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Tuesday, December 22, 2009, 06:30 am PT (09:30 am ET)

AT&T continues to deny iPhone tiered data pricing plans

AT&T continues to fight back against the perception that the company will implement tiered data plans for iPhone users — a rumor that started after the company's president said "incentives" to discourage heavy bandwidth consumption are likely.

AT&T views expansion of its free Wi-Fi hotspots for customers as a short-term solution for its 3G network issues, which have resulted in dropped calls and spotty reception for some users. Those problems, the company says, are due to iPhone users who consume large amounts of data, well more than the average user.

AT&T Mobility President Ralph de la Vega spoke with BusinessWeek in an attempt to clarify his comments made at an investor event in New York earlier this month. At that event, he was asked about how AT&T would deal with bandwidth-heavy users. De la Vega responded by saying the company has investigated giving incentives to users to "reduce or modify their usage."

De la Vega said he never intended for his words to suggest that data caps or tiered pricing models for iPhone users were imminent. "I guess I should have been more clear," he told BusinessWeek.

It's the second time in a week that he has made a high-profile effort to clarify his comments. Last week, de la Vega spoke with The Wall Street Journal to say AT&T had made no decision to implement tiered pricing.

AT&T's Wi-Fi strategy will utilize the service as a "lifeline" to keep users off of its 3G network and relieve some of the pressure. The nation's second-largest wireless carrier has announced an agreement with fast food chain McDonalds to waive the $2.95 charge for Wi-Fi use at the restaurants for two hours of access. Similar deals have been reached with Starbucks and Barnes & Noble.

Following the introduction of iPhone OS 3.0, AT&T saw 15 million users connect to its Wi-Fi network in one quarter alone this year. The company offers more than 20,000 hotspots.

Also a part in the strategy are "femtocells" that use a home Internet connection and serve as a mini cellular tower. Femtocells can be used to relieve dead spots in coverage in some homes, but the strategy also allows AT&T to have devices connect to a wired Internet connection rather than its 3G network. The 3G MicroCell was tested earlier this year in Charlotte, N.C., and offers 3.2Mbit/sec 3G service to users in their home.

AT&T's network has struggled since the successful launch of the iPhone 3GS, which has brought more bandwidth-heavy devices to its network. The wireless provider has been the subject of much criticism since June. AT&T has noted that 40 percent of AT&T's network capacity is consumed by just 3 percent of smartphone users.

Capital spending at AT&T is expected to decrease this year, from $20.3 billion in 2008 to $17 billion in 2009. Still, de la Vega reportedly said that the company's investments are beginning to pay off. For example, AT&T had fewer dropped calls in San Francisco the week of Dec. 7 than ever before. The company also has plans to further improve its coverage in major metropolitan areas, like San Francisco and New York, where there are more smartphone users.