Throttling data speeds really irritates customers. But if throttling successfully shifts heavy users from unlimited plans to tiered pricing, then, from the operator perspective, the customer angst is probably worth it.
Back in November 2011, a report from mobile service optimization company Allot Communications showed that almost half of mobile operators that offer unlimited mobile data plans also throttle speeds after customers consume a certain amount of data. Though it's certainly not alone in this practice, AT&T has lately borne the brunt of user frustration because it recently began throttling the data speeds of customers on its grandfathered unlimited plans.
The operator contends that it only throttles speeds for users on unlimited plans who exceed the top 5 percent of usage in areas where network capacity or spectrum is insufficient. But anecdotal evidence from around the Web indicates that AT&T unlimited-plan customers who hit 2 MB of data usage in one month have a good chance of finding their speeds throttled until their next monthly billing cycle.
AT&T found out the hard way that throttling speeds creates all sorts of ill will. It will be interesting to see if the operator's churn numbers for this quarter reflect that. As FierceBroadbandWireless recently reported, a study commissioned by Nokia Siemens Networks showed that heavy users of advanced mobile services are more likely to switch networks than other mobile customers, particularly if they are unhappy with their mobile broadband service quality.
But maybe losing some zealous data consumers wouldn't upset AT&T at all. Perhaps AT&T wants its most data-hungry users to churn to a rival operator where they can suck up someone else's precious network resources. I doubt any mobile operator would ever admit that losing data hogs could be a positive outcome. Yet if an operator could attract five new data users on tiered-pricing plans in exchange for one heavy user on an unlimited plan who left after being throttled, I suspect that company might be pleased.
Cisco's latest global mobile data traffic forecast revealed that tiered plans are doing exactly what they're meant to, which is constrain the heaviest mobile data users, especially the top 1 percent. "While the number of tiered plans as well as the usage per tiered plan are increasing, the average usage of a connection on a tiered pricing plan is half that of unlimited plans," said Cisco.
Cisco further noted that, due to tiered pricing, the megabytes per month consumed by an average top 1 percent of mobile data users have been steadily decreasing compared to overall usage. "At the beginning of the two-year study, 52 percent of the traffic was generated by the top 1 percent. At the end of the 22-month time frame, the top 1 percent generated 24 percent of the overall traffic per month," said the firm.
John Donovan, senior executive vice president for AT&T technology and network operations, recently wrote on the company's Innovation Space blog that AT&T has seen a doubling of wireless data traffic every year since 2007 and noted that over the past five years AT&T's wireless data traffic has grown 20,000 percent, leading to a "wireless data tsunami."
He noted that in 2011, AT&T invested $20 billion in its wireline and wireline networks, plus completed more than 150,000 wireless network improvements. "We expect to invest about $20 billion again in 2012 with a focus on wireless, including more 4G LTE deployment, the roll-out of distributed antenna systems in key venues across the U.S. and adding even more AT&T Wi-Fi Hot Spots to the nation's largest Wi-Fi network," Donovan wrote.
But the sad fact is that even with all of that investment, the operator and others like it still can't keep up with the data tsunami that their promotion of smartphones and data services has helped create. Mobile customers are consuming ever more data. Cisco found that over a year's span, "average usage per device on a tiered plan grew from 144.3 MB per month to 388 MB per month, a rate of 169 percent, while usage per device of unlimited plans grew at a slower rate of 83 percent from a higher base of 391 MB per month to 715 MB per month."
Even technological advances such as Wi-Fi data offloading serve only to buy operators some time by eeking out extra capacity, which will be just as quickly gobbled up by YouTube videos, social networking and more. (Cisco notes that without offloading, the 2011-2016 global mobile data traffic CAGR would be 84 percent instead of 78 percent; I would argue that either figure still points to growing mobile network congestion.)
Mobile operators throttle speeds because their data networks are pushed to the breaking point, or at least the completely backed-up traffic-jam point. Despite the loud consumer complaints and even potential threats of class-action lawsuits on behalf of customers on older unlimited data plans, mobile operators will likely continue to throttle speeds and encourage their unlimited data customers to shift to tiered pricing plans. After all, desperate times call for desperate measures.--Tammy