AT&T's mobile broadband house of cards

It has to be an unsettling week for AT&T Mobility. Looking to put a more aggressive stake in the mobile broadband market, competitor Verizon Wireless introduced a new netbook and dropped its overage fees for its $60 and $40 mobile broadband plans, from $.25 per megabit to $.05/MB and $.10/MB. And the $40 plan has seen its data usage limit increase from 50 MB to 250 MB.

In comparison, AT&T Mobility offers a 5 MB cap on its $40 plan and charges some steep overage fees: about $1/MB as an overage rate for its $40 plan and $.51/MB for its $60 plan. Analysts predict Verizon's new moves will prompt AT&T, which is by far the most aggressive at subsidizing laptops and netbooks, to change its mobile broadband pricing and overage fees.

Moreover, AT&T has found itself defending its network policy that prompted content placeshifting technology developer Sling Media to remove 3G access from the iPhone edition of its SlingPlayer Mobile video application. AT&T said the application would take up too much network capacity. SlingPlayer for iPhone enables users to stream live and recorded television content from their home entertainment system to their mobile device. In order to earn approval for the application, Sling Media was forced to disable 3G streaming capabilities, meaning iPhone users can only view content over WiFi. The same is true for Skype's iPhone application. It only works over WiFi.

According to AT&T, applications such as SlingPlayer eat up much bandwidth to operate over 3G. "Slingbox, which would use large amounts of wireless network capacity, could create congestion and potentially prevent other customers from using the network," the operator said. "Applications like this, which redirect a TV signal to a personal computer (it classifies the iPhone as a computer), are specifically prohibited under our terms of service."

Indeed, AT&T recently revamped the terms of service for its wireless data plans, stipulating that data sessions may be conducted only for Internet browsing, email and intranet access. The company noted that there are "certain uses that cause extreme network capacity issues and interference with the network and are therefore prohibited." Examples of these prohibited uses include: server devices or host computer applications, camera posts or broadcasts, peer-to-peer file sharing and devices that maintain continuous active Internet connections when a computer's connection would otherwise be idle or any "keep alive" functions.

From reading all the feedback to AT&T's move in regards to the SlingPlayer, the overwhelming consensus is: Why are customers required to shell out lots of money when they can't use all of the applications they want? Of course, it goes back to the old argument that spectrum is a finite resource. Capacity just isn't infinite. But will consumers understand?

Now, however, the stakes are higher for AT&T: Competitor Verizon has just announced some pretty attractive data terms with some cheap overage charges that might not deter end users from going over their plans. AT&T has to respond. At the same time, it has to fight a public-relations battle, play the bad guy and admit it can't support the capacity for some very popular applications. Let the mobile broadband growing pains begin.--Lynnette