AT&T CEO regrets offering unlimited data, cringes as iMessage steals messaging revenue

AT&T CEO Randall Stephenson recently spoke at the Milken Institute's Global Conference, where he voiced his regret for offering unlimited data when the iPhone first came out, and indicated that he worries how apps like iMessage bite into AT&T's traditional messaging revenue streams. Regardless, Stephenson still attributed the iPhone for kick-starting the mobile data business; what's really worth listening to starts at 4:41 in the video, where Stephen describes the story of how the Apple and AT&T exclusive partnership coalesced some two years before it actually came out. He goes on to describe how data usage exploded 20,000% from 2008 when the App Store launched to 2011. Here's what Stephenson had to say specifically about unlimited data and iMessage.

My only regret was how we introduced pricing in the beginning, because how did we introduce pricing? Thirty dollars and you get all you can eat. And it’s a variable cost model. Every additional megabyte you use in this network, I have to invest capital. You lie awake at night worrying about what is that which will disrupt your business model. Apple iMessage is a classic example. If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.

Although it's less of an issue now, I wonder if Stephenson was more okay with BBM than iMessage, since they got an additional cut from BlackBerry data. Speaking of which, Stephenson also talked a bit about the spectrum crunch and limited bandwidth, which are both issues which RIM's old CEOs aggressively tried to address. Stephenson says that the next block of 50 MHz (which is next to nothing compared to AT&T's demands) will take six to eight years to fully bring into the cellular world.

Here's the full interview, if you've got an hour to kill. It's a really interesting talk, and adds a lot of perspective to the iPhone's early days, as well a bunch of important issues in the wireless industry overall.

Source: NYT

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Simon Sage

Editor-at-very-large at Mobile Nations, gamer, giant.

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Reader comments

AT&T CEO regrets offering unlimited data, cringes as iMessage steals messaging revenue


I regret I had to choose AT&T as my iPhone carrier... Didn't have other choice. I can't say anything bad about its services, in fact i liked it the most, its just so much expensive than my other options; And for a college student, it matters a lot.

The amount of money the carriers make on messaging is obscene, since it costs them next to nothing. I smile a little every time I use iMessage, especially on WiFi.

I have been a customer of att for many years. Stop whining i use very little data so be sure to take care of your long time customers. It is pretty easy to say good bye now a days.

Wow we pay a $100 a month for one iPhone and can only stream about 2 movies a month on unlimited and surf some, yeah it sounds more like the customer is getting $crewed.

AT&T is doing a great job in throttling down bandwidth to the point of being useless. I'm sorry I didn't move to VZ when I had the chance!

In Denmark, and I believe most of Scandinavia, we have free messaging service in our contracts. That applies to every carrier.
We just pay a fixed amount every month or quarter where you choose a loft of your data use in advance. Low data use= cheap pricing.
I have a 10GB loft on my contract.
Not too shabby...
Still, no 4G yet...

Years from now, we'll all look back and laugh at how the cell carriers all got kicked down the staircase. Into the commodity ISP basement. It's inevitable.

If the Carriers keep getting their way. We will be on 500MB plans with 50.00 per GB overages in the near future. As of now the future is far from bright for the consumer. All of this talk he did just confirms it. Sad just so Sad.

Yes. And our boy Randall thinks that improving AT&T's network is a bad thing:
..."Every additional megabyte you use in this network, I have to invest capital."...
Sounds like an industry ripe for creative disruption. And the only reason it hasn't happened is the extremely high cost of entry. The cell carriers all operate like health clubs. They want to sign up as many members as possible, even though they can only accommodate a small fraction of their members at a time.

