Despite years of building ad campaigns around the idea of "Truly Unlimited" data, Sprint (NYSE:S) has started throttling download speed for the top 5% of its data users in heavily congested areas, FierceWireless reported.
The company can legally do this. Complaints about the throttling on its own message boards were answered by a SprintCare customer service representative with some double speak and a referral to the contract technicality the company is using to justify its actions.
"Our unlimited plans are in fact unlimited however; there are some restrictions as outlined via our terms and conditions," the service rep who identified herself as Dania wrote. That may be technically true, but it seems like a disingenuous path for a company that ran multiple TV ads (including the one below) promising "No metering, no throttling, and no overages."
So to Sprint a promise pushed as the key element of a long-term marketing campaign -- which was also a major selling point over its main competitors that likely brought in or helped retain millions of customers -- is something the company can renege on based on a technicality. That is not likely to sit well with anyone who signed up with Sprint based on the promise of unlimited data, whether they are in the top 5% or not.
What Sprint is doing
Sprint has two types of customers: postpaid (people with a contract who are billed either under the Sprint name or its Virgin Mobile USA and Boost Mobile sub-brands) and pre-paid (customers who pay in advance), and they have been receiving notices telling them about what Sprint is calling "data prioritization management." The program begins in June and Sprint says it is being employed to prevent network congestion.
According to FierceWireless, Virgin Mobile customers received a text message that read: "Beginning 6/1/14, to provide more customers with a high quality data experience during heavy usage times, Virgin Mobile USA may manage prioritization of access to network resources in congested areas for customers within the top 5% of data users."
It's easy to see why Sprint is doing this -- the heaviest users are hogging bandwidth, leading to bad experiences for casual users (who can also be described as people who pay for unlimited data but don't really take advantage of it). Sprint won't be cutting those heavy users off, it will just be making their access less of a priority and slowing down the speed of data delivery to them.
The approach "will enable us to provide more customers with a high quality data experience during heavy usage times," Sprint said in a statement sent to FierceWirelessTech. "Once the customer is no longer connected to a congested cell site, or the site is no longer congested, speeds will return to normal."
In this approach Sprint is attempting to paint itself as Robin Hood, stealing from the rich bandwidth hogs and giving it to the poor limited-use customers. In reality the company is shutting off access to the all-you-can-eat buffet to the handful of customers who eat only shrimp and filet mignon instead of filling up on bread and salad.
The reality is that those in the top 5% will still get unlimited data -- technically -- but at certain times that data will be delivered so slowly that it won't be useful.
Why Sprint is doing it
The secret here is that Sprint doesn't care if the heavy bandwidth customers leave the service. Much like the guy stuffing his face with shrimp and steak at the buffet, these high-volume users cost Sprint more than they are worth. If by throttling their access Sprint can change their behavior, Sprint will happily keep them on board. If the change causes the customers to leave, Sprint might actually win for losing.
The beauty of this move for Sprint is that most users are not in the top 5% so they won't notice any change. Even those in the top 5% might not notice or they might chalk up their throttled service to the problems that impact Internet service and speeds that seem to randomly occur no matter who our providers are.
The risk for Sprint is that word gets out about the throttling with its regular customers -- people who signed up based on the idea of unlimited access, even if they don't actually take advantage of it. If that happens the company could see a revolt of customers leaving because they feel the company did not live up to its core promise.
Sprint played this wrong
Sprint could have easily announced the throttling plan publicly and offered a grandfather period for existing users -- like Netflix (NASDAQ: NFLX) did with its recent price increase. The company could have been honest and acknowledged that the heavy use of a few affected its ability to serve the many, so it was -- after a time -- changing its definition of unlimited data.
Instead it used the tactic that has served the mobile phone industry so well for so long and simply implemented first without regards for how its customers would feel. in the past that may have worked, but with T-Mobile (NASDAQ:TMUS) building its ads around being the "un-carrier" and doing things differently, Sprint may have opened a door for its feisty competitor.
Offering unlimited data had been a proud differentiator for Sprint. If the company loses that -- or creates the perception it has -- than T-Mobile may well steal a sizable portion of its user base.
Daniel Kline has no position in any stocks mentioned. He is a Sprint customer. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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