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Big Wireless Users Get Throttled

Generally speaking, the words "choking," "throttling" and "squeezing" are not typically associated with Telecommunications. However, one annoyed guy in California took on one of the largest providers and prevailed, in a small, but meaningful way. At the same time, customers have also been put on notice that the day of the unlimited data plan is over, despite the status of an existing agreement for exactly that--unlimited data.

The source of the problem, which is not really limited to any one wireless provider (although AT&T has taken the lion's share of the bad publicity), is that there is a limited amount of available spectrum to support the increasing demands for wireless Internet. The rise in the number of smartphones and other sophisticated devices (and data hogs) like iPads has driven demand to unprecedented levels, while supply remains fixed. As an important side note, one of the primary motivators behind AT&T's attempt to acquire T-Mobile was to secure the spectrum that T-Mobile utilizes. The plug on the deal was pulled before the sought approval was denied, but AT&T knew--and knows--that with or without--T-Mobile, it has a problem. When demand is burgeoning and supply is limited, there is what's known as a big honking problem. As a point of reference, according to AT&T, demand for its wireless data network has grown 20,000% over the past five years. Yup...that's right...20,000%.

In an effort to try to manage the demand for its wireless capacity, AT&T, along with other carriers, decided to implement "throttling," also known as choking or squeezing. As a means of managing the limited resource of its capacity, AT&T originally decided to limit its largest wireless data consumers, with the hope that such limits would "encourage" those users to either use less or go elsewhere. Unfortunately for some irate consumers, this policy did not exactly reflect the services for which they had contracted.

Operating under the same theory that a church isn't built to handle the Easter Sunday crowd, telecommunications companies built--and continue to build-- networks not based upon maximum possible usage, but rather on highly sophisticated models of maximum circuit utilization and efficiency combined with the amount of spectrum available. The problem occurs when a provider--wireline or wireless--sells significantly more capacity than it has. It's textbook oversale and under-delivery, and no one likes to be on the receiving end of the under-delivery.

According to the New York Times, in the iPhone case, the plaintiff was streaming an episode of "The Office" to his phone when he received a message notifying him that he was in the top 5% of AT&T wireless users, and as such, for the balance of his billing cycle, the speed of data sent to his device would be reduced. So, for the next period of 30 days or less, he could expect less than optimal performance from a device which he thought had an unlimited promise from the provider for data access. He got mad, sued, and prevailed.

However, before the Class Action Bar can salivate, it's important to recognize that late last year, the U.S. Supreme Court upheld AT&T's contractual right to prevent class action litigation (see Blau v. AT&T Mobility, No. C 11-00541, 2012 WL 10546 (N.D. Cal.), which significantly limits consumers' rights to do anything other than arbitrate contractual disputes. With his hands effectively tied behind his back, the plaintiff had no choice other than to sue AT&T in small claims court, where he was awarded a whopping $850 in damages. Although AT&T has announced its intention to appeal, more interestingly, it has changed its policy as well. Either fearing ongoing litigation in every small claims court in America, or simply because the provider recognized that throttling as originally deployed wasn't optimal, AT&T, within days of its loss in small claims court modified its policy.

AT&T stopped offering unlimited data plans to new customers in 2010, although it continues to have a number of customers (according to statistics cited in the NY Times, 17 million of them) with unlimited data plans who signed up while the plans were still available. Earlier this month, AT&T modified limits it placed on its unlimited data plan customers to target its largest users using its 3G network (the threshold is customers downloading 3 gigabytes of data per month, which is equivalent to receiving more than 1,500 minutes of video or 150,000 emails in a month). Under terms posted by AT&T Mobility, the provider will slow the speeds of unlimited data users who cross specific data thresholds. Rather than throttling the top 5% of its customers in a specific location, it will now determine who gets throttled based upon not only the volume of data, but also the type of network those customers are using (3G v. LTE). Those customers that are affected will be notified of the throttling by a single text message, and the throttling will continue only until the start of the next billing cycle.

In fairness, AT&T isn't alone in its throttling activities, which affect only the largest consumers of data under these unlimited plans. Verizon euphemistically calls its throttling process "network optimization," but it too has admitted to throttling up to 5% of its data consumers on unlimited data plans as well, but only when its network in specific geographic areas have been overloaded.

The bottom line of this tale is that although no one reads the small print on the back of the wireless contract, it can matter.