AT&T’s Top Data Users Will See Speeds Slow to a Crawl

Beginning in October, the top five percent of data consumers on AT&T’s (NYSE:T) unlimited data plan will witness data speeds slowing to a crawl. Though AT&T stopped offering unlimited data plans in June 2010, many long-term subscribers still have them as part of their contracts, and have been congesting networks with video and music streaming.

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AT&T described the users who will be affected by its new policy as being a “small minority of smartphone customers” who use 12 times more data than the average smartphone customers. AT&T will warn customers who will be affected ahead of time. Normal speeds will resume at the start of the next billing period.

With the exception of Sprint Nextel (NYSE:S), all of the major national carriers have put caps on their data services. AT&T did away with their unlimited data plan in June 2010, followed shortly thereafter by Verizon (NYSE:VZ). T-Mobile maintains an “unlimited” data plan that has a five-gigabyte cap.

While data caps are necessary to keep traffic running smoothly until wireless carriers can adapt their networks to the growing demands of smartphone users, companies like Netflix (NASDAQ:NFLX) are arguing against the data caps, as they take away a major competitive edge from Internet companies trying to compete with cable and other television services. Some consumer groups worry AT&T and Verizon will use data caps to promote their own television services over competitors like Hulu (NASDAQ:CMCSA) and Amazon (NASDAQ:AMZN).

Computers now only account for 63% of Web traffic, and that number is expected to decline to 46% by 2015 as the number of mobile Internet users increases to 788 million globally. AT&T (NYSE:T) has cited the increasing number of customers using their WiFi networks to stream data-heavy video and music as increasing network traffic, and has suggested that its planned merger with T-Mobile, which would increase the size of AT&T’s network, could help cut back on congestion.

However, some lawmakers and consumer groups argue that AT&T (NYSE:T) could have acted to increase network capacity on its own years ago. Even before the burgeoning smartphone market stretched the networks’ data capacity, AT&T was notorious for dropping calls, and data services for the first iPhones were slow despite less demand on the network. Those opposing the merger of AT&T and T-Mobile insist that AT&T could act to increase its network capacity on its own, building the infrastructure to handle its large customer base as it should have years ago.