iPhone Tethering/Personal Hotspot Plans Revisited

| Ted Landau's User Friendly View

When AT&T at last enabled tethering for the iPhone in June 2010, a year after Apple first introduced the feature in iOS 3.0, I wrote a column detailing why I thought the plan was absurdly overpriced — apparently intended to convince you not to use tethering. Here’s a quote:

“Turning on tethering costs an additional $20/month. Further, the option is only available for DataPro ($25/month) users. In other words, having tethering available requires that you pay $25 + $20 = $45/month.

If you have the DataPlus plan ($15/month) and a situation crops up where tethering would be useful — and you only need it for a few hours — you’ll need to spend an extra $30 for those few hours. As an added irritation, iPhone tethering usage counts against your 2GB cap. This amounts to double-charging. That is, the $20/month tethering fee gets you nothing except permission to use tethering.”

With last month’s release of iOS 4.3, AT&T upgraded its USB/Bluetooth tethering to include the WiFi-sharing Personal Hotspot feature introduced in an earlier version of iOS 4 for the Verizon iPhone. Personal Hotspot is now the name iOS uses for the combination of all of these options. The basic pricing of the various data plan options remains the same. The one notable change is that the plan that includes “Smartphone Tethering” now adds an additional 2GB of data per month.

With all of this upheaval, I decided to revisit the topic. In particular, I wanted to see if the pricing was any more palatable than it was a year ago. My answer in brief is this: It’s marginally better pricing, but not enough to encourage the vast majority of iPhone users to enable the option. Overall, especially with AT&T, it remains a very bad deal — another example of phone carriers overcharging their customers simply because they can.

Hotspot feature

The “unlimited data plan” dilemma

If you’ve maintained your original AT&T “unlimited data” plan — and you use enough bandwidth to justify its $30/month cost, you obviously don’t want to give it up. However, if you select to enable the Personal Hotspot option, you’ll have to give up your unlimited plan — forever. It’s a strict one-way street.

I understand AT&T’s rationale. They no longer offer the unlimited data option and would like to see everyone abandon it. And they certainly don’t want to enable the Hotspot option with an unlimited allowance.

My suggestion. There is a way to protect AT&T interests regarding tethering without requiring that users give up their unlimited option. As one example, AT&T could charge $20 per month for enabling the Personal Hotspot…with additional surcharges if a user goes over 4GB data transfer (similar to how Verizon is currently handling tethering). AT&T could easily do this. But they won’t.

The “infrequent use” dilemma

While the extra 2GB included with the $20 fee for tethering is a welcome change from AT&T’s previous data plan, it is of little benefit if your Personal Hotspot usage is sufficiently low that you never eat into the additional allotment.

For example, suppose you are a DataPlus user, paying $15/month and having no trouble staying within your 200MB limit. You take a few vacations or business trips a year and would like to use the Personal Hotspot on those occasions. For each month you want to enable it, you will need to pay AT&T an additional $30 — even if you only use it for one day during a month. To do so, you will need to switch plans when you want to use the Personal Hotspot and switch back when you are done.

There is a silver-lining in how all of this works, but the cloud remains a dark shade of gray. AT&T allows you to switch plans at will. You are charged for a higher-priced plan only for those days you are actually enrolled in it.

In theory, this means you could switch from DataPlus to DataPro/Tethering on Day 1, use the Personal Hotspot, and switch back to DataPlus on Day 2. With this move, you would only be charged the more expensive rate for the one day you were enrolled in it.

AT&T doesn’t make it easy to learn about this switching possibility. The only reference to it that I could find on their website was on an Answer Center page. I did confirm the essential details in a phone conversation with an AT&T representative.

Still, things quickly get complicated. You are charged the full monthly rate in advance. If you cancel early, a credit for the difference will show up on your next month’s bill. If you plan on switching back and forth a couple of times during a month, it can get messy. Further complicating matters are the data usage limits: How much of the 2GB monthly tethering allotment can you use in your one day in the plan? All of it or only 1/30th of it? What if you go over your 200MB limit for DataPlus while enrolled in DataPro? Will that affect your limit or fee when you switch back?

