Why AT&T is undercutting the RIM PlayBook

It's all about data revenues, and the BlackBerry-tethered tablet doesn't boost AT&T's income

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.

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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.

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