In June, AT&T finally added a tethering plan for iPhone users, which allows a computer to use the phone's internet connection to get online. It works over USB and Bluetooth and costs $20 extra on the $25 2GB monthly plan. I've had the opportunity to test it out a couple times this summer, first in July when I moved to a new home and had to wait a week and a half for Comcast to hook up the internet, and again in August when I was on vacation in the Outer Banks and the internet was down the entire week.
The installation is extremely easy: you can add the feature to your account right on your phone using AT&T's myWireless iPhone app (under Features) and you turn it on in Settings (General > Network > Internet Tethering). You don't have to call an AT&T rep and wait on hold to have your plan changed.
The connection quality was very good for me, even though I get mediocre signal at home (usually 2 bars). Web pages would usually instantly display and I regularly experienced download speeds of over 250K. I checked speedtest.net and the reported results were about 2 megabits download and .5 megabits upload. For day-to-day use, it's really pretty good.
If you're a casual user who just checks e-mail and browses the web a little here and there, a tethering connection just may be good enough to ditch your traditional internet service at home. For the 2GB plan it comes down to $45 a month which is very competitive when compared to broadband plans of Cox, Comcast or Verizon, only with it you can connect anywhere and never have to wait on the technicians to come to your place and hook anything up.
If you're more of a heavy user like myself, there is still great value in since you can turn it on only when you need it. Let's say that you know you'll be going away for a week and want to just have tethering for that period of time, you can do that: you will only be charged extra for those 7 days, the rest of the month will be prorated. So you'd be paying about $20/4 or $5 extra for that month. I'll be away at a conference all week and needless to say I'm activating tethering for those days. As a matter of fact I'm publishing this blog post from an airport using my tethering connection. It's much safer than using an open, unsecured Wifi and it's sure cheaper than any of the pay-as-you-go airport networks.
Still, a lot of people have been irked by the fact that AT&T charges $20 extra for the feature without giving you any extra bandwidth for it. You're still capped at 2GB even though you're paying almost twice as much. It's likely that the extra charge is really there to discourage users: it's well known that AT&T can barely keep up with its 3G network demand, especially in New York and San Francisco, and you will definitely be using more bandwidth if you're tethering than if just using the phone. I think more people would be OK with the $20 charge if it raised the cap to something like 4GB (that would be in line with AT&T's $10/Gig over policy). Alas I wouldn't bet on that happening until AT&T has a firmer handle on its network and is actually trying to get users to use the feature.