AT&T U-Verse Cap Is Crazy (T, TWC, CMCSA)
They warned us that this would happen. They were right.
This week, AT&T (NYSE: T) announced its new plan for corporate growth – a 250GB cap on U-Verse subscribers. Officially, the cap is being employed to curb high data use among the top two percent of U-Verse subscribers. But if you think this has more to do with long-term profits than data reduction, you're not alone.
While 250GB might sound like a lot (AT&T's own defense is fairly convincing), it's important to remember that this is only the beginning.
As the first company to employ a cap in 2011, you might think that AT&T stands to lose the most. That is certainly possible – Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) could simply ignore the data cap and continue to offer a flat monthly fee for unlimited use of its respective ISPs. In that case, AT&T could be doomed.
Unfortunately, it's not that simple. For one thing, Comcast already employs a data cap of 250GB. Now that AT&T has opened the floodgates even further, it's only a matter of time before others follow suit.
At the current monthly cap of 250GB, U-Verse subscribers can watch an estimated 125 hours of high-def video. However, that assumes that U-Verse subscribers do not have any family or friends who use their account. If they do, and if each additional user watches video, plays games online, or downloads enormous files, the 250GB cap could be reached very quickly.
AT&T claims this isn't the case and that only a small percentage of its users will actually reach the cap. But even if that's true currently, should we really take the word of the company that has imposed these restrictions?
Computer, game and video technology is constantly evolving. The games we play today are far more graphic-intensive than the games we played five years ago. The same is true for video streams, which are finally beginning to deliver a respectable high-def experience.
As these and other Internet-dependent technologies evolve, our data usage will continue to increase. Fifteen years ago, we barely needed a few megabytes. Today, we need gigabytes. Tomorrow, we might need terabytes. In 10 years, who knows?
While some speculate that AT&T will increase its data cap as needed, the more likely outcome is that the company – along with every other Internet service provider – will simply use evolving tech as an excuse to raise its monthly fee.
Wallets Speak Louder Than Words
Now that the new net neutrality rules have all but given high-speed Internet providers the freedom to charge whatever they desire, it is unlikely that anything could stop this except for consumer demand.
If consumers were to immediately abandon ISPs that employ data caps for service providers that don't, we might see a change. But that is unlikely to happen. And since it is only a matter of time before every ISP employs a data cap, we are in serious trouble.
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