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As Networks Speed Up, Data Hits a Wall

Jenna Wortham|The New York Times
Monday, 15 Aug 2011 | 10:41 AM ET

The newest smartphones are intended to run on speedy 4G networks that allow people to effortlessly stream music, watch Netflix movies and tune in live to a Mets game, wherever they are.

Cellphone plans that let people gobble up data as if they were at an all-you-can eat buffet are disappearing, just as a new crop of data-gobbling Internet services from Netflix, Spotify, Amazon, Apple and the like are hitting the market or catching on with wide audiences.

These services use far more data than simply checking e-mail or browsing the Web, so their heaviest users may find themselves running over their plan’s monthly allotment and paying extra.

George Frey | Bloomberg | Getty Images

The wireless carriers say their tighter limits will affect only a small percentage of customers. And they say they are simply trying to get ahead of an exploding appetite for data and avoid problems with overburdened networks.

Mark Siegel, a spokesman for AT&T, said that if current trends continued, the company’s network would carry more data in the first two months of 2015 than in all of 2010. He described the pricing issue as a “balancing act,” adding: “The tiered data plans will meet the needs of the overwhelming majority of consumers. A lot of people think they’re heavy users, but they’re not.”

But analysts say that inevitably more people will find themselves in the “heavy user” category, particularly as more of them trade in their lower-end phones for smartphones and move to 4G networks.

For most people who use their phones to check e-mail, surf the Web and watch an occasional video, the move toward tiered pricing will not immediately raise their phone bills. Verizon’s monthly plan offering two gigabytes of data for $30, announced last month, costs the same as its old unlimited plan, for example. But even now it doesn’t take much for a media-hungry smartphone user to chew through two gigabytes; watching Netflix video for more than roughly 20 minutes a day will do the trick. And an extra gigabyte will cost Verizon customers an additional $10.

“Over time, as you give people faster devices with faster speeds, it’s going to be a lot easier to hit that two-gig mark,” said Philip Cusick, an analyst with JPMorgan Chase who follows the telecommunications industry.

In addition to worrying about overtaxing their networks, wireless carriers are looking for new ways to make money from mobile data and applications, rather than voice minutes.

Over the last three years, the amount of money consumers spent a month on mobile calling declined to $30 from $40, according to Recon Analytics. During the same period, the average amount spent on data nearly doubled, jumping to $13 from $7.

“We’ve fallen in love with data and the utility that we get from it,” said Roger Entner, an analyst at Recon. “The usage pattern has changed dramatically.”

AT&T and Verizon have both phased out their unlimited data plans in favor of tiered plans. Verizon offers 75-megabyte plans for basic phones, as well as two-, five- and 10-gigabyte plans for smartphones, topping out at $80 a month. Those in the more expensive plans who go over their limit are charged $10 for another gigabyte, as are AT&T customers who exceed the limit on that company’s two-gigabyte plan, which costs $25.

T-Mobile, which AT&T is hoping to acquire, offers tiers from 200 megabytes up to 10 gigabytes. Those on the 200-megabyte plan are charged 10 cents for an extra megabyte. And if those with the upper-tier plans exceed their limits, the company slows their data connections until the next billing period.

Sprint is the last carrier to hold onto its unlimited data plan, but analysts and industry experts say it is unlikely to last.

All of the carriers let customers track their data use through their Web sites and on their phones, and they send alerts when customers are in danger of going over.

Of course, those who want to avoid paying more can simply wait until they are connected to a Wi-Fi network to, say, download high-definition videos, since this will not count against the monthly limit. But that doesn’t help someone who wants to stream movies or music on a long evening commute.

Terry Hartup, 34, who works as a technology consultant in Clearwater, Fla., said he was frustrated that his connection might be slowed if T-Mobile decided he was using too much data.

“These new services are coming out that let us do more, but the pipe is getting smaller and smaller,” he said. “And costing us more.”

Do you know how much data you use?

Mr. Hartup, who streams audio throughout most of the day on Spotify and Pandora over T-Mobile’s network and Wi-Fi, says he rarely goes over two gigabytes a month. But he worries that new apps and services will make it harder to stay under that cap.

The data caps are very much on the minds of developers of mobile apps and services, who need to think about how they will affect the way people use their phones.

Malthe Sigurdsson, vice president for product design at the Internet music service Rdio, said the company was adapting to the data limits. Rdio includes several features intended to help prevent users from unwittingly churning through their data allowance.

“You can set Rdio to play at a lower quality when using a cellular network, and then decide to use a higher quality when on Wi-Fi,” he said. “We try to help people out so they don’t use up their cap in a few hours of using our service.”

Most people, he said, have adjusted their behavior to stream only when they are on a Wi-Fi network, or make use of a feature that lets them store songs on their phones to play when they are away from Wi-Fi.

Kevin Systrom, one of the founders of Instagram, a popular photo-sharing application for iPhones, said he was concerned that data caps would constrain developers from creating innovative and possibly data-intensive features and services.

“Any low data limits imposed would curb usage of all services,” he said. He called the introduction of data caps “a step backwards for mobile technology.”

Yet AT&T and other carriers, along with some developers, argue that the caps make data use more affordable and improve the performance of the carriers’ networks for all.

The main issue, developers say, is that most people have no idea how much data they are using when watching a YouTube video or sending an e-mail.

“They don’t have an intuitive feel for how much data they’re using,” said Rick Osterloh, vice president for development at Skype. “You can so easily blow through a data plan if you’re watching videos, browsing the Web and making Skype calls.”

Mr. Osterloh said he sympathized with the challenge the carriers face in managing demands. But he is concerned that mobile Skype users who accidentally go over their limits may get upset with the company rather than their carrier.

The wireless carriers, who will increasingly compete with one another for customers, could raise their data caps to best rivals and accommodate customers’ increasing appetites.

During a recent call with investors, Lowell McAdams, Verizon’s newly appointed chief executive, said it was not inconceivable that carriers might once again dangle unlimited data plans to lure subscribers.

“There may be some that hold out longer with unlimited, and I wouldn’t be surprised if unlimited comes back in and out from a promotional perspective,” he said. But he added that the trend toward limits was “inevitable.”

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