March 2 (Bloomberg) -- AT&T Inc. will start slowing the data speeds of customers with unlimited wireless plans once they reach a certain threshold, a sign of the industry trying to cope with soaring traffic and limited network capacity.
Customers will experience slower access speeds if their data usage exceeds 3 gigabytes a month, the second-largest U.S. wireless carrier said yesterday on its website. For customers with so-called long term evolution, or LTE, devices, the limit is 5 gigabytes a month, the Dallas-based carrier said.
The move means millions of longtime customers may need to deal with reduced speeds at some point in their billing cycle, a nuisance that AT&T is betting will persuade them to switch to its more expensive plans. AT&T is struggling to accommodate rising data traffic as the popularity of smartphones and tablet computers increases, while trying to extract more revenue out of a user base whose growth is slowing.
“The wonderful thing about smartphones is that they are computers in your hand, but they are like cars from the 50s and 60s, real gas guzzlers,” said Roger Entner, an analyst at Recon Analytics in Boston.
To expand their limited spectrum capacity, AT&T and bigger rival Verizon Wireless have sought acquisitions and agreements. AT&T Chief Executive Officer Randall Stephenson said in December that the failed acquisition of T-Mobile USA -- a deal AT&T abandoned amid regulatory opposition -- would result in capacity constraints and higher prices.
AT&T’s new data caps only apply to existing customers with contracts that include unlimited data, plans that the carrier has stopped offering to new subscribers. The new limits represent a change to a previous AT&T policy of reducing speeds to the 5 percent of unlimited users who used the most data.
Instead of offering unlimited data, AT&T now sells so-called tiered plans that include a certain amount of data at various price points. In January, AT&T raised those plans’ prices by $5 a month and increased the capacity allowances.
AT&T’s tiered data plans cost $30 a month for 3 gigabytes and $50 for 5 gigabytes, and $10 for every gigabyte over those limits. The longtime customers with the old unlimited plans typically pay $30 a month.
To reach 3 gigabytes, every day users would have to stream about an hour of video or 3.5 hours of music, or post photos to Facebook about 300 times, according to AT&T’s data calculator.
AT&T’s caps leave Sprint Nextel Corp. as the only carrier in the top three to offer an unlimited data plan with no caps or speed limits. Sprint’s unlimited data plan costs $79.99 a month.
“This is part of the reason Sprint has been able to turn its subscriber losses to gains with its offer of unlimited data,” Entner said.
AT&T rose 0.3 percent to $30.74 at 10:32 a.m. New York time. Sprint was little changed at $2.50.
Verizon Wireless, the No. 1 mobile carrier, slows the speeds of 5 percent of users who use the most data. Verizon reduces the speed when the phone is in what the company calls a congested area in order to preserve the quality of the network for other users, said Brenda Raney, a company spokeswoman.
AT&T says it’s still honoring the original unlimited plans and not capping usage, only reducing speeds to customers going over the monthly thresholds.
To contact the reporter on this story: Scott Moritz in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Peter Elstrom at email@example.com