AT&T Chief Regrets Offering Unlimited Data for iPhone

When Randall Stephenson, AT&T’s chief executive, spoke about the state of the wireless industry at a conference this week, he shared some surprisingly frank comments about the iPhone. In particular, he said that he wished the company had never offered an unlimited data plan for the device and that he loses sleep over free texting services like Apple’s iMessage.

If AT&T hadn’t offered unlimited data, it would have been able to get people who used more data to pay up for it, as opposed to having the light data users subsidize the heavy ones, he said.

“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,” he said in the on-stage interview at the Milken Institute’s Global Conference on Wednesday. “And it’s a variable cost model. Every additional megabyte you use in this network, I have to invest capital.”

AT&T discontinued unlimited data in 2010, and it has since moved to limited, tiered data plans. The switch is working out well for AT&T. In the last quarter, the company reported $6.1 billion in revenue from mobile data alone. Ralph de la Vega, chief executive of AT&T Mobility, said 70 percent of the people on tiered data plans were paying for the more expensive options.

But that’s not the end of AT&T’s concerns. Mr. Stephenson said he worried about services that could replace the company’s own offerings. For example, free Internet-based messaging services like Apple’s iMessage are eating into the company’s revenue from text messages.

“You lie awake at night worrying about what is that which will disrupt your business model,” he said. “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.”

A recent analysis of the mobile industry showed steep declines in text messaging in several countries. In the United States, text messaging is still growing but more slowly than before. Some analysts expect texting revenue to shrink for American carriers this year.

Mr. Stephenson added that Skype, the Internet-based phone service, was becoming a more viable voice service as data networks improved, which also poses a threat.

But over all, Mr. Stephenson said he didn’t regret the decision to support the smartphone, which pushed the phone industry into a data-driven model. Earlier in the interview, he reflected on the initial discussions with Steve Jobs on whether Cingular Wireless, which eventually became AT&T, would support the iPhone.

Mr. Stephenson was chairman of Cingular’s board at the time, and he said Mr. Jobs had met with Stan Sigman, who was chief executive of Cingular. After the meeting, Mr. Sigman approached the board to talk about a “unique opportunity.” He hadn’t even seen a picture of the iPhone, but he described a device with a touchscreen that one would use to make calls, do e-mail and run apps.

The board was nervous about the Apple smartphone because it was aware that it would transform its business model, Mr. Stephenson said.

“I remember asking the question: Are we investing in a business model, are we investing in a product or are we investing in Steve Jobs?” Mr. Stephenson said. “The answer to the question was, you’re investing in Steve Jobs. Let’s go after this thing. And we went after it, and the rest is history.”