The Empire strikes back (again): Why we switched to AT&Ts no-contract shared data AT&T Next Plan

Between $40/year/phone H2O wireless for the kid’s hand-me-down unlocked iPhones and our fully optimized minimal voice [1] parent plan I thought we had AT&T under our thumb. True, SMS cost us 20 cents/text, but SMS was dying and we had iMessage and Google Voice. I was fine with a $10/month text bill.

But the Empire was licking its wounds; it struck back (again) with a brilliantly diabolical move. Instead of riding the dying SMS revenue stream down, AT&T shot it dead. SMS is now bundled with AT&T’s plans (even texting from US to Canada). Perhaps not coincidentally, we seem to get more text than ever. Worse, while H2O is dead cheap it has no data; the kids have been whacking us with SMS. Last month our AT&T SMS bill was $60 - more than our data plan costs.

Yeah, there were things we could do with the text message problem, like using Google Voice SMS and being careful with iMessage. I tried those — but it didn’t work. Emily didn’t share my particular obsession with fighting AT&T — the SMS workarounds were just one PITA too many.

So I admitted defeat.  We’ve switched to the current offering, which is a no-contract shared data “AT&T Next” plan. It looks like this:

Sorry for the hard to read jpeg — but it’s a rare gem taken from our local AT&T store. The online descriptions I was able to find were hard to parse and ultimately misleading; the real cost was higher than I’d estimated (and higher than it was a few months back). Notice what AT&T has done — individual plans are $25/device/month, family plans are $15/device/month, but the minimal family data is 10 GB month for $100.

Let us sit back and contemplate that for a moment. Feel the evil. Do they understand complexity fraud or what?

We went for the 2GB “single line” plan (for two lines), which means our base monthly cost is now $90 + fees [3]. This is very close to our previous base cost once one backed out the hidden subsidy [2] but we have half the data and my corporate discount is no longer applied to the hidden subsidy cost. We’ve exchanged 2GB/month of data for unlimited SMS. What a wonderful trade that is.

See what I mean? AT&T beat us like a drum.

Wait - it’s worse. Emily and I are usually under 2GB month combined, but sometimes we hit 2.2GB. AT&T will add on $15 for the 3rd GB [3], so our base costs are higher than we used to pay and we have less data (but we have &%*! SMS). Oh, and “unlimited voice” - which is worth the proverbial plugged nickel. We’ve also lost the old low cost family plan, to which we could add phones for low monthly costs and minimal data (but H2O was much cheaper).

Are there any upsides, besides the reality (must be admitted) that we expect to send AT&T less money each month even after accounting for the subsidy loss [4]? There are a few…

• We had two phones under subsidy contract. AT&T is so eager to bring people into this plan (ooooh, the evil, it burnssss) that they’re giving up on the subsidy payments we owe. We remain under contract, but the prior payment was $120 (subsidy included) and now it’s $90. So we’re ahead by about $450 if we stay with AT&T. If we leave we do need to pay off that residual subsidy.
• We’re no longer under the Family Plan trap. Once our contracts are up Emily can switch her unlocked iPhone 5 to T-Mobile LTE. This plan takes us one step further from AT&T
• Tethering (HotSpot) is included. So when traveling in the US the kids can use our data.
• When we want a new phone we can either switch to the “2 yr agreement” (if it’s available then) or use their financing plan [5] or (my preference) pay full price for an unlocked phone (and thus get full price extended warranty coverage with my AMEX card)
• There’s no longer a $36 fee tacked on each time one gets a new phone — just for “new lines”.

 On balance I suppose we’re marginally ahead, but I bet this scheme of AT&T’s takes a lot of victims.

- fn - 

[1] 700 min of voice was plenty for Emily and I as was our 2GB/each data. I used Google Hangout.app (iOS) for all my business calls — far better than cellular audio and no voice minutes. In theory our bill was $15 in fees (hah!) + $85 (primary) + $35 (secondary) = $135/mo. That monthly fee included equivalent of $40 in phone subsidy, so base cost was $95/month before subsidy. (We also have a corporate discount, not shown here. In the old model corporate discount applied to the hidden subsidy, but in new model it will not!)

[2] Smartphone is the default, “basic and messaging phones” cost about the same even though they use little to no data!

[3] Could be a lot worse - they used to have huge overage fees. So the data fee is $40 for 2GB, $55 for 3GB, and $70 for 4GB. They just hide the 3.

[4] The savings is all in the SMS, remember we’re losing the hidden subsidy value. I’ll believe it when I see it. I also want to see if they apply our corporate discount.

[5] I’m very happy to report that I found the worm in AT&T Next. You know it’s somewhere in the Apple, and it’s great to know where it is. If you use AT&T’s financing to get a new carrier-locked phone you actually save a bit over the cost of a new unlocked phone, but to get a new phone you have to trade in your “old phone” (which is typically worth $200 or so).

See also

• Analyzing mobile phone plans: Our old AT&T plan vs. H2O wireless 9/2013
• Pay-as-you-go voice and SMS service for a contract-free AT&T iPhone with H2O Wireless 3/2012
• Mobile phone fraud - The accidental data charge and other scams 11/2009. Yeah, they earned our enmity.
• The Empire Strikes Back: complexity, mobile phone plans, and Apple defeated 6/2008. They’ve beaten me before.
• Information asymmetry and my Cuisinart coffee maker - Steve Jobs in Hell 4/2012
• Why quality collapsed in the bubble years: Akerlof and the last good toaster 3/2012 (information asymmetry is how AT&T wins)
• Why coupons? Price concealment information and memetic archeology in the pre-web world 5/2012 (more on econ)
• Fraud on Cyber: An annotated sample of Gordon’s Notes 8/0211 - more …

Update 7/5/14

This is working out pretty much as promised - a substantial savings with, of course, no phone subsidy. Confusingly the plan is billed at $40 a month, but then a $15 “Discount for mobile share value savings” is applied. The real cost with the hidden surcharges/fees/taxes etc is about $98 for the two of us.