The first one was his fault, as the CEO he made the decision to offer unlimited data and to not have any controls or clauses into the contract to allow limitations of use. Shame on him.
The second, iMessage, they have been happy for Blackberry users to circumvent the SMS messaging system for years and Blackberry messenger is no different in operation with the exception that it doesn't sort the iPhone to iPhone messages from those that just cannot go through iMessage. Really though, to complain about revenue loss on a service that was a 'bonus' use of gaps in the digital bandwidth used by the voice system is an insult. To charge a person not only to send an text message but then to receive a text message is taking the proverbial P out of the customers.
Not only do they act like an auction house and take commission from both ends, the sender and the receiver but they want a rediculous amount.
A prime example is the international texting situation, AT&T want you to pay $10 for 100 international texts or pay 25 cents to send and let them take the received text off your monthly allowance. Cheaper than Verizon who, regardless of your messaging plan charge you 25 cents to send and 20 cents to receive. Yes, even with unlimited messaging.
Now because iPhone users can use some of their own data allowance for iPhone to iPhone, iMessage, texts he feels aggrieved.
In this case it is again, HIS FAULT, people would not have been begging for a messaging service like Blackberry's if the Telco's had not been so greedy charging a premium for wasted space in the packets of data carrying voice calls.

AT&T is the only one crying. They really messed up with the iPhone. It was great at first but now that they oversold the network they want to cry. Sprint still gives unlimited everything, Verizon only throttles you if your on a congested tower, and T-Mobile is cheap, but only cause they want outta the us market. With the 3.5G upgrades and 4 Billion lost with T-Mobile, AT&T really blew it, and I dont feel bad. Verizon will end up with the slowest LTE speeds but will have way more coverage than AT&T will. Bottom line is that AT&T really messed up.

And that just shows how greedy these companies are. Boo hoo we overprice so much and now aren't going to make as much because the cell phone manufacturers see this and create things into their devices that are out of the carriers hands. Maybe you should have invested some capital into your piss poor network so it could handle the load.

Blackberry shared the money though. Apple, Google, and Microsoft would never so that though. That's why he is crying over texting plans.

Hahahahahahahahahaha. Well maybe AT&T should get rid if all the plans they have and start over. Offer smartphone plans based on data useage and speed. Since the future will have all phone calls through the data network. Get rid of minutes since Google voice and others can eliminate minutes needed. I message and others eliminate the need for text plans. So offer data only plans and give higher data limits and speed based on how much someone will pay.

Change your revenue model in being a dumb pipe and all your problems are solved. Why should he be worried that iMessage is taking money and moving it to data usage.

Glad I bailed on AT&T when I did. My data isn't nearly as fast as Verizon or AT&T, but at least with Sprint, I do have unlimited data. And voice. And Text. And Sprint TV. Screw AT&T. NEVER going back to them.

It was a good informative video. It's interesting to see where the mobile industry is headed. I however do not believe that mobile broadband will replace wired broadband anytime soon. Especially with the "spectrum issues" at hand. I would love to see high speed 50 Mbps mobile broadband delivered via satellite but I would also like to see real life millennium falcons flying around too...

I can't believe he actually said that out loud.... I can't wait till my contract is up. I wish they would just leave us unlisted users alone. I have unlimited data and I'm still worried about it. Worried about getting pushed on a different plan or being throttled. Lte can't come fast enough and when it does.... I'll speak with my dollars.

These CEO's are some real pricks. They make more money than they can ever spend in a life time and complain about not being able suck any more blood from your veins. Not everyone with unlimited uses a lot of data. I have unlimited and used only 300mb one month, and 500mb another month. I rarely go over 2gb. And I'm jailbroken. So I'm sure it evens out a lot. These guys are making plenty of money and they should be greatful they're even in business in this economy.

Awww, I almost feel sorry for him. Maybe he should invest that capital into not being the worst customer service in the land. Oh and how much capital have you invested in Uverse? What ever it is, its not enough. I would say stick to mobile phone service but you dont do that very well either. If not for the Iphone you would have not gotten to where you are now.

Yeah we're supposed to believe you actually lost sleep over the pricing model? Yeah right, I'm sure with your pockets getting fatter you we're able to just buy that so-called lost sleep back.

