AT&T “streamlined” its text messaging plans over the weekend for new customers, eliminating a less-expensive $10/1000 text budget plan in favor of unlimited texting plans that cost much more.

That means new AT&T customers who want to text will pay dearly for the privilege:

• $0.20 per text message sent/received,
• $20.00 Unlimited texting (individual line)
• $30.00 Unlimited texting (family plan)

So much for asking customers to ‘pay for what they use.’  AT&T is moving towards unlimited texting — at a very high price — while moving away from unlimited data.

AT&T released a statement about the changes:

“We regularly evaluate our offers and are making some adjustments to our messaging lineup. Starting August 21, we’re streamlining our text messaging plans for new customers and will offer an unlimited plan for individuals for $20 per month and an unlimited plan for families of up to five lines for $30 per month. The vast majority of our messaging customers prefer unlimited plans and with text messaging growth stronger than ever, that number continues to climb among new customers. Existing customers don’t have to change any messaging plan they have today, even when changing handsets.”

Gizmodo points out AT&T is charging customers who don’t have a text plan 100,000 percent more than what they charge for online data:

Here’s how it breaks down:

AT&T charges $25 for 2 gigabytes of mobile data, which states how much they think their bits and bytes are worth. That comes out to 80 megabytes per dollar. 80 megabytes will get you 500,000 text messages—assuming you’re writing the largest possible message, which you’re often not (i.e. “Hey” “Nothing” “lol”).

Now divide that dollar by the 500,000 potential texts. That comes out to $0.000002 per text—two ten thousandths of a cent. A very, very, very small amount of money.

Now, let’s say you send 5,000 texts a month. That’s a large, though wholly realistic number. Multiply that by the above worthless cost per text, and you’ve got—hold onto your wallet!—$0.01. A penny for five thousand texts, according to how much AT&T says its data is worth in a data plan.

But outside of the data plan? Oh boy! Things get very different very fast. And by very different, I mean inordinately overpriced. Those same 5,000 texts, at a rate of $0.20 per message, will cost you $1,000. Not a penny—a grand. Two very different prices for literally the exact same thing.

For customers who only send and receive occasional text messages, losing the $10 option means most will either pay the heavily marked-up $0.20 a-la-carte price, or pay double and not worry about how many messages they send.

Ultimately, AT&T’s new prices may drive an increasing number of users to alternative ways of communicating with friends and family, especially as prices keep rising.  Some AT&T customers remain grandfathered on text plans that offer 200 messages for $5 a month.  But for customers like Ben Chinn of San Francisco, even $5 is asking a lot.

“With everything with the mobile carriers, I feel I’m getting nickeled and dimed,” Chinn told the Los Angeles Times. “I resent paying so much for text messaging, and I feel that it’s not a reasonable price to pay for something that costs the carriers next to nothing.”

Free Press Research Director S. Derek Turner says AT&T’s new prices foreshadow the kinds of higher prices all Americans will pay if the wireless industry continues its march towards consolidation.

“This move is simply another example of AT&T passing off a price increase for consumers as a benefit,” Turner said. “If this were a truly competitive market, AT&T would offer its customers more choice and value, and no carrier would get away with a 10-million-percent markup on its services. This should serve as a warning to the Department of Justice and the Federal Communications Commission — if AT&T is already able to unilaterally increase prices, allowing the company to eliminate low-cost competitor T-Mobile will only make things worse.”

The Times notes Juniper Research has predicted that global revenue for text messaging will peak this year and begin to drift down. And in a recent report, UBS Investment Research warned that “customers could elect not to pay for texting as smartphones and third-party applications become pervasive.”

Facebook has introduced Messenger, a free smartphone app that allows members to exchange text messages with friends, as well as anyone else who happens to have a cell phone.  Google Voice includes unlimited free texting, if those sending messages remember your Google Voice number.  Apple’s forthcoming iMessage will be pre-installed on most Apple devices, offering a ready-made opportunity to bypass high-priced text plans.  There are dozens of other apps that offload text traffic to your smartphone data plan, where the added traffic is so insignificant, it has largely no impact on even the lowest usage plans.