Further, as Glenn Fleishman told me in an email: “{Shifting plans} messes up the current display of usage on the iPhone. Both the myAT&T app and the att.com website give you a ‘please call’ message. Their systems can handle the changes, but can’t yet show the stuff.”

Given all of these headaches, I don’t expect many users to take advantage of the switch back-and-forth possibility. But AT&T offers it if you want it — which is more than I can say for Verizon. The Verizon Personal Hotspot data plan is $20 per month for 2GB of usage — with no pro rata possibility. However, Verizon compensates for this by offering unlimited data in its basic plan.

My suggestion. Phone carriers could help those who have only an occasional need for a Personal Hotspot by providing some sort of “day pass.” For example, they could charge $1.00 per day for each day that you have the feature enabled — perhaps with some additional daily allotment of data provided as well.

My more radical (but preferred) solution is for AT&T to simply stop charging for the Personal Hotspot altogether (dropping the additional 2GB you now get). When I choose a plan that has either a 200MB or 2GB limit, why should I have to pay more just to enable tethering? Does it cost AT&T any more for me to use my MBs for tethering vs. streaming video? I believe not. Once again, AT&T could make this change, but I remain confident they won’t. At least not any time soon. 

The jailbreak dilemma

If you remain dissatisfied with the Personal Hotspot offerings from AT&T and Verizon, you do have another option. You can jailbreak your iPhone and install MiWi. With this app, you have similar Personal Hotspot options — without any additional “tethering” fee. MiWi also works with iOS devices not supported by the AT&T or Verizon plans — including the iPad 3G.

There’s only one problem with MiWi. Well, two actually. The first is that you have to jailbreak your device to install it, which you may be reluctant to do for ethical or technical reasons. Actually, it’s currently almost impossible to jailbreak if you’ve updated to iOS 4.3.x. The second is that phone carriers “prohibit” this sidestepping of their official path. In this regard, AT&T recently sent an email to some of its customers that they suspected of using MiWi. The email stated in part:

“To take advantage of [tethering], we require that in addition to a data plan, you also have a tethering plan. Our records show that you use [tethering], but are not subscribed to our tethering plan. If we don’t hear from you, we’ll plan to automatically enroll you into DataPro 4GB after March 27, 2011. The new plan – whether you sign up on your own or we automatically enroll you – will replace your current smartphone data plan, including if you are on an unlimited data plan. If you discontinue tethering, no changes to your current plan will be required.”

There are three intriguing implications of this email:

• While AT&T stated that they “require” you to subscribe to their tethering plan, they did not claim it was “illegal” to use MiWi instead. This is perhaps akin to splitting hairs, but it suggests that MiWi users need not fear being sued or criminally prosecuted.

• There is apparently no way that AT&T can block MiWi. I assume that’s why their solution is to “automatically enroll” MiWi users in AT&T’s tethering data plan rather than just prevent MiWi from working. By the way, this enrollment means that you will lose your AT&T “unlimited data” plan, if you presently have one.

• AT&T can detect when someone has been using MiWi. That’s presumably how they knew who should receive the email warning. Several online postings have expressed surprise and dismay at this fact. They shouldn’t be surprised. Verizon has already indicated that this can be done — via the pricing for their Personal Hotspot option: 2GB is allocated just for the Hotspot feature (their basic data plan offers unlimited data). In other words, Verizon presumably can tell when you are using the Hotspot.

Clearly, the iOS software knows when some form of tethering is enabled; it shows this via the pulsing blue status bar at the top of the display. I am guessing that carriers can detect this usage indicator. Others suggest that detection must be indirect — based on patterns of usage or flags that indicate you are accessing desktop software. In any case, I doubt that developers will find a way to entirely circumvent the detection.

So far, Verizon has not sent out any similar email. But I expect they will eventually follow suit.

An alternative. There is a “work-around” to AT&T’s threat — if you have an iPad with 3G. You can use MiWi on the iPad. As there is no Personal Hotspot option on the iPad, there is no way that AT&T can force you to enroll in that option.

