Verizon Wireless (VZ) and AT&T, Inc. (T), the U.S.'s two largest cellular service providers, are also the nation's two most expensive providers in terms of data plans.  Unlike Sprint Nextel Corp. (S), their more expensive plans don't include an all-you-can-eat data buffet.  And unlike Deutsche Telekom AG's (ETR:DTE) T-Mobile USA, they will punish you for overages rather than simply throttling (slowing) your connection once you exceed your allowance.

However, Verizon and AT&T have decided they're going to unload yet another limitation on their plans -- throttling for "greedy" data users.  Under an official plan [PDF] from Verizon and a rumored plan from AT&T, the networks will likely slow your connection once you hit a certain limit in your usage.

The great unknowns are what that limit is in MB or GB, and how slow the connection will be post-throttling vs. pre-throttling.

According to sources quoted by 9 to 5 Mac, the limit may be at around 12,000 emails, 12,000 website views, 4 streaming movies, and 5 hours of streaming music.  The former items seem quite generous, but the latter indicate that customers may definitely bump into the data limit.

Verizon has insisted that its implementation will only affect the top 5 percent of data users, who use roughly 30 percent of the network's data bandwidth.

Throttling is a tried and true communications industry principal, pioneered by companies like Comcast Corp. (CMCSA).  While it's a policy that many customers despise, it can deliver bigger profits to the service provider, or relieve stress on overtaxed networks.  The latter benefit is particularly important in the mobile realm, as the major carriers are struggling to build enough towers to keep up with customers' data bandwidth demands.  Since 2007, AT&T has reported an 80 fold increase in data consumption by its customers.

Ultimately the benefits of the planned throttling may include a higher average data speed for standard users under the threshold, and lower overages for customers over the threshold.  

Disadvantages include that customers could get even less return on the already exorbitant plans, should the throttling threshold be set too low.  Further, the move essentially neglects the small percentage of customers who would be willing to pay reasonable overage rates or a larger monthly fee for an "unlimited" data allowance.

The new plans reportedly will roll out around September -- just in time for the launch of the new iPhone.  IPhone users traditionally have been some of the heaviest consumers of data, so this timing is likely not coincidental.


Updated 7/27/2011 @ 7:30 pm

AT&T has officially announced its throttling plans which will target the top 5% downloaders who have unlimited data plans. Here's a clip from the press release:

One new measure is a step that may reduce the data throughput speed experienced by a very small minority of smartphone customers who are on unlimited plans – those whose extraordinary level of data usage puts them in the top 5 percent of our heaviest data users in a billing period.  In fact, these customers on average use 12 times more data than the average of all other smartphone data customers.  This step will not apply to our 15 million smartphone customers on a tiered data plan or the vast majority of smartphone customers who still have unlimited data plans.

Starting October 1, smartphone customers with unlimited data plans may experience reduced speeds once their usage in a billing cycle reaches the level that puts them among the top 5 percent of heaviest data users.  These customers can still use unlimited data and their speeds will be restored with the start of the next billing cycle.  Before you are affected, we will provide multiple notices, including a grace period.

This change will never impact the vast majority of our customers, and is designed to create a better service experience for all. 

The amount of data usage of our top 5 percent of heaviest users varies from month to month, based on the usage of others and the ever-increasing demand for mobile broadband services.  To rank among the top 5 percent, you have to use an extraordinary amount of data in a single billing period.