2010 Year in Review: Usage-based pricing gains traction

The news: After months of hints about the move, AT&T Mobility (NYSE:T) in early June became the first U.S. carrier to switch from unlimited smartphone data pricing to a usage-based model, offering 200 MB of data for $15 and 2 GB for $25. Users who had unlimited data plans were grandfathered in.

To ease subscribers into the change, AT&T offered a "usage calculator" that provided data transmission calculations for a number of common actions. The carrier also put in place a warning system that would alert users when they reached certain thresholds of data.

AT&T said in September that the switch made "a lot of people move into the data market who had not been in the data market before."

Verizon Wireless (NYSE:VZ), which had long hinted it would employ a usage-based pricing scheme for its LTE data services, quietly unveiled a promotional, usage-based data offering in late October for its 3G smartphones. Verizon kept its unlimited data plan for $30 per month and added a $15 option for 150 MB of data.

T-Mobile USA followed suit days later with its own promotional offering of 200 MB for $10 per month with a two-year contract, or $15 per month without a contract. T-Mobile also kept its $30 unlimited data plan. 

Sprint Nextel (NYSE:S), however, said it would keep its unlimited services for the time being, arguing unlimited pricing is simpler for subscribers.

Despite all the switches, mobile subscribers in the United States prefer unlimited data plans, according to a survey conducted by analyst firm Sanford C. Bernstein and Co. The survey, which was conducted in July, found that 58 percent of light data users said they would change carriers to get an unlimited data plan. Among the highest data users, that figure rose to 67 percent.

AT&T revealed in December that it had 7 million mobile broadband subscribers using its usage-based plans. The carrier counted 33.5 million postpaid integrated devices in its base of 92.8 million total connections at the end of the third quarter.

Why it was significant: AT&T's switch was a bold move geared to controlling data traffic that has grown 3,000 percent during the past three years, due in large part to Apple's (NASDAQ:AAPL) iPhone. The carrier's action also gave cover to Verizon and T-Mobile to experiment with their own usage-based plans. Carriers typically argue that consumers are already familiar with usage-based pricing for utilities, and that all-you-can-eat pricing plans leave little room to generate additional revenues. AT&T's implementation of metered pricing has also opened up the door to a discussion about a pricing paradigm for mobile data that would allow customers to purchase a single bucket of data for multiple devices.