New iPhone Carriers Aim To Control, Or Profit From, Mobile Data Consumption

Since the iPhone first arrived on the scene, it has been used to access mobile data like no other device before it. Owners of iPhones browse the web, download apps, upload photos to social networks, and generally download more and more data on the fly than others. The device's popularity--and users' associated habits--have stressed phone networks to the point that over the previous year or so, iPhone carriers (particularly in the U.S.) have slapped data limits on the plans they offer, even what they call "unlimited" plans, in an attempt to preserve their network's stability.

With the arrival of the iPhone 4S, which is expected to sell in the tens of millions by Christmas alone, cell phone networks are going to be even more pressed. These businesses are reacting.

AT&T is perhaps the most high-profile network to defend itself against what they deem "bandwidth hogs" using iPhones. Earlier this year, the company announced that bandwidth "throttling" would be imposed on unlimited data plan customers, starting October 1st. True to that promise, AT&T has started to draw down the speed on what it says is just "5%" of its userbase--people whose massive data burden is disproportionately large, compared to everyone else's. They're saying these bandwidth hogs access twelve times as much data as the average smartphone user in the other 95% of their userbase.

Lest Apple fans call bias, AT&T's also sensitive to other smartphone users. Android is such a massive player in the market, AT&T just released a Smart Wi-Fi app that allows "Android customers to locate and seamlessly connect to Wi-Fi hotspots" and even "helps customers manage their wireless data usage by auto-connecting to Wi-Fi instead of using a wireless connection." That sounds sweet, and many an Android user will benefit. But if you think about it what AT&T's saying is "whenever possible, don't use our 3G data network. In fact, let's help you sponge off other people's Wi-Fi connection. Because it's likely to be more reliable and faster. Plus it'll save you money. Honest." 

We understand AT&T's nervousness, of course--for years it was the target of customer dissatisfaction in dense urban areas like New York or San Francisco, where the iPhone burden on its network resulted in performance slips, and the famous dropped call problem. Aware that other U.S. networks will also have the iPhone 4S, and the iPhone 4 and knowing it retains exclusive access to the 3GS (still on sale free, on-contract, as an incentive to woo customers to the network and to the iTunes fold) AT&T's trying to prevent damage to their own brand, but they're doing so in a smarmy way, by telling everyone there are better ways to get data and that "data hogs" are spoiling the performance for everyone else and must be punished.

Shouldn't AT&T boost its network infrastructure to cope? The network is not alone. Verizon, still the largest cell phone network in the U.S., also began to throttle user's bandwith this year. Unlike AT&T's system, which swings into effect when your bandwidth consumption pushes you into the top 5% and then ends at the end of the billing period, Verizon's throttling approach will affect the billing period after the "infringing" one.

Verizon's press release tries to make the company sound as if it is acting in the public good: "Customers within the top 5% of Verizon Wireless data users, may have their data speeds periodically reduced [...] This is to make sure all users enjoy high quality network performance." It's a classic leveraging of Star Trek's Spock's famous quote "The needs of the many outweigh the needs of the few." But--with both Verizon and AT&T--this means consumers pay for 3G data at speed, but if they dare to wholeheartedly embrace the service, they won't get 3G speeds. If you're on Verizon, then one data-hungry month will actually significantly impact your enjoyment of mobile data the next month, too--it's almost like being grounded for eating too many of your vegetables.

Sprint, a brand-new iPhone carrier, is making hay while the sun shines and has revealed that when its customers get their hands on a Sprint-flavored iPhone this month, they'll be able to enjoy an unlimited data option...with no hints of data throttling to come. The market is expecting this situation to rapidly change, however. It's entirely plausible that Sprint may perform a climb-down in pretty short order (much as Verizon did when, with much fanfare it said it would support the CMDA iPhone 4 with unlimited plans...only to pull them months later). 

The thing is, data control isn't unusual for iPhone users around the world-- it's just more clearly communicated. In Portugal, carriers like Optimus are open about it: Their iPhone 4 tariffs come with a strict 2GB cap, with charges for overage. There's no so-called "unlimited" option. Meanwhile local carrier TMN does offer a so-called unlimited pricing plan for both calls and data for €100 a month, but the terms and conditions show that there's a 5GB cap on it, under a "responsible utilization" rule. When T-Mobile got the original iPhone in the U.K. right away, the company said it would throttle network speeds after a data cap had been surpassed. 

You can argue it's a sensible move, and that indeed the needs of the many do outweigh the needs of the few. You can equally as easily argue that cell phone networks are simply using this excuse to nickel-and-dime their customers the same way they do over SMS fees in the U.S.

But there's one thing you can't argue: Data throttling and data caps for smartphone use are likely to move beyond the merely tiresome, occasionally irritating situation that impacts a handful of users. They are poised to become serious blockages in the way of more futuristic mobile communications systems uses. This all boils down to one emergent and exciting tech: The Cloud. In Apple's case the iCloud.

Cloud services are clever, promising, come with so many self-evident benefits like extra security for your files. They have already changed how we think about online music--thanks to the advent of streaming services like Spotify, which just got a turbo-boost thanks to its Facebook integration, and Rdio, which just rolled out an ad-free service. If all of us are streaming music down from the cloud to our iPhones, grabbing mobile video from legacy services like YouTube, and uploading our eagerly snapped videos and photos from the new 8-megapixel/1080P HD camera on the iPhone 4S...how soon will more and more people bump themselves into that top 5%, rather than the habitual group of "data hogs" who are there now? And how soon before AT&T, Verizon and pals are expanding that "top 5%" to a "top 10%" limit?

It's a 3G mess, and it is likely to get sticky. If the famously money-raking habits of cell phone companies are anything to go by, it'll effect 4G in short order, too.

Chat about this news with Kit Eaton on Twitter and Fast Company too.

[Image: Flickr user Frank Kehren]

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3 Comments

  • jurgen arts

    Currently we  experience likewise measures in the netherlands. As a heavy spotify & itunes user, I'm using about 40 mb in the hourly drive to and from my work. i agree that top 10% of heavy users is expected to grow rappidly due to all new great apps. The current reaction from providers to cut data usage and increase cost charged to customers however isn't a very good one. although i understand that they face a problem in their cashflow per customer because of whatsapp and skype decreasing sms and phone call cost, simply charging more however will not solve this. Techonologic development is ecpected to increase rapidly, this means that the investment to deliver internet acces will go down. If telecom opperators don't change their game and start to be innovative they will face new competition soon.In my believe this competition can be comming from sharing the millions of local routers however not by google's initiative but rather from cable operators such as ziggo & ups who simply start to deliver digital setupboxes with a public wifi in the back. With this they would no longer only provide acces to tv channels but could also start offering telecom services for outside our home.Let's hope this is happening fast so i can keep using my spotify and podcasts in my car!

  • Rahul

    Thanks for the wonderful article and the information you gathered regarding various places and tariffs. It certainly tells me that the situation is same all across the globe. Also the last paragraph of your article describes about the healthy future of clouding services which is the best idea to centralize the data and thus making it secure.

    Regards,
    Http://www.southerndentalofbro...

  • Tim Liao

    So I have a question about this. I was not grandfathered into unlimited data, so I have to choose a package. Let's say I choose one of Verizon or AT&T's high end packages; for instance Verizon's $70 data plan that comes with 7GBs of data plus mobile hotspot. Now I understand their intentions to throttle unlimited customers that go near 7GBs a month, but if I am paying for 7GBs, I hope they don't plan on throttling me and my 7GBs that I have paid for. What do you think? Would they?