We use our smartphones a lot: when we are lost, when proving to a friend our random fact is indeed correct, to text, and, oh yeah, actually place calls. And why shouldn’t we? Might as well take advantage of unlimited data plans. But like our mother always taught us, if unlimited sounds too good to be true, it probably is.
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While wireless providers offer unlimited data plans for a hefty price each month, they are also slowing down users’ phone speed. The practice, known as throttling, slows down the operating speed on customers' phones if they are in the top percentage of data usage.
AT&T (NYSE:T), which charges around $30 a month for unlimited data plans, has taken to reducing the data "throughput speed" for its top 5% of data users, according to a release from the company. Verizon (NYSE:V) also does the same thing, throttling the top 5% of users on its unlimited 3G data plans, which run also run for around $30 a month, according to its website.
AT&T raised prices on its tiered plans, which charge different amounts based on the level of data usage, in January by $5 each. Now, 300MB of data costs $20 a month, 3GB $30 a month and 5GB for $50 a month, including a mobile hotspot and tethering, which allows you to use your smartphone as a hotspot for other wireless devices.
AT&T spokesperson Mark Siegel says the carrier is still allowing customers with unlimited plans to remain on those plans as long as they chose. While Siegel declined to give exact numbers for customers on its unlimited plans and tiered plans for proprietary reasons, he says the tiered plan is in the "tens of millions" of customers and is "very popular."
"The move is about giving people choices," he says of throttling. "We do what others in the industry are doing to make sure all customers can move mobile internet when the want to. If you fall into the top 5% of data users, we could slow your speeds. This is also as spectrum and usage in your local area warrant it."
AT&T customers that are dissatisfied with service and want to end their contract early will still be subject to a termination fee, according to Siegel. The fee is prorated, and depends on where the customer is in his or her contract, Siegel says.
"The longer you are with us, the lower the fee.”
He adds that tiered plans are not subject to throttling. "We place no restrictions on how much data they use. When you reach the tier you want to go over, you can pay for additional use."
Personal finance expert Scott Gamm, founder of HelpSaveMyDollars.com, says the throttling issue creates an interesting dynamic between consumers and carriers.
Gamm says that carriers are trying to curb heavy users with their new plans.
"Anytime a company offers an unlimited plan, they are missing out on monetizing those who use an exorbitant amount of data. They want to charge you $50 for data instead of $20. They're trying to wean people off of unlimited plans and move them to pay-per-use plans."