The preferred outcome of using any of these third-party apps is to cancel expensive texting plans from your phone carrier.  But there are obstacles:

1. Many friends may continue to text your primary cell phone number directly, incurring a-la-carte text messaging fees if you cancel your text plan;
2. Many require all of your contacts to run specific apps to exchange messages, which can quickly become a burden;
3. Apple’s iMessage assumes all of your friends are using Apple phones or devices.  Everyone else will have to hope for, find, and install another app to support the service.

The trade-off works for some, but not for others.

Hieu Do of St. Louis tells the Times he’s had to pay for individual text messages after dropping his text plan, but Google Voice has still helped him save money:

“At the beginning of every month I would lose a dollar here and there from people texting my old number, but it’s worth it more than paying $5 or $10 a month for a texting plan,” he said.

But Jim Jeffords, one of our readers, tried Google Voice for awhile and decided it was just too cumbersome for texting.

“I ended up getting text messages from a lot of business contacts that didn’t know about my Google Voice number, but had my cell phone number,” Jeffords says. “I was not about to throw a Google Voice number into the mix and come across as cheap and make them remember what number to text.”

Jeffords went back to a basic text plan with a few hundred messages a month included.

“It wasn’t worth the hassle to deal with,” he said.

While wireless providers currently treat Wi-Fi as a friendly way to offload wireless data traffic from their 3G and 4G networks, the wireless industry is starting to ponder whether they can also earn additional profits from regulating your use of it.

Dean Bubley has written a white paper for the wireless industry exploring Wi-Fi use by smartphone owners, and ways the industry can potentially cash in on it.

“It is becoming increasingly clear that Wi-Fi access will be a strategic part of mobile operators’ future network plans,” Bubley writes. “There are multiple use cases, ranging from offloading congested cells, through to reducing overseas roaming costs and innovative in-venue services.”

Bubley’s paper explores the recent history of some cell phone providers aggressively trying to offload traffic from their congested 3G networks to more-grounded Wi-Fi networks.

Among the most intent:

• AT&T, which acquired Wayport, a major Wireless ISP, and is placing Wi-Fi hotspots at various venues and in high traffic tourist areas in major cities and wants to seamlessly switch Apple iPhone users to Wi-Fi, where available, whenever possible;
• PCCW in Hong Kong;
• KT in the Republic of Korea, which has moved as much as 67 percent of its data traffic to Wi-Fi;
• KDDI in Japan, which is planning to deploy as many as 100,000 Wi-Fi Hotspots across the country.

America's most aggressive data offloader is pushing more and more customers to using their Wi-Fi Hotspots.

Bubley says the congestion some carriers experience isn’t necessarily from users downloading too much or watching too many online shows.  Instead, it comes from “signalling congestion,” caused when a smartphone’s applications demand repeated attention from the carrier’s network.  An application that requires regular, but short IP traffic connections, can pose a bigger problem than a user simply downloading a file.  Moving this traffic to Wi-Fi can be a real resource-saver for wireless carriers.

Bubley notes many wireless companies would like to charge third-party developers fees to allow them access to each provider’s “app store.”  Applications that consume a lot of resources could be charged more by providers (or banned altogether), while those that “behave well” could theoretically be charged a lower fee.  The only thing preventing this type of a “two-sided business model,” charging both developers and consumers for the applications that work on smartphones, are Net Neutrality policies (or the threat of them) in many countries.

Instead, Bubley suggests, carriers should be more open and helpful with third party developers to assist them in developing more efficient applications on a voluntary basis.

Bubley also ponders future business strategies for Wi-Fi.  He explores the next generation of Wi-Fi networks that allow users to establish automatic connections to the best possible signal without ponderous log-in screens, and new clients that can intelligently search out and connect to approved networks without user intervention.  That means data traffic could theoretically be shifted to any authenticated or preferred Wi-Fi network without users having to mess with the phone’s settings.  At the same time, that same technology could be used to keep customers off of free, third party Wi-Fi networks, in favor of networks operators run themselves.

Policy controls are a major focus of Bubley’s paper.  While he advocates for customer-friendly use of such controls, sophisticated network management tools can also be used to make a fortune for wireless providers who want to nickle and dime customers to death with usage fees, or open up new markets pitching Wi-Fi networks to new customers.

Bubley

For example, a wireless carrier could sell a retail store ready-to-run Wi-Fi that pushes customers to a well-controlled, store-run network while customers shop — a network that forbids access to competitors or online merchants, in an effort to curtail browsing for items while comparing prices (or worse ordering) online from a competitor.

