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AT&T Hints at Charges for FaceTime Users on its Cell Network

By Thomas Gryta and Ian Sherr Software developers using a pre-release version of Apple Inc.'s (AAPL) iPhone operating system have hit a roadblock while trying to access the popular video-calling application FaceTime on AT&T Inc.'s (T) cellular network. The sudden change has prompted speculation that AT&T is gearing up to charge users for the data-intensive application. That's because a new notice about the restriction in the software strongly resembles a notification that emerged in another pre-release version of the software two years ago. At that time, the alert appeared just before AT&T began allowing users to pay for tethering, which permits other devices to use the phone's network connection. The emergence of the potential restriction comes as AT&T is widely expected to unveil new pricing plans that will focus on data usage and diminish the role of voice minutes and texts. Currently, FaceTime only can be used when connected to wi-fi, but it will be available on cellular networks when the new operating system is released in the fall. A development version of the iOS 6 software had previously allowed FaceTime to be used on AT&T's network, but a recent update prompts users to activate their account. For its part, AT&T declined to comment on whether customers will have to pay extra to use the service. A spokesman said the message comes from a "developer preview that will be updated before our customers see it." He added that AT&T is "working closely with Apple right now on the new developer build on iOS 6. We will share information with our customers as it becomes available." It is unclear if the change would remain in the final release of the software, or if it would apply to all customers or possibly just those who still have unlimited data plans. Apple spokeswomen did not immediately respond to requests for comment. Meanwhile, AT&T rival Sprint Nextel Corp. (S), which still offers unlimited data to new and existing users on its network, said it has no plans to erect pricing barriers to FaceTime. "We are committed to our unlimited data and that means not charging for data consumption based on the application," a spokeswoman said. Officials from Verizon Wireless--a joint venture of Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD, VOD.LN)--declined to comment immediately. Verizon Wireless recently launched a new pricing model that focuses on subscribers' data usage and will raise prices for many users. AT&T is expected to disclose a similar pricing structure soon. The company was the first to charge for a preset amount of monthly data in 2010 and has been successful in getting 60% of its postpaid customers off unlimited data plans. AT&T, once the exclusive carrier of the iPhone, previously blocked users from tethering other devices to the iPhone because of fears about the amount data that would be consumed. The feature was available on the phone in 2009, but AT&T only made it available for an extra fee in 2010 when it stopped offering unlimited data to new customers. When that feature was enabled, the notification for its activation was virtually identical to the wording of the latest notice. That option emerged in a pre-release version of the software about a month before AT&T announced its availability. With that announcement, AT&T also first introduced its tiered pricing plans and moved the company away from offering unlimited data. FaceTime uses a camera on the iPhone to connect with others on their phones, iPads or Mac computers. The data consumption from FaceTime on a cellular network could be significant for regular users as the next-generation iPhone is expected to operate on 4G networks using LTE, or Long Term Evolution, technology. The existance of the message was previously reported by "9to5Mac," a technology blog. According to the notification message seen by Dow Jones, the attempt to activate FaceTime's use on the network prompts the user to contact AT&T "to enable FaceTime over cellular on this account." FaceTime allows for variable bandwidth so that the quality of the picture can adjust to the available connection speed. The ability to use high-speed connections should allow FaceTime to operate at the maximum rate and thus consume maximum data. Akshay Sharma, an analyst at research firm Gartner, estimates the application uses about 1.5 megabytes to 7.5 megabytes per minute. For those on the low end of Verizon's new data plan--with a single gigabyte to last the month--users could potentially exceed their allotment just by making one five-minute call a day on FaceTime. FaceTime's ability to enable more data consumption is part of the reason why the application wasn't initially allowed on cellular networks that were once dominated by subscribers with unlimited data, industry sources have said. Write to Thomas Gryta at thomas.gryta@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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