Why AT&T is undercutting the RIM PlayBook

RIM’s great hope to break out of the messaging-only market, where it’s been pummeled by the iPhone and Android competitors, took another bullet today — perhaps a fatal one. The PlayBook tablet was announced with great fanfare last October but has debuted to near-universal scorn among reviewers. The big issue for many is that to get email, calendar, and contacts, you must tether the PlayBook to a BlackBerry — the tablet itself has no such essential business apps. Now it turns out AT&T won’t allow such tethering on its network.

That’s a huge blow. AT&T accounts for something like 40 percent of all mobile customers in the United States, and it has regularly nabbed six-month exclusive deals for new BlackBerry models as part of its efforts to lead in business-capable mobile devices. Thus, AT&T’s disallowing of the BlackBerry Bridge tethering feature that makes the PlayBook potentially useful in a business context is a serious injury for RIM.

In hindsight, it should have been obvious that AT&T would make such a move. AT&T has consistently charged more for data access by tablets and other computerlike devices than it has for smartphones. It was one of the last carriers to support tethering on the iPhone — and only by requiring customers pay another $20 per month for the privilege. It has a similar requirement for Android devices such as the Motorola Atrix when tethered to a Lapdock.

Although AT&T and others sell data access in buckets of gigabytes, they know that smartphone users consume only a fraction on average of their buckets; for example, a 2GB smartphone plan for $30 typically ends up using less than 400MB of AT&T’s data bandwidth. A tablet on the same plan uses much more data, because the device is more suited for doing data-intensive applications — so AT&T makes less per customer if it charges the same amount for that 2GB bucket.

When AT&T grabbed iPad exclusivity a year ago, it could charge Apple users separately for an iPad data plan and an iPhone (or other smartphone) data plan. AT&T liked that. As Android manufacturers began touting the use of their smartphones as 3G tethers to other devices, such as laptops, AT&T said no way and began requiring that the tethered devices pay more for data access.

In essence, AT&T wants to charge for each device’s access separately, whether or not the device has its own 3G radio. (Verizon Wireless also charges for tethering, whereas Sprint and T-Mobile have often not charged such fees as a way to try to get more customers — but that low-cost strategy hasn’t really worked out for them.)

The PlayBook goes against that fundamental business model at AT&T: Every device pays separately for its data access. It’s a line in the sand AT&T doesn’t want crossed, as that would lead to reduced income. Carriers like AT&T know that prices in telecom usually decrease over time, so they do everything possible to slow down that trend and make as much money up front as they can.

You could argue, and I’m sure RIM has, that the key communications apps accessible on the PlayBook via the BlackBerry are really BlackBerry apps, so there is no increase in data usage. At first, that seems like a reasonable argument — except that users will do other things on the tablet as well, and to do so means tapping into the 3G service the BlackBerry shares with the PlayBook. To AT&T, sharing means revenue lost.

Whether or not the PlayBook crosses that line in the sand, the device is moving closer to it, and AT&T has no interest in encouraging that trend. It’s not surprising AT&T is saying no to tethering for the PlayBook as it has done to other devices. It said no to Apple and got its way — does RIM really think it will do better?

The only surprises in retrospect are that AT&T didn’t say tethering was permitted for an extra $20 per month — and that Verizon isn’t charging that premium for its users. My guess is that AT&T will “compromise” by allowing PlayBook tethering for an extra monthly cost — if the PlayBook survives in the market, that is.

This article, “Why AT&T is undercutting the RIM PlayBook,” was originally published at InfoWorld.com. Read more of Galen Gruman’s Mobile Edge blog and follow the latest developments in mobile technology at InfoWorld.com. Follow Galen’s mobile musings on Twitter at MobileGalen. For the latest business technology news, follow InfoWorld.com on Twitter.