Customers could also face smartphones programmed to connect automatically to a Wi-Fi network, while excluding access to others while a “preferred” network is in range.  Wireless carriers could develop the same Internet Overcharging schemes for Wi-Fi use that they have rolled out for 3G and 4G wireless network access.  Also available: speed throttles for “non-preferred” applications, speed controls for less-valued ‘heavy users,’ and establishment of extra-fee “roaming charges” for using a non-preferred Wi-Fi network.

Bubley warns carriers not to go too far.

“[We] believe that operators need to internalize the concept of ‘WiFiNeutrality’ – actively blocking or impeding the user’s choice of hotspot or private Wi-Fi is likely to be as divisive and controversial as blocking particular Internet services,” Bubley writes.

In a blog entry, Bubley expands on this concept:

I’m increasingly convinced that mobile device / computing users will need sophisticated WiFi connection management tools in the near future. Specifically, ones that allow them to choose between multiple possible accesses in any given location, based on a variety of parameters. I’m also doubtful that anyone will want to allow a specific service provider’s software to take control and choose for them – at least not always.

We may see the emergence of “WiFi Neutrality” as an issue, if particular WiFi accesses start to be either blocked or “policy-managed” aggressively.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/The Future of Wi-Fi.flv[/flv]

Edgar Figueroa, chief executive officer of The Wi-Fi Alliance, speaks about the future of Wi-Fi. Wi-Fi technology has matured dramatically since its introduction more than a decade ago and today we find Wi-Fi in a wide variety of applications, devices and environments.  (3 minutes)

Verizon's aggressive offers promoting adoption of more profitable smartphones delivers higher average revenue from every customer that is convinced to upgrade.

Verizon Wireless continues on its mission to seek out old customers, to explore new ways of earning more money from them, and going where other carriers have already  gone before to get customers to dump basic phones in favor of more profitable smartphones.

The company begins testing a new basic data plan on Thursday around the nation’s capital that will provide up to 300MB of smartphone data for $20 a month in an effort to reduce sticker shock for would-be upgraders confronting the smartphone fact-of-life: the mandatory smartphone data plan.

Curiously, Verizon is calling its limited promotion a “back to school” special, despite the fact some of the heaviest data users around are school age, likely to blow right past their usage allowance.

Verizon Wireless’ leaked press release:

Starting Thursday, existing Verizon Wireless customers in Maryland, Washington DC, Virginia and North Carolina will be able to add a 300 MB data plan to their smartphone or basic phone for just $20 monthly access when added to a voice plan. All new and existing customers are eligible for the promotional data plan that will be available from Aug. 18 through Sept. 30.

Customers in Maryland, Washington, DC, Virginia and North Carolina can choose from an array of 3G- and 4G LTE-enabled devices that include top sellers on all mobile operating systems including BlackBerry, Android, iOS, Palm and Windows Mobile. The plans are not restricted to specific phones but are geared to customers whose data use falls within the 300 MB allowance. Customers who go over their monthly allowance will automatically receive an additional 300 MB for an additional $20 per month.

If that doesn’t convince you to upgrade, perhaps Verizon’s version of “cash for clunkers” — a cell phone trade-in program, will.  Verizon Wireless is offering up to $100 for customers in their western region to trade-in basic phones for a shiny new smartphone, as long as they upgrade between Aug. 18-Sept. 30.

According to Phone Arena, some customers even under existing contracts may qualify:

• 1) Current customers with a basic phone that are eligible for a 2-year upgrade will have to purchase a new smartphone at the discounted upgrade price, re-sign a 2-year contract and add a smartphone data plan.
• 2) Current customers with a basic phone, but are still under a contract may be eligible for an early upgrade. If so, they purchase the new smartphone, re-sign a 2-year contract, and add a smartphone data plan.

Phone Arena had the benefit of a friendly Verizon Wireless employee willing to share the company’s employee-only documentation about the offer:

Stop the Cap! reader Larry Posk from Atlanta just threw AT&T overboard, fed up with the company’s anti-consumer policies, and Sprint paid him $125 to walk.

“I can’t think of a single reason to stay with the sharks at AT&T who are spending my money to pay off legislators to drop Net Neutrality, impose usage caps on all of their broadband and wireless accounts, and now try and wipe out T-Mobile; I’ve had enough,” Larry writes.  “I told AT&T goodbye and switched to an unlimited plan from Sprint, who more than covered my early termination fee and gave me a new smartphone for free.”

