Busy Signal: AT&T Dials Up Shared Data Plans
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AT&T Inc. (NYSE: T) has just announced that they are "dialing up" shared data plans similar to Verizon Communications Inc.'s (NYSE: VZ) Share Everything plans. AT&T's new data plan, called Mobile Share, will let you pay one monthly fee for wireless data which can be shared across as many as ten devices. In contrast with Verizon, AT&T will not force customers to switch over to the new plan, but will let consumers voluntarily switch or keep their old plans.
AT&T’s plans require you to own a smartphone first; then up to nine other devices such as tablets, gaming platforms, laptops, and netbooks. The AT&T plans consist of three basic charges: a monthly smartphone fee, a monthly data fee, and monthly fees for any other extra connected device you may have.
To start off, you will first choose from one of six data plans that include anywhere from 1GB to 20GB of monthly data. The more data you choose, the less expensive your per-gigabyte and smartphone monthly charges will be, but the monthly charges for extra devices would stay the same.
So, why has AT&T decided to make this move?
AT&T wants to stay more competitive with Verizon. Verizon is the top wireless communications service provider in the United States, with 108.7 million subscribers, while AT&T comes in second at 103.2 million. Verizon has been expanding its Long Term Evolution (LTE) 4G market, and far outranks AT&T, Sprint Nextel (NYSE: S), and T-Mobile (NYSE: DT) in its LTE network coverage. AT&T is pursuing an expansion of its LTE network, as well as Sprint and T-Mobile. By setting these plans in place, AT&T offers a different, more open, but similar alternative to the cell carrier giant Verizon, while keeping Sprint and T-Mobile in check.
Sprint has said that they will not be changing their current rates and policies over to a shared data option, while T-Mobile came out with scathing criticism of AT&T's new policy, saying that the shared data plan is costly, complicated and punitive. T-Mobile is also maintaining that they will not be switching over to a shared data plan anytime soon.
Verizon customers strongly criticized their carrier's new plans when they were first announced, although it's been reported that customer response has been generally positive since the plans have been put in place. AT&T is capitalizing on this negativity by offering the alternative.
AT&T is also seeking to boost confidence in its investors by continuing its uptick. AT&T has been starting to catch up to Verizon according to the Q1 2012 earnings call held on April 24, 2012. The company's mobile data growth clocked in at 20%, and mobile growth looks like it will continue. AT&T's stock has also been doing very well, as illustrated in this chart:
However, the new AT&T initiative is not entirely fool-proof. The company faces a quandary because consumers can move subscriber identity modules (SIM cards) between different devices. The SIM card identifies the devices to a network, and contains the phone number (in the example of phones). Subscribers can easily move the SIM card from a phone, for which they pay $30 per month, to a smartphone, which can cost as much as $45 per month. This would be a big issue as consumers would be paying less money for a more expensive phone service, cheating AT&T out of money.
So, when the AT&T plans are "dialed up" in August, will they be getting a good connection, or will the busy signal ring ominously? The plan will have some good effects, but AT&T must find a way to combat the SIM card moving to stay competitive, profitable, and be able to compete effectively with Verizon.
EvanBuck has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.If you have questions about this post or the Fool’s blog network, click here for information.