AT&T’s Outrageous iPhone & iPad Rates

It would not surprise me if AT&T Wireless some day issued a press release that read: “As part of our endless quest to squeeze out every potential dollar while pushing the envelope of legality, today we announce that roaming fees will be charged whenever a customer connects to our data network while outside of their home. After all, if someone is not at home, they’re roaming around. Further, if customers are in an area where there is no AT&T service, they will be charged US$1.00 per minute for continued attempts to connect to the network.”

If this sounds like sarcasm, that’s because it is. But not by much. The reality is remarkably close to the absurdity of this imaginary press release. How many ways does AT&T overcharge its wireless customers? Every possible way. 


To be fair, AT&T is not alone. Verizon and the other major carriers are almost as bad, and occasionally worse. But, having used AT&T for my iPhones since 2007, I have by far the most experience with this company. So I chose to focus on AT&T, with occasional references to Verizon. [Note: Neither AT&T’s not Verizon’s websites make it easy to figure out what their various plans cost. This is probably deliberate on their part. Thankfully, Apple provides a useful comparison chart of iPhone plans.]

Where to begin? It’s hard to decide. Let’s see….how about text messages?

Text messages

Consumer Reports summed up the situation quite nicely:

“Text messages take up almost nothing on their networks, but the carriers are charging much more for them than they do for phone calls, which use up a heck of a lot more space. The rates for texting are completely outrageous.”

Or, to put in another way, the profit margin for text messages is 99.96% (or higher!). Gizmodo calls AT&T’s latest text message plans ” an outrageous, gigantic scam” that “overcharges you by 10,000,000 percent. Literally.”

The pricing has led to those horror stories where a family gets shocked with a $10,000 phone bill, thanks to all the text messages their teenage daughter has been racking up.

The phone company’s solution for avoiding such gigantic bills is to switch to an “unlimited” text messaging package. Currently, for this unlimited service, AT&T charges $20/month for a single iPhone ($30/month for families).

My main question is: As AT&T is presumably making a profit at $20/month, no matter how many text message you send, how do they justify the exorbitant per message rates? Never mind, it was a rhetorical question.

While the unlimited plan may be a reasonable option for very frequent text-ers, it’s still a vast overcharge compared to what it costs AT&T for sending those texts. Further, as of last August, AT&T eliminated a middle ground alternative: $10/month for 1000 messages. For people who text often but never go over 1000 messages, AT&T now forces you to choose between the per message rates of $.20/message ($.30 for MMS messages) or the unlimited option for $20/month. At per message rates, you reach $20 with 100 SMS messages.

In other words, the elimination of the $10/month fee results in a higher cost for all users who send/receive between 100 and 1000 messages a month. My guess is that this is a huge chunk of AT&T customers. [Verizon still offers 1000 messages for $10/month.]

Thank goodness for Apple’s iMessage. With it, you can send text messages to other iOS users for free, bypassing AT&T altogether.

Monthly data plans

When you get an iPhone, you are required to sign up for a data plan. This is what provides your Internet access over 3G. AT&T’s cheapest plan is $20/month for 300 MB, with an additional $20 for each additional 300 MB. At this rate, using 3GB in one month would cost you $200! Not to fear, you can instead sign up for a 3GB/month plan for $30.

Again, I am left to wonder: How does AT&T justify the $20/month plan? Why should you have to pay a rate that amounts to per GB charge of more than six times the $30/month rate just because you use the service less? I can understand a small rate difference, possibly to account for a minimal overhead. But not one that could result in thousands of dollars per year for the same usage. Forget it, this was another rhetorical question.

As with text messaging, it’s the customers in the middle that get hurt the most. If you use more than 300 MB of data in a month, the $30/month plan is cheaper than the $20/month plan. But unless you are using closer to 3GB per month, you are getting overcharged for the data you use. Put it another way, if AT&T’s 300 MB/month plan were at the same percentage rate as its 3 GB/month plan, the lesser plan would cost only $3/month.

The situation is similar with iPad data plans. You can choose between $15/month for 250 MB ($60/GB) vs. $30/month for 3GB ($10/GB). [Verizon is more reasonable than AT&T at the low end. Its least expensive rate is $20/month for 1 GB.]