Larry is a beneficiary of Sprint’s customer win-0ver promotion that covers up to $125 in early termination fees when customers cancel service mid-contract.  Larry owed AT&T around $70, but Sprint gave him the full $125 benefit as a credit on his first Sprint bill.

“All I had to do was transfer my old AT&T number to Sprint, which effectively ended my AT&T service,” Larry says.  “Technically I did not even have to call AT&T to cancel service — the number transfer does the trick, but I felt extra satisfaction giving AT&T a piece of my mind.”

Larry doesn’t want to do business with companies that engage in Internet Overcharging.

“I can basically understand there might be a need for some limitations on wireless service, but when AT&T put the same scheme on their DSL and U-verse customers, it was clear they were simply ripping customers off and I want no part of it,” Larry says.

Sprint also gave Larry another 10 percent off because he belongs to a credit union that qualifies him for additional discounts.  In the end, he’s actually saving about $24 a month and isn’t exposed to a usage limit any longer.

“I recognize the fact Sprint’s network isn’t as wide-ranging as AT&T or Verizon, but I barely travel and Sprint’s coverage in Atlanta is actually better than AT&T because Sprint hasn’t dropped any of my calls,” Larry says. “Data speed is adequate for my needs, and is about on par with what AT&T was delivering here in Atlanta, but it’s not as fast as Verizon.”

Larry says he didn’t know about Sprint’s promotion until he asked, and he recommends customers inquire about Sprint covering their early termination fees before signing up for service.  We found some customers complaining they did not get the credit, but we suspect that might be because they didn’t follow the terms and conditions.  The most important one of all: you have to buy your new phone from Sprint, not a third-party retailer.  Here is the fine print:

Available for consumer and individual-liable lines only. Available online, via telesales, and in participating Sprint stores. Purchases from other retailers are not eligible for the service credit. Requires port-in from an active wireless line/mobile number or landline/number that comes through the port process to a new-line on an eligible Sprint service plan. Excludes $19.99 Tablet Plan. Request for service credit must be made at sprint.com/switchtosprint within 72 hours from the port-in activation date or service credit will be declined. Ported new-line activation must remain active with Sprint for 61 days to receive full service credit. Upgrades, replacements, add-a-phone/line transactions and ports made between Sprint entities or providers associated with Sprint (i.e. Virgin Mobile USA, Boost Mobile, Common Cents Mobile and Assurance) are excluded. You should continue paying your bill while waiting for your service credit to avoid service interruption and possible credit delay. A $125 service credit will be applied for netbooks, notebooks, tablets, mobile broadband devices and smartphones which include BlackBerry, Android, Windows Mobile, Palm, and Instinct family of devices. All other phones are considered feature phones. A $50 service credit will be applied for feature phones and Sprint Phone Connect (when available). Smartphones require activation on an Everything Plan with data with Premium Data add-on charge.

It’s Cell Company Customer Crackdown-month for AT&T and Verizon Wireless as the two carriers increasingly engage in aggressive “management” of their wireless data networks.  Days after AT&T announced it would throw customers off legacy unlimited data plans if caught using “unofficial” tethering applications, Verizon has reportedly locked out customers from accessing web pages over jailbreak apps like MyWi, redirecting requests to a Verizon Wireless $20 Mobile Hotspot offer instead.

Mobiledia reports Verizon now requires users have a hotspot-capable data plan if they want to tether data from their smartphones to other devices.  At regular prices, those plans start at $20 for 2GB of usage, with a $10/GB overlimit fee.  Certain LTE/4G customers have fared better, being offered unlimited tethering for $30 a month — an option not available to 3G phone owners.

The Federal Communications Commission’s Net Neutrality policy exempted wireless providers from observing its core principles, giving carriers carte blanche to block websites and third party applications from their networks, and Verizon has put the green light to good use.

AT&T has favored direct punitive measures against customers who don’t respond to their demands to upgrade by auto-enrolling customers in $45 tethering plans or threatening legacy customers with the loss of their unlimited data plan.

Some media reports — including those from Mobiledia — have declared third party tethering applications “illegal,” which is inaccurate.  While carriers may not like these applications and declare use of them contrary to their respective acceptable use policies, they do not violate any laws.