AT&T sets new limits for 'unlimited' data plans

Affects some iPhone owners who bought Apple's device between 2007 and 2010

AT&T yesterday clarified when and how it will slow down the connection speed of smartphone users who still have an unlimited data plan.

Starting immediately, those with unlimited data will be warned via text message when their billing cycle consumption nears 3GB for a 3G device, or 5GB for a mobile device connecting through the faster LTE network.

If the customer passes those consumption barriers, AT&T will drastically reduce the speed of the data connection until the end of the billing cycle, at which point the meter is reset. Previously, the carrier had slowed connections for customers it identified as among the heaviest data consumers -- those in the top 5% -- but had given them no warning prior to strangling their bandwidth.

The company couched the change as a benefit to its users.

"Our unlimited plan customers have told us they want more clarity around how the program works and what they can expect," AT&T said in a statement yesterday. "[And] for context, less than 5% of smartphone customers use more than 3GB per month."

Jack Gold, principal analyst with J. Gold Associates, said AT&T was both being clearer to customers and tightening the screws on those with unlimited plans. "The bottom line is everyone wants to have unlimited data, but at the same time they complain that the service sucks," said Gold. "But it's not an unlimited resource. Get used to it."

AT&T first began throttling unlimited users' data speeds last year, but had dropped those plans for new customers in June 2010. People who had already signed up for unlimited data, however, have been allowed to retain those plans, even when they purchased a new device.

Most of the AT&T customers with unlimited data bought an iPhone during the stretch between June 2007 and June 2010.

"I'm with AT&T on this one," said Gold. "Cellular data is a limited commodity."

The problem AT&T finds itself in is the fault of both the company and customers, Gold added. "Users have unrealistic expectations, but it's also the carrier's fault," he said. "They offered unlimited data because they wanted people to use it."

And now, with the spectrum crowded -- more so in some markets than others -- AT&T finds itself, as Gold put it, "Damned if they do, damned if they don't."

The alternative would be for AT&T to bite the bullet and discard all unlimited plans currently held by customers. But Gold saw such as move as very unlikely.

"That would be a really tough one," he said. "They would get clobbered, because they had an agreement with those customers. This way, they come across as not quite as much of a bad guy as they would [if they ditched all unlimited plans]."

Sprint is the only major U.S. carrier to still offer an unlimited data plan to new smartphone customers. Like AT&T and Verizon, Sprint sells a variety of Android-powered phones as well as Apple's iPhone 4S.

Verizon, which briefly offered unlimited data last year -- it touted that as a selling point when it launched the iPhone 4 on its network -- stopped selling the plan to new customers in July 2011.

AT&T has been struggling for some time to get a handle on data consumption: Since mid-2010, it's sold tiered deals at various prices.

Last month, the carrier raised data plan prices between 11% and 33% -- the latter for the least-expensive plan -- as it raised the data allowance between 25% and 50%.

On its website, AT&T urged customers to use Wi-Fi as much as possible. and reminded users they could check their billing cycle data consumption at any time by dialing "*data#" -- sans the quotation marks -- on their phone.

Mobile World Congress 2012 revealed many emerging trends for smartphones. Which will be the most significant?

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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