You might be wondering if you can reasonably expect to get by with just 250 MB in a month. The answer is: Not unless you are very careful. I wound up using my entire 250 MB when I launched Pages and it uploaded a single Keynote file that was waiting in iCloud!

The situation with iPads is likely to only get worse as people begin to use LTE networks. With attainable speeds that rival Wi-Fi, users may be tempted to take advantage of the convenience of LTE, even if Wi-Fi is available. Beware! If you start using LTE for tasks such as streaming HD video, you’ll wind up running through GB of data in no time.

Unlimited restrictions

Speaking of data plans, early iPhone owners who opted for (and remain “grandfathered” in) AT&T’s now defunct “unlimited” plan are finding just how far AT&T can twist the definition of “unlimited.” In an effort to coerce users to abandon the unlimited plan, AT&T throttles the data speed of anyone on the unlimited plan who uses more than 3 GB per month. They still get the promised unlimited amount of data, just not at a speed that is usable. Nice.

AT&T justifies this by claiming that only 5% of users exceed the 3 GB limit. My question is: How does AT&T reconcile their claim with its rate plans? Specifically, the 3 GB/month plan is the cheapest one that makes financial sense, the one that users will feel almost forced to select. Why structure rates so users are compelled to select a data plan that (at least according to AT&T) should be more than almost anyone needs? Why not offer a cheaper plan at a more realistic limit, at say 2 GB/month? Yes, that’s yet another rhetorical question.

International data plans

Back in 2008, I wrote about how ludicrous AT&T’s international data plans are, so I won’t rehash it all here. The basic facts remain sadly unchanged: What AT&T charges you for Internet access when traveling out of the country amounts to robbery. The situation for phone calls and text messages isn’t much different. But let’s keep the focus on data plans here.

AT&T’s default rate for 3G access overseas is $.0195/KB. At this rate, if you used 3 GB of data during a one month trip (what would cost $30 at the 3GB/month rate domestically), it would cost you $58,500!! (this is not a misprint).

Can there be any justification for this? Is there any place in the universe where this makes even the least bit of sense? File these questions under “rhetorical.”

AT&T does offer an alternative. You can purchase a discount data package in advance of your trip. But even with the most economical package, you would still pay $2400 for that 3 GB! In the end, your only practical option is to severely limit your 3G usage to the maximum of the package rate (such as 125 MB for $50). If you go over the package limit, you pay $10/10 MB.


Perhaps the most irritating of AT&T’s policies deals with tethered Personal Hotspots. AT&T has decided that, in order to use this feature at all, you need to sign up for its 5 GB/month data plan (for $50 month). Remember, 5 GB/month is a usage amount that, by AT&T’s own admission, almost no one needs. No matter. That’s what you have to pay to give a hotspot a try.

I don’t believe it costs AT&T any more money for someone to run a hotspot as opposed to web browsing or checking email. So why not allow people on the 3 GB/month plan to use the hotspot option? If you guessed this is a rhetorical question, you’re a winner.

As it stands, AT&T’s rates are a complete rip-off for anyone who intends to use a hotspot only occasionally, such as when on a business trip or vacation. In my case, I might use a hotspot a half-dozen times a year. For this privilege, I would need a data plan that costs $20/month more than the one I now have, for a total of an extra $240 per year. Ridiculous.

Would you like to create a hotspot with your AT&T iPad? Forget it. AT&T does not permit this at all for now. Only Verizon offers hotspots for the iPad.

[Verizon’s fees for iPhone hotspots work a bit differently, but not better. You can add a hotspot capability to any iPhone data plan for an additional $20/month. The $20 also buys you a 2GB more of data usage. This means the cheapest way to get a Personal Hotspot is to add it to a 2 GB for $30/month plan, for a final cost of $50/month for 4 GB. With the iPad, things are better: the hotspot feature is enabled at no extra cost for all data plans.]

Summing up

AT&T vastly overcharges for sending text messages. AT&T’s monthly data plans penalize the majority of its customers, forcing them to choose between plans that don’t offer enough vs. ones that charge for more than they need. International data plan rates are so absurd that Congress should investigate their legality. AT&T prices the hotspot feature so that almost no one will find it economical to use. And on and on.

How does AT&T get away with this? Because there isn’t significant competition. For iPhones and iPads, you are limited to AT&T and Verizon (with a small presence of other carriers for the iPhone). Your only choice is to pay up or give up your iOS device.