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Some heavy video users may leave AT&T for Sprint
March 2, 2012 / 11:00 PM / 6 years ago

Some heavy video users may leave AT&T for Sprint

* No mass exodus to Sprint is foreseen -analysts

* Switches may be limited by contracts -analysts

* AT&T limit would allow for about 10 hours of video streaming

By Sinead Carew

NEW YORK, March 2 (Reuters) - Big fans of services like mobile video streaming may switch to Sprint Nextel Corp after AT&T Inc’s move to impose usage caps on its unlimited data customers, but analysts do not expect a mass exodus.

AT&T announced a new policy on Thursday limiting high-speed wireless data usage for its 17 million customers who still subscribe to unlimited data plans. The move angered some customers who think they should be entitled to unlimited usage if they signed up for an unlimited plan.

AT&T said it needs to limit the data use of its most avid customers, or face degraded service for all its customers as the popularity of data-hungry smartphones and tablet computers is straining the No. 2 U.S. carrier’s network.

After customers reach their monthly limit of data usage, they will still be able to surf the Web and receive emails, but their service will not work as well for the rest of the month.

Customers will notice the biggest difference if they try to stream video, AT&T said.

Under the new rules customers would come up against the limit and have their service slowed down after they have watched roughly 10 hours of high-definition video, according to AT&T’s network estimates.

Since the company’s smaller rival, Sprint, still offers unlimited data services for a flat monthly fee, some frustrated customers may opt to leave AT&T for Sprint due to the change.

“It may, on the margin, hurt them a little bit,” said Stifel Nicolaus analyst Christopher King, who expects Sprint’s marketing to focus on this difference as it seeks to attract new customers.

However, customer departures to Sprint may be limited by several factors, analysts said. For one thing, most AT&T customers have committed to two-year contracts so they would face a hefty penalty if they left the service before the end of their contract.

And many of those contract customers are signed on to family plans, so they may balk at moving the entire family to another service, analysts said.

“Sprint’s message of unlimited will resonate a little better now there’s all this negative publicity around AT&T,” said Bernstein analyst Craig Moffett. “But the fact customers haven’t left (AT&T) yet tells you these relationships are stickier than people think.”

Another issue in AT&T’s favor is that most of its customers do not consume huge amounts of data to make them subject to the new rules.

According to AT&T, more than 95 percent of its roughly 40 million smartphone users are not affected by the policy because they use less data than AT&T’s newly specified cap.

And if the affected customers reach their limit later in the month, they may not be too worried about having slower speeds for just a few days, Guggenheim Securities analyst Shing Yin said.

“I imagine it probably does present a little more risk (for AT&T) but the risk is probably small,” Yin said.

The analyst said that AT&T appeared to have little choice but to implement the changes because the alternative would be to risk service degradation for all its customers.

He also suggested that it might not be such a bad thing for AT&T if the heaviest data users left its network.

“For users of unlimited data plans, those that use the most data are least profitable, and at some threshold they become unprofitable. In that case the carrier would be more than happy to get rid of the unprofitable customers,” Yin said.

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