cellular networks were a 100 Yard Dash, Verizon would be an legendary winner, taking race after race. However, consumers should be savvy enough to understand that it’s a close call every time.

Josef says:

Not really BS

This isn’t really a bait & switch. It’s more like a crappy service provider. ATT knew it wasn’t ready for prime time in the 3G arena, but that’s just how marketing goes. Push the product and service and hope it works. Because it was for iPhones, its not like people really had much choice.

There is more than enough bandwidth. The problem isn’t bandwidth hogs and I’m sick of the carriers trying to slip that point in all the time. If there were really a bandwidth shortage then, how do the wireline carriers justify their move into video.

How can they provide me with IPTV, if downloading a movie is such a strain on their networks.

Bottom line is ATT got caught with their pants down and they want the customers to pay for their mistake. I guess that sounds fair if you work for ATT.

Danny (profile) says:

How long is iPhone exclusive to AT&T?

Anyone here know how long the iPhone is exclusive to AT&T? I would love to get an iPhone, but won’t use AT&T (even before reading this post) due to poor signal quality in Chicago.

The whole recent ad controversy showing how poor their nationwide 3G coverage is strengthens my decision.

So, I want an iPhone when I can get it with another provider who supports Chicago (and other places) better.

Snidely (profile) says:

A little harsh on the Beaver

I think we need to cut AT&T a break here. They definitely underestimated the huge increase in usage thanks to the iPhone and are trying to remedy that situation. It takes a long time to get approval to add more towers and expand coverage. It’s not just a matter of turning up the power to improve the signal strength. I don’t fully support Mike’s point here because he is effectively equating the caps on mobile broadband to fixed broadband. Regular readers know that Mike hates caps on fixed broadband and doesn’t buy into the arguments that “the internet is running out of capacity”. I completely agree with him there. The mobile world differs in that operators are constrained by spectrum availability, so bandwidth hogs really do impact the service everyone else receives. I totally agree that operators should be sued every time they use the word “unlimited”. AT&T has a rather simple solution to kill off the bandwidth hogs – ban streaming services. Might drive away all of their customers, but will definitely solve the bandwidth issue.

Derek Kerton (profile) says:

Re: Re: A little harsh on the Beaver

It’s both.

New equipment increases capacity and bandwidth.

New towers increase coverage and reduce gaps.

Furthermore, the newest technologies often have smaller effective ranges (at same frequency and Tx power) as older technologies. Meaning that more towers are needed to get the expected higher throughputs.

Nothing about cellular networks is simple.

Anonymous1 says:

think we need to cut AT&T a break here. They definitely underestimated the huge increase in usage thanks to the iPhone and are trying to remedy that situation…

Give me a break. I don’t own a “smart phone” for mutliple reasons, including the price of plans, and need. It’s clear however that AT&T knew EXACTLY what they were getting into.The reason AT&T fought SO hard to get the deal with Apple is due to Apple’s success. They saw what Apple was able to do with the ipod. That’s why they wanted a partnership. Eveyone knew the iphone was going to be big, perhaps not the exact growth %, but big none the less. For AT&T to NOT adequately invest in the network is the height of shortsightedness, and IMHO, greed. So, it looks like according to the above posts, AT&T can change the terms, but people can then choose to leave the contract. If their plans go ahead as predicted, customers may well be leaving in droves.

Derek Kerton (profile) says:

Re: Re:

Yeah, except that you’re wrong.

AT&T, and every other carrier in the world, has been trying to hit a home run with mobile data, or some differentiated service, ever since…ever.

Every time they have EVER thought they had a hit on their hands, they launched it…and were wrong. Every “exclusive” launch was basically a flop.

Exclusives on ringtones? Not a sudden hit, and quickly copied by all other carriers.

Exclusive on content, like Shakira music? Tried, and basically not enough to move any dials. http://listserv.techdirt.com/blog/wireless/articles/20060314/152841.shtml

Exclusives on handsets? Tried many, many times before the iPhone, but no other device was unique and desirable enough to move people from one carrier to another.

Awesome content that would drive up usage? Tried, and basically flatlined. Ringtones have been flat, mobile games have been flat.

Video that would be the savior of carriers and use some of their 3G capacity at a time when they had built 3G but no consumer gave a damn? Failed. Consumers weren’t interested in mobile video.
http://www.techdirt.com/blog/wireless/articles/20050927/1219240.shtml

The only other hit, the Blackberry, was not a sudden success, but instead grew steadily in popularity since 1999, with success limited to email.

What I’m getting at here is that in 8 years of trying to drive increased use of mobile data, the carriers had seen near-failures at every turn, and only slow, steady growth up until 2007. These were “teachable moments” for them.

So, when Apple and AT&T struck their deal, despite past disappointments, you think AT&T should have KNOWN that it would be a sudden and huge success, and invested $20 Billion or so on the expectation that it would create huge, dramatic, unprecedented data traffic growth?

That isn’t reasonable.

Derek Kerton (profile) says:

Re: Re:

OK, smartypants.

But if those wireless carriers (stupidly) offered unlimited services for many years, does it mean they MUST continue to offer them in the present, and for all the future forevermore?

*ahem* no.

Are the carriers’ Terms of Service stipulated with contract lengths of “forever”? Negative on that.

Have you never seen a seller increase their price? Reduce their quantity? Did you not know that that is legal, often fair, and even occurs frequently in a free market?

So, yes. They sold unlimited. They are also allowed to stop selling unlimited. Duh.

Seriously! To be so stupid as you try to impugn others…

Johnny~xL^ says:

How did this devolve to PC v mac?

This has nothing to do with the silly pc/mac debate.

To all of you trashing At&t you need to get your facts straight. Yup, AT&T have a lame 3g network, but you do have unlimited bandwidth. Verizon would never allow that w/o a * in fine print and 4Gb or slightly more limit per month. Just look at all Verizons net cards & netbooks. Even their droid pricing is alacarte. Verzon is notorious for locking down phone functionality. Verizon does have great coverage, but their customer svc, billing, and neutrality (getting the most from YOUR device) are pathetic. Verizon will get the iPhone in time, and they will have a wacky pricing scheme that claims unlimited data but really has an upper limit that will be set too low. Nether of theses telcos are stupid, they are greedy, but AT&T won’t be stupid and blow the only good thing they have by pissing off their best customers and creating a Sprint/nextel style mass exodus, which is a lesson I believe they should all focus on.

Anonymous Coward says:

Luke Wilson can be bought and told to say anything.

“Old School” was a funny movie.

As you may recall, there was a scene where Luke Wilson’s character tells people to throw cinder blocks over the roof of a three-story building… These cinder blocks were attached to ropes which subsequently were attached to fraternity pledges in odd places.

If Luke can be bought for a script that includes such violent imagery as penis decapitation, I wonder… If the money is right, I wonder what else he could be persuaded to say on TV or the radio…

dean wysocki says:

Luke Wilson Whored Himself Out Deceiving People

I dont understand how luke wilson jumped in to represent At&t. With all forums blowing up about shabby service and the true pathetic 3g map they have, luke is deceiving people, he doesnt mentioned the nations fastest 3g is only available in very limited areas. and postcards in that commercial, too bad he didnt read them to find out that those att cust’s couldnt email him : >

Chris Pratt (profile) says:

Everything I Wanted to Say

Took the words right out of my mouth, Mike. I cannot for the life me figure out how the execs over at AT&T keep their jobs. If I was a shareholder, I’d be screaming for their heads. Just one idiot move after another. I’m praying with every fiber of my being that Verizon get’s the new iPhone in 2010; then, it’s so long AT&T.

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