He is bummed about offering unlimited data plans to iPhone users.
I get bummed when I try to make calls from:
My house
Outside my house
In my backyard
At my sons school
In the parking lot at my sons school
On the way to his school
At the store
At the Mall
At the gas station
At Chipotle
Wherever I try and make a call
And this dude is bummed? Improve your service before you cry the blues, jerk wad.

I have original unlimited data plan and teather to my ipad for free. Regret that. lol

I don't know why he cares that he gave unlimited data, because he's not honoring it. Jerk (Randalll Stephenson), you should feel bad for not giving what we signed up for and paid for. Yeah this is the customer that renewed his contract for unlimited and you offered it, but if I leave I have to pay early termination fee. Wow that's the way to keep customers. Oh don't worry Randall I still pay for unlimited texting too, since not everyone has a iPhone.

Randall Stephenson wasnt even involved in any of the original negotiations with Apple. If the 2 companies started talking 2yrs prior - then CEO at that time was Ed Whitacre. He didnt "retire" til June of 2007 which was when the original iphone launched. I dont like either of them, but at least Ed Whitacre was one of own (had history with telecom and climbed up the ladders. Randall has zero knowledge in telecom.

This guy is so out of touch. For one, he's creating middle, that pay 100k a year? Where I come from that's a damn good.job. upper class money. Moat people here make 25-50k a year. Then spectrum problems. Here is an idea. Build some fing wifi networks? Dumb old ceos, cant understand where tech is.going
I hope he fails.

Stephenson needs to remember that 60 million pay him. Your are one step away from being Cingular banking on Symbian.

"Every additional megabyte you use in this network, I have to invest capital."
Do you actually think I give a fck what you have to do on your end? Do you actually think I feel sorry for you when I use my additional megabyte of data? I don't give a fck if your dinner is out of a can as long as you deliver what you promised me. Especially when you don't give a f*ck about the money you take from me when you don't provide what you promised me you POS.

LoL I laugh when I hear complaints about texting from At&t because there are so many free alternatives out there and if you choose to pay extra for something that you could be getting for free than your too blame. Personally I have the unlimited everything plan but yet on At&t I have the cheapest plan. Confused yet? I have 450 mins 5000 n&w for 39.99, no texting, 2Gbs data plan for 25 after tax my bill comes out to about 65 a month. For At&t thats not bad, so where does the unlimited part come in. Well, I use to use text free, textnow, or even Textme which are all free texting services that also allow you to make free calls by gaining free mins after watching 30 sec ads. Now I use google voice which gives me free calling nationwide, and free texting. I use this as my att mins just keep rolling over, so what abou the data? Well every where has wifi and I rarely ever go over my 2Gb limit. Come to think of it I should have gotten the 1Gb plan when it was being offered but Att keeps changing their rates to keep you locked in. All in all I have amassed thousands of mins which I never run out of but for the texting you have to opt out b/c if you do not tell them this and someone sends you a text then you get charged no matter what. The hardest part of all this is trying to tell people that your text and voice number are different but this is where google voice comes in and takes care of it all. Gvoice can be your main number and it can receive texts and voice calls and you get the point

Wow I want your taxes. $40 + $25 and after taxes its still at $65? thats pretty damn good......or you cant add.

It is amazing how these big companies think. GREED!! I think that all these big companies should have to pay 50% to 65% of there profits to taxes.

If the average data usage is only about 2 gigs, unlimited should not have been a problem.
As far as iMessage biting in to their profits, good. Paybacks as far as I'm concerned.

Why does (jerk) Randall Stephenson feel bad about giving unlimited data? I'm not sure because he isn't giving me my unlimited data. Let's see I pay for it, I signed a new contract for unlimited data but I don't have close to unlimited data. iMessage probable hasn't effected much unless more people pay for one text at a time than I would have thought. How many people are going to only text people with iPhones.
We honor paying our bills Randall Stephenson, so honor your agreement and give the unlimited users their unlimited data. Then you can feel bad.

