The Fading of Unlimited Data Plans Accelerates

Carl Weinschenk

In the past, it was safe to say that the telecommunications industry was moving "slowly and inexorably" to some way of managing the use of wireless bandwidth by subscribers.

That overused phrase is no longer appropriate. The latest sign that the move to control is quickening is from AT&T. Last week, the carrier said that it will throttle heavy users. Note that the release was issued on the last Friday of July (probably in the afternoon), suggesting that the company hoped reporters were at the beach and that exposure would be minimized. In any case, here is the bottom line:

Starting October 1, smartphone customers with unlimited data plans may experience reduced speeds once their usage in a billing cycle reaches the level that puts them among the top 5 percent of heaviest data users. These customers can still use unlimited data and their speeds will be restored with the start of the next billing cycle. Before you are affected, we will provide multiple notices, including a grace period.

On one level, the new rule makes sense. Assuming that it will be applied as described, relatively few bandwidth hogs shouldn't be allowed to affect the rest of us. Indeed, the explosive growth of consumption has been the subject of much hand-wringing. The numbers in Cisco's Visual Networking Index read more and more like science fiction with each release. Another good indicator of the depth of the problem comes from In-Stat. I spoke with market analyst Amy Cravens last week. Her takeaway from recent research is that mobile video use will accelerate quickly as tablet penetration increases and content rights obstacles are overcome.

As for the AT&T announcement in particular, it is possible that the carrier's needs are greater than some others' needs, as suggested at The Street. It is interesting to note that before the announcement, Digital Trends suggested that the move may be done in conjunction with the release of the iPhone 5. Since that post, AT&T's announcement was made and rumors surfaced that the new Apple phone may be delayed. Though the process did not pan out as the poster suggests, it is fair to note the bottom line of both posts: There probably is a connection between the new rules and the iPhone 5 rollout. It also is quite likely that AT&T's purchase of T-Mobile was driven to a great extent by the need for bandwidth.

This is not only about AT&T, of course. In the bigger picture, the importance of the move from unlimited plans to those that are in some way constrained - either by throttling or surcharges - shouldn't be overlooked just because of their inevitability. It is a big deal.

The years ahead will feature a constant battle between ways of extending/adding to capacity (adding bandwidth and squeezing more use out of existing bandwidth) and the no doubt radical growth of demand created by new services and more voracious versions of current services (for instance, the move of a mobilized video service from standard to high definition and from a smartphone to a tablet display). While it flows into the future, regulators and, if necessary, the judicial system must ensure that the carriers are not subtly gaming the system in their favor. This becomes more of a concern because this will be a business built on a scarce resource - and one that they control.

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