AT&T CEO regrets offering unlimited data plans, worries about SMS competitors

Randall Stephenson iPhone

As mentioned in an interview with Harvard Business Review Group editorial director Justin Fox at the Milken Institute’s Global Conference this week, AT&T CEO Randall Stephenson indicated that he regretted offering an unlimited data plan when the first iPhone was released nearly five years ago. While Stephenson does credit the iPhone for the success of AT&T’s paradigm shift to earning more revenue from data over other cellular services, his preference would have been to implement tiered data plans from the start rather than shift consumers to that model during 2010.

iphone 3GSpecifically, Stephenson stated “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.”

Stephenson spent some time explaining how the iPhone was being shopped around to wireless cellular providers prior to the launch of the smartphone. While Stephenson was serving as chairman of Cingular’s board, Steve Jobs met with Cingular CEO Stan Sigman in order to sell the concept of the phone. Without a prototype or even a picture of the phone, Jobs was able to accurately describe the iPhone to Sigman and convince Sigman to approach the board with the concept. While the board was concerned that their business model would have to shift to a data-focused design, they took the plunge based on Steve Jobs reputation alone.

Looking forward, Stephenson is concerned with free texting competitors and losing the revenue generated by text messages. While text messaging is still growing within the United States, the rate of growth is consistently slowing down and cellular providers may see losses this year due to competition from Facebook, Apple and other competitors. When asked about SMS, Stephenson stated “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.”

att ceo regrets offering unlimited data plans worries about sms competitors attt randall stephensonWhen asked about AT&T’s slow ability to build its data network during 2008 and 2009 after the iPhone exploded in popularity, Stephenson attributed that to the amount of time it takes to cut through bureaucratic red tape rather than time spent actually building the towers.

For instance, Stephenson stated that it took AT&T about multiple years to build new towers within San Francisco and approximately two thirds of that time was spent on zoning and permit issues rather than simply putting up the towers. Stephenson indicated that the company faced similar issues in large metropolitan areas like New York City and Los Angeles. 

When asked about the growth of 4G and the future of AT&T’s data network, Stephenson continually brought up the concern of the lack of available spectrum within the United States. Specifically, Stephenson stated “We’re running out of the airwaves that this traffic rides on. Even worse, we’re not allocating spectrum properly for data use and not moving new space to the market quickly enough.” Much of Stephenson’s focus within the entire interview concerned reforming spectrum policy within the United States.