Bottom Line

If you want to use a Personal Hotspot on your iPhone, you’ll likely have to pay extra for it. Even though the fee includes a data allotment, it mainly amounts to a charge just to enable the feature. I’d like to think that this fee may eventually go away — as a consequence of increased competition and decreased costs to the carriers. However, with AT&T’s intended purchase of T-Mobile, the competition continues to shrink, making such a possibility seem less likely. For the foreseeable future, whether or not you believe the tethering fee is justified, it is here to stay.

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5 Comments Leave Your Own

Ross Edwards

It took years for the cell carriers to compete their way down to the current cost strata for voice plans.  (Anyone remember being on AirTouch or MobileOne or whoever in the 1990s and paying over $100 per month just for a 200-minute base plan?  I do.) 

I have no doubt the carriers will continue to collude while federal regulators turn a blind eye, but eventually the disparity in price between ATT and VZ and their lower-tier counterparts (MetroPCS, Boost, Cricket) will grow so wide that they see substantial subscriber attrition.  At that point they’ll creep the data prices down, raise caps, and/or reduce tethering restrictions, and the cycle will repeat.

The first carrier that says “Whatever, you can have unlimited everything, period, for $39.95” is going to convert HUGE swaths of the subscriber base.

Peter

The first carrier that says ?Whatever, you can have unlimited everything, period, for $39.95? is going to convert HUGE swaths of the subscriber base.

I’m not too sure.

Hey, this is an Apple site.  Let me ask you:  “Would you trade in your iPhone for an Android phone and a $39.95 plan?”

wab95

Let me ask you:? ?Would you trade in your iPhone for an Android phone and a $39.95 plan?

Good question. Answer: No. It was never, nor has it become, a primary driver behind my use of the iPhone.

Moreover, the longer features like tethering and even personal hotspot use remain as exorbitantly priced as they are, the longer the average user’s smartphone experience will get along without those features. People seldom demand what they have never had, unless a critical mass of people with such access can model for them why such features are essential.

From a service provider’s business model point of view, the question should be asked, ‘Where does this feature (tethering or whatever) fit into our overall business plan, specifically our plans for growth? Where does this technology fit in the future of the industry?’. The longer that business’s behaviour discourages, through non-competitive pricing or other punitive measures, said feature’s uptake, the less likely will it ever gain traction in practical user experience, and the less it will contribute to that company’s growth. And they can always argue, ‘There’s little demand, therefore the price remains high. These are just market forces at work’.

Is that necessarily a problem for that company. No, particularly if its competition is behaving equally egregiously towards its customers. The threat to the company, should it ever arise, is more likely to come from breakthrough technology from a third party source that provides users with an alternative means of doing something similar, but outside of the original company’s control (think Skype vs long distance telephony or Netflix vs Blockbuster - including their online business).

So long as a company is convinced that this, or any other, feature set is not central to its plans for growth, and they feel they have a good bead on potential technology threats on the horizon (and the Feds are not putting them under pressure) they are unlikely to make it more accessible. If there is no popular demand for this feature, who cares? But if there is pent up demand, they ignore it at their own peril.

Why? Because recent history favours emergent, breakthrough technology to disrupt a model that stifles such popular demand. And when that happens, it’s market forces, the same sword by which those older companies held sway, that severs their own jugulars.

I just love capitalism.

Ross Edwards

?Would you trade in your iPhone for an Android phone and a $39.95 plan??

Well, I meant FOR the iPhone, not with a hardware changeover.  The carriers are really just dumb pipes—that’s why they offer a subsidy to attract customers on the promise of the latest and greatest equipment.

I wouldn’t switch my Verizon iPhone to Android, but I would definitely jailbreak my iPhone and bolt to Sprint, for example, if they offered the $39.95 unlimited-everything plan on CDMA.  The numbers might even justify paying the ETF.

db

The article states:

The Verizon Personal Hotspot data plan is $20 per month for 2GB of usage ? with no pro rata possibility. However, Verizon compensates for this by offering unlimited data in its basic plan.

===

I just called Verizon support and they told be that if I start up the hotspot feature and use it for a week, I can then turn it off and get charged only for the week that I use it (that is to say something like 25% of the $20 monthly fee).  This assumes that my usage stays below 25% of the 2gb monthly allowance.  In any case, in some way they are willing to pro-rate my usage of a partial month.  This seems a very flexible implementation of the tethering concept.

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