Summary
Without a competitive landscape, AT&T is free to dictate whatever pricing structure the want for iPhone data plans. AT&T is currently stifling application innovation for the iPhone due to restrictions they are placing on applications which utilize their bandwidth, despite the high cost and "unlimited" nature of these plans. When users adopt a platforn such as the iPhone as a means of performing important day to day activities, it is quite discomforting to be forced to accept the terms of only one service provider, since there is no other choice.
Analysis
The nature of wireless services in the USA is one which heavily favors the provider over the consumer. In order to have the opportunity to use wireless devices on a carrier network, one must either agree to a long-term contract with the carrier, which typically allows the consumer to obtain a subsidized device, or provide their own device, which typically allows greater contractual flexibility.
This system has been in place in the USA for as long as most wireless users can remember. Wireless providers have fought long and hard to "lock in" users, who are a source of continual revenue once they are "locked in". Until Wireless Number Portability was mandated by the FCC in 2003 carriers would use the inconvenience of being forced to relinquish a phone number when switching wireless carriers as a way to keep costumers from moving to competitors. One of the greatest immediate benefits of the abolition of this stranglehold was the drop in prices of carrier rates and the rapid acceleration of additional feature implementations (such as data networks) by the carriers. Competition is a good thing for cutomers.
Device technology was also rapidly expanding during the same time period. Prior to (approximately) the year 2000, cell phones were merely expected to provide voice and SMS communication. With the growth of the PDA and digital imaging in the late 20th Century, consumers began demanding more integration. This led to the development of the "smartphone".
Early smartphones were limited in their capabilities. Besides making and receiving calls and text messaging, very basic calendaring and email management were both common, as well as WAP internet browsing. It was archaic by today's standards, and did not attract US consumers at the levels the inovators of such applications were hoping for. Demand for data plans on cell phones was quite small.
The demand for data capabilites, however, began growning with the advent of the camera phone. Consumers loved the ability to snap photos anywhere they happened to have their cell phones (which is typically everywhere), and they also loved being able to send these photos to friends and family members. Sending photos required the use of data networks, and this led to rapid growth in demand for data plans. Life was good for carriers.
Device manufacturers responded to this demand by creating devices that harnessed both the multimedia aspect of the "new" cellular phones, as well as the data capabilities of the networks. Cell phones went from being communication devices to becoming ultra-portable computers, capable of doing almost anything one could do on a desktop computer.
Some devices were better and "cooler" than others. Carriers and device manufacturers worked closely together to develop the next hot device, in hopes that the carrier would adopt the device (from the device maker's perspective), and that the device would attract more customers to the carrier's network (from the carrier's perspective). Devices were typically released with a carrier "exclusive" for a set time period, and then released to the general cell phone market once the exclusivity period ended. This was (ostensibly) justified (by the carrier) as a way to recoup the implementation costs of introducing the device to the network. While much of this "cost" justification may be dubious (i.e. branding and marketing costs, which serve to benefit the carrier), some costs involved network infrastructure changes, and that is a substantial cost.
Devices that captured the hearts of consumers soon led to a new "lock-in" model. Exclusivity meant that a high demand device would force consumers to switch carriers (if the devices are compelling enough), and the typically airtight contracts would assure a constant revenue stream while the device was still "hot" and the carrier held onto the exclusivity. This seemed to work well, but no device seemed capable of capturing the hearts of consumers for a long enough period that would justify an exclusivity agreement lasting more than a year (generally speaking). Once the "wow" factor of the new device wore off, consumers moved onto the next hot item. This led to devices that transitioned to multiple carriers, which led to a substantial drop in consumer costs for obtaining them.
The introduction of the iPhone brought about substantial changes to the carrier/device manufacturer paradigm. Apple agreed to provide the iPhone to AT&T for (initially) a 1 year exclusivity agreement, but it would NOT be subsidized by AT&T. Also, for the first time I can remember, the iPhone would NOT have any AT&T branding on it whatsoever. Apple was, essentially, "calling the shots" on the iPhone. I have read stories of how Apple went to several carriers with their typically "our way or the highway" way of doing business, only to be turned away. AT&T decided to take a big chance with the iPhone, and it has paid off in spades.
The iPhone, as we all know, exploded in popularity, bringing MILLIONS of new customers to AT&T. Apple and AT&T renewed their exclusivity agreement before the introduction of the iPhone 3G, which AT&T now subsidizes (a move that has attracted MANY new customers). While the carrier subisidy may be a good thing for consumers, the rest of the "agreement" leaves consumers much to be desired.
Owning an iPhone means agreeing to an iPhone data plan. This means a consumer monthly cost of at least $80 per month (when you include a voice plan), and that does not include any text messages. That is a substantial monthly cost for wireless sevices. Don't like that price? Well tough luck! Go to another carrier and leave your iPhone behind.
If you then couple this with the iron fisted manner in which Apple controls the App Store, things really start appearing predatory. With almost any device EXCEPT the iPhone, developers are able to create applications and consumers are free to install and use them on their smartphones as they see fit. AT&T has tried (and failed) to control the use of smartphone applications that utilize network bandwidth on other devices, but through their agreement with Apple they are quite successful at preventing applications they deem unsuitable from becoming available in the App Store. One such application is Qik, which allows users to stream live video from their phones to the internet. It works extremely well, and I have seen it in action on a "Jailbroken" iPhone. AT&T will simply not allow this on their network. Nor will they allow tethering applictions (which would allow laptop users to utilize their cell phone as conduit to the internet), Voip applications (which would allow data plan users to communicate with voice without having to use voice minutes). Sure, Skype has been released (the most popular Voip client), but it can only be used over WiFi, NOT ON THE AT&T NETWORK.
So now consumers are left in a lurch. Not only must we pay for AT&T bandwidth, but we are also FORCED into allowing AT&T/Apple into dictating how we can use the bandwidth. This is a serious limitation of the AT&T "UNLIMITED" plan. While AT&T may indeed be justified if they choose to intervene when network bandwidth is used for illegal activities (such as file sharing of copyrighted music and/or movies), it is not reasonable for AT&T AND APPLE to control the way paying customers utilize network bandwidth for activities which are PERFECTLY legal (such as Voip and video streaming). AT&T may claim they are doing this to insure that customers do not experience bad network services due over utilization of bandwidth, which is a legitimate concern, but this would be less of an issue if the user base was spread out over several networks. Verizon, Sprint, T-Mobile, etc. all have their own "pipes" that can help balance the load, but only AT&T has the iPhone. This means that AT&T really has no incentive to either change its policies or improve the network to allow such applications to flourish. No competition gives AT&T the upper hand.
Since the iPhone is now experience nearly astronomical adoption both in the consumer space and in enterprise, to allow AT&T to continue on with it's monopolistic control of the iPhone is both unfair to consumers and unfair to competitors. AT&T already controls a HUGE portion of the wireless and landline landscape in the USA, and to allow them to continue with their stranglehold of consumers wanting to use the iPhone is nothing more than criminalistic in nature.
AT&T, you have had one great ride for the last 2 years. It is time to start playing fair.
You too Apple !
