While scrappy underdogs like Sprint and T-Mobile still offer -- and advertise -- unlimited data plans, industry market share leaders Verizon and AT&T (NYSE:T) do not. After years of charging for cell phone minutes and texts, these services are now unlimited in most packages, as Verizon and AT&T found data to be the most effective way to monetize its mobile network.
But that doesn't mean these carriers don't have subscribers with unlimited data plans -- there are a few subscribers who are still grandfathered under unlimited-data contracts. More recently, however, this has led to a contentious relationship, as AT&T and Verizon have introduced "network management practices."
Succinctly put, once an unlimited-data subscriber used a specified amount of data, the carriers would slow (aka: throttle) their data speeds, supposedly to make room for new subs that paid for data by the gigabyte. The practice was somewhat controversial, with even the FTC weighing in with a formal complaint late last year. For AT&T, it seems the company is modifying its stance to the benefit of unlimited subscribers.
A large increase for unlimited-data subscribers
For AT&T, its network optimization policy can best be described as a constant work in progress, as it has been through two recent changes. The first change, instituted in May, kept the data limit at 5GB per cycle, but changed how it throttles Unlimited Data Plans exceeding that amount. Before that period, throttling was indiscriminate; if you exceeded 5GB, you could expect throttled service. After the change, however, AT&T would only throttle users if AT&T felt the local network was congested.
In an about face, AT&T's former cap of 5GB has now been lifted. On the company's support site, AT&T announced that its limit was increased to 22GB before triggering, and the reduction in speed would occur only for the remainder of the billing cycle the customer exceeded the data cap. Essentially, AT&T is offering a data reset every month, while leaving the current "congested network" stipulation in effect.
All in all, this is a more friendly policy than AT&T's last definition, and a much better policy than the one in effect at the beginning of this year. It incorporates network concerns as the basis for throttling instead of an arbitrary cap.
Was AT&T's hand forced?
One could ask if this was done willingly by the company, or if this was a preemptive move to placate the various federal agencies. The FTC's warning led to a lawsuit alleging that the company failed to properly disclose its policy of throttling unlimited-data subscribers late last year, and earlier this summer, the FCC fined AT&T $100 million for similar reasons. AT&T continues to appeal and fight these rulings, so a cynical interpretation is that the company is trying to curry favor with the court system or the FCC by moving to a more-generous network optimization policy for subscribers.
In the end, however, regardless of whether the federal government forced its hand or not, AT&T's move toward a more-generous unlimited policy may pay both tangible benefits -- in the form of negotiating smaller penalties and fines throughout the legal process, and less tangible ones in the form of customer goodwill and positive press. It's not quite unlimited, but AT&T's new network optimization policy is a huge step forward from what it had in place at the beginning of this year, and the company should be commended for modifying its policy.
Jamal Carnette owns shares of AT&T and Sprint. In addition, the author is among the subscribers that have unlimited data with AT&T and has received a text warning about potential throttling when the cap was 5GB. The Motley Fool recommends Verizon Communications. 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.