They only offered unlimited data on the iPad for one month. Those of us who still have it were grandfathered in simply because we were early adopters.
I'm sure there are many, many iPad users who are very displeased because they purchased their original iPad thinking that they would have access to unlimited data. But they missed it by that much.
I'm certainly unhappy. now I have to pay for my unlimited plan every single month instead of having the option of canceling it for months at a time. All because AT&T changed the terms of the plan just when it was too late for iPad early adopters to return your iPad.

Plain old greed. Best thing he can do is resign his position now. Text plans are a big ripoff. I tried to stop using them but always have some friends who insist on keeping them. If only they would go with a message app. Love iMessage but fixing to go with a android phone. I can feel some more price hikes coming our way.

Funny how they weren't worries for years when BBM was being used a lot by BB users. I guess during those times, a lot of normal people still has dumbphones and subscribed to their texting plans. All in all, it's not like people don't buy texting plans from these carriers now. Not everyone has an iPhone and I'd rather be safe than sorry, but I only have a small package of limited texts per month... which is all I've ever had because in-carrier (same carrier) texting has always been free from big red.

What a load of c*ap!!!
Who is he crying to?
If he can't manage the costs he should either step down as CEO or take a cut in incentives worth millions that the company offers him.

I understand the bit about unlimited data - although that was his company's decision, was it not? But complaining about iMessage? For years, AT&T has been ripping off its customers by charging them for texts that should have been treated like data in the first place. It's highway robbery to charge the sender AND the recipient for texts. AT&T has no respect for their customers. If I can get a better deal elsewhere, I won't hesitate to switch when I buy my next iPhone.
I wish somebody offered an option for data only. I'd pay full price for my next iPhone and not even get a phone or text plan.

What is WRONG with American companies -AND- American users with this impression that "texting is not data"?! I have lived in Japan over 15 years and we DO NOT PAY FOR TEXTS. They are the same as email, they are the same as everything that goes via data and the companies have never charged for it. In fact, most japanese just use email and are more than happy with it! Why are Americans so stuck on this antiquated system that is basically redundant? Am I missing something magical here? Why do they need it and we don't? Our phones do it, people just choose to avoid it for the most part as it's technically inferior to real email. And the carriers are making cash hand over fist and STILL offer unlimited data here

FOr me, it's not even about the unlimited data, but the way they treat their customers. I left Sprint for the original iPhone and when Sprint gets the next iPhone, I will switch back. AT&T's service is absolute junk where I live and I never once had an issue with Sprint's.

What a f&@king dirtbag. I agree, I don't give a f&@k what you have to invest capital in. Basically this di@khead is saying AT&T wouldn't improve and expand their network if it weren't absolutely necessitated by unlimited data iPhone customers. Sounds like this idiot would prefer to let his company stagnate, and rather than reinvesting profit in the infrastructure, this a$$hat is more worried about lining his greedy f&@king pockets. What an assh@le...I hate that I'm locked into this f&@ker's company. First chance I get, I'm bailing...

What a moron. It's attitudes like this among big business that are ruining this country. He needs to go.

What's really lame is I still pay for unlimited text because there's not use in changing it to the lower one because then I will lose the mobile to any mobile. I'm sure most people still have the same texting plan. Using iMessage is not taking away that much revenue from them. LAME!!!

Hey Drake do you work for At&t? By those companies raising there prices to cover taxes won't work. By them doing that they will be paying more and more taxes every time they raise there prices. So they will end up Losing.They will price them self out of the market.

Okay I use a lot of data and they took my unlimited data plan saying I was "tethering" mind you I was not as I had wifi in my home plus a years worth of complaints about service in my new home and I have been a long loyal customer my only complaint is to conserve they're letting people who stay in the range of the new data keep their "unlimited" data while the ones who go over get the pole. They made the mistake not us we gave enough as custies for them to expand their network so in cuncluson bring back unlimited as I'm personally tired of paying overage charges it's B.S. plain and simple

As a att employee I will tell you what the problem is.

  1. At&t spends more money per year buying Republicans in Washington than they do improving there network.
  2. Strict policies.
  3. High prices.
  4. Blaming the companies failure on customer service reps, not marketing nor corporate.