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AT&T Decides to Commit Financial Suicide, Discourage iPhone Data Use [UPDATED]

Oh, this is just so unbelievably dense that you have to wonder whether it's a real story or a plant by some fiendishly clever pranksters. Top AT&T (T) management is saying that the company will try discourage mobile data use. That's another way of saying, "Let's spend ridiculously large subsidy amounts to have the iPhone, require people to purchase data plans, and then tell them we don't want them to do anything other than talk."

The carrier has had trouble keeping up with wireless data usage, leading to dropped connections and long waits for users trying to run programs on their devices. AT&T is upgrading its network to cope, but its head of consumer services, Ralph de la Vega, told investors at a UBS conference in New York that it will also give high-bandwidth users incentives to "reduce or modify their usage."

De la Vega didn't say exactly how or when the carrier would change its policies, but he said some form of usage-based pricing for data is inevitable.

Oh, I'm sure I'll hear from someone at the carrier complaining that it's only the egregiously gluttonous users that the company is targeting -- the consumers who don't realize that they're supposed to be moderate in their online demands.

But people buy an iPhone expecting that they will do such things as download music, videos, and apps. AT&T and Apple (AAPL) both know it, which is why there's so much advertising emphasizing these. [UPDATE: Ustream Live Broadcaster, now available from the app store, lets users broadcast live video from an iPhone 3GS or 3G. Now there's a potential bandwidth eater.] Those expectations involve transferring data over a network. And, from the estimates I've seen, 60 percent of the time, that means over a cellular network. AT&T's cellular network. You know, the powerful 3G network with the pretty sparse 3G map that has become fodder for such taunting by Verizon. (And I say this actually being an AT&T customer.) Whatever would happen if the company had widely spread 3G service? How much of its roughly $3.2 billion in net income from Q3 alone would it have to invest to upgrade more, still leaving billions in other quarters? And notice that at least one third party estimate guesses that the data volume from iPhone users is 250MB a month. That's a lot of data transfer? Give me a break.

It costs money to be in business, and consumers don't care about how much profit a company and its shareholders would like to take home at the close of the fiscal year. All the customers know is that they're spending money to get something and they actually want what they paid for. If the profits aren't large enough, maybe the investors should go put their money into something else. Or you can actively tell people to do something on one hand, try to discourage them on the other, and then see them walk away to another service provider. (And one guess has Verizon picking up the iPhone in mid-2010.)

But I'm being unfair in one aspect, because this is not an "AT&T" issue. All the carriers, wireless, wire, and cable, have been moaning about the cost of bandwidth and how much people want to use. Hey, folks, what the devil did you expect? Everything is moving up to the web. You spend lots of time and money touting how much bandwidth you can get to people. You charge fair amounts of money for people to have access to the Internet, whether at home, at work, or on the move. And then you want to penalize them for taking you and the entire high tech industry at your words, paying for what was offered, and then having the temerity to use it.

This is the way the industry and the world are moving. Content will be on the Internet. Data will be on the Internet. Entertainment and applications and communications will all be on the Internet. And if you want to take money from people for access, they will want what they paid for. Live with it.

Image via Flickr user kevindooley, CC 2.0.

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