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November 23, 2017
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AT&T counters cable threat with unlimited broadband, but for subscribers it comes at a cost
Posted On: Apr 04, 2016
AT&T (NYSE: T) will soon begin offering unlimited broadband data without any caps, an effort it is taking to keep customers from fleeing to cable after being penalized for using too much bandwidth.

But customers have to shell out an additional $30 a month to get the unlimited data plan.  A potential attraction is that a user can to switch unlimited home Internet data or add TV service at any time -- even in the middle of their billing cycle.

Despite the added fee, the unlimited plan will resonate with a distinct group of users, particularly gamers and online video addicts. Gamers require a broadband connection to handle the latency-sensitive nature of real-time sessions. 

"The unlimited data plan is likely for the uber-data users that far exceed their data allowance each month," said Brett Sappington, director of research for Parks Associates, in a research note.

AT&T is also raising the caps for the rest of its existing U-verse broadband tiers, while providing multiple warnings for those that go over their limit.

Users who exceed these caps in any given month will automatically have to pay for 50 GB of additional data for $10 each. Users who want to avoid the cap will now need to pay $30 a month more moving forward, but if you're a DirecTV or AT&T U-Verse TV customer, AT&T is waiving the $30 fee.

While these plans seem compelling, the fact is most broadband subscribers don't actually know what speed they actually get.

Parks Associates found that 43 percent of subscribers do not know their current broadband speed, while over one-third of consumers who switched service providers in the past 12 months did so in order to obtain a faster service at a comparable price.

Whether an existing customer opts for the unlimited plan or sees the utilization allowance rise, AT&T's thesis is clear: users' consumption of data continues to rise as they connect more devices, stream more videos, and enjoy other data-driven activities.

Another issue is the nature of competition. AT&T has been aggressively expanding its 1 Gbps FTTH footprint into more cities, but the telco is facing aggressive threats from cable operators like Comcast (NASDAQ: CMCSA) and Cox. These two service providers are also fast on the trail of rolling out 1 Gbps over a mix of fiber and their existing hybrid fiber coax (HFC) facilities as DOCSIS 3.1 equipment becomes more widely available.  

AT&T is not alone in implementing some form of metered billing on their broadband users.

Rival broadband provider Comcast has expanded its usage cap trials into Miami, nearby Fort Lauderdale, and the Florida Keys. The cable MSO's customers are required to pay a $10 fee for every 50 gigabytes above their limit, as do AT&T's customers.

Similar to AT&T, Comcast customers participating in its metered trial markets also got a new option: to pay Comcast $30 extra to avoid the company's 300 GB cap, and instead get unlimited broadband. 

Meanwhile, CenturyLink (NYSE: CTL) is looking at conducting a trial of metered broadband usage sometime this year on its copper and FTTH-based products. Apart from saying it would begin the trial later this year, details about their trial are lacking.

Previously, some users said they were confused about CenturyLink's bandwidth cap and usage policies. A group of users were given a warning when they went over their cap, while other "heavy users" got no warning or were told the service provider does not implement usage caps.

Smaller providers aren't immune to the metered billing idea either. Suddenlink, which is now part of Altice, has implemented a 550 GB monthly cap on its 1 Gbps/10 Mbps offering.

Cincinnati Bell is also interested in metered billing, but have not announced any specific plans other than to say that it is an industry-wide trend that could emerge over time.

Meanwhile, Gigamonster which offers unlimited 1 Gbps broadband services in multi-dwelling units, has no intention of implementing usage caps, contract terms or hidden fees. Interestingly, the service provider has implemented Direct Routing technology, which allows its customers to stream video from popular sites like Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Netflix, and YouTube.

Bill Dodd, CEO of Gigamonster told FierceTelecom that the company's goal is to "get rid of everything that everyone hates about doing business with cable and ISPs."

It's unlikely traditional providers like AT&T are going to follow Dodd's call. The more likely scenario is that ILECs and cable MSOs will offer unlimited plans as a premium to those who are willing to pay and continue to implement usage allowances, with the argument that controlling consumption is part of reining in network build and operation costs.--Sean


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