U.S. wireless carriers are moving to cut off the feast of music downloads, movie watching and non-stop Internet browsing at bargain prices. They've fired the opening volley in a war in which their chief target is cheap, unlimited data.
Why? The answer can be summed up in a single word -- bandwidth -- and what it costs mobile carriers to provide enough of it to feed consumers' voracious appetite for data.
The first shot in the attack on cheap data plans was fired last week by T-Mobile.
The company said the legacy plans -- many of them featuring unlimited, uncapped data downloading -- will be terminated and subscribers will be moved to comparable but more expensive current plans, the carrier said, because it was "reducing the number of older plans in our systems."
In simpler language, T-Mobile -- and all wireless carriers -- are losing money as smartphone owners care less and less about calling and texting, turning into gluttons for music and movie downloads.
Global mobile data traffic in 2012 was nearly 12 times greater than traffic for the entire Internet in 2000, network equipment manufacturer Cisco reported.
And in 2012, mobile video traffic -- all those blockbusters being watched on smartphone screens -- exceeded 50 percent of mobile traffic for the first time.
Carriers struggling to provide sufficient bandwidth for all that mobile traffic are finding their network costs going up -- which means their profits are going down.
The bean-counters at the wireless carriers can no doubt spout a figure of the cost to the carrier for every gigabyte of data delivered to customers, which is why customers holding on to older, cheap unlimited plants are seen as a thorn in the companies' sides -- or at least at leak in their profits.
Carriers have taken a number of steps to make those unlimited plans history.
Some customers upgrading to a new, more powerful smartphone -- as most smartphone owners like to do at about 2-year intervals -- are finding their carriers insisting they sign up for a new data plan, removing the option of sticking with an existing plan for the new phone.
Verizon will allow customers to hold onto their older unlimited data plants when they upgrade, but only if they pay the full retail price for a new phone -- at $500 or $600 -- rather than the more normal $99 to $199 subsidized contract price.
Also, the unlimited data plans at many carriers carry a "throttle" cap: When a user exceeds a set gigabyte limit -- usually about 2GB to 3GB -- the download speed for data is slowed to the point where it becomes almost unusable for data-heavy tasks like streaming video or Web browsing.
The writing is on the wall for unlimited, uncapped and unthrottled data plans, even for customers who try to stay under the radar by quietly sticking with their legacy "bargain" plans and forgoing the attraction of upgrading to a newer phone.
T-Mobile has seen to that. Other carriers are almost certain to follow.
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