AT&T (T) has apparently lost patience with customers who forgo TV packages to stream content with internet-only service. The company’s newest pricing model greatly increases costs for these “cord-cutters.”

On April 29, 2016, I received an email from AT&T announcing a dramatic change to the company’s internet service. No longer will AT&T tolerate unlimited use of internet bandwidth at current prices. AT&T has decided to implement a pricing model for its internet service that is very similar to the model it uses for data plans on smartphones.

Starting May 23, 2016, AT&T will establish a usage limit on internet service. If customers exceed that limit, AT&T will charge them $10 for each 50GB in excess of the limit. At least AT&T will cap the overage charge at $100 per month. I imagine heavy users of streaming services like Netflix, Hulu, and YouTube can easily hit the allowance every month. Cord-cutters, like myself, are exactly the customers most likely to fall into this category of heavy user. For this reason, I feel AT&T’s policy directly targets cord-cutters.

At the time of writing, AT&T does not provide specifics on the allowance or offer a way to review past internet usage. Customers may not be able to gauge their risk for exceeding AT&T’s internet allowance until after May 23rd.

There are two things customers can do to reduce the cost of heavy internet use. My preferred option is to pay an additional $30/month to retain the “privilege” of unlimited internet use. AT&T also offers a bundling option. If customers subscribe to DIRECTV® or U-verse TV, AT&T will provide unlimited internet service. The bundle option is more expensive because of the leasing charge for a cable box and the minimum $100/$110 (DirectTV/U-Verse) customers must spend on the bundle with internet service minimally good enough for streaming. Separately, the lowest option for TV (DirectTV or U-Verse) is $50 and for minimal internet is $40. AT&T no longer offers a bargain basement option that only provides local TV channels.

Here is the message AT&T sent to customers:

“Beginning on May 23, 2016, we will be increasing the U-verse® Internet data allowance for many customers. After a grace period, and as our agreement provides, there’s a $10 charge for each 50GB of data you use over the allowance amount. The maximum overage charge will be $100/mo. If you choose to bundle your U-verse Internet with DIRECTV® or U-verse TV you will be provided an unlimited Internet data allowance with a $30 value at no additional charge, as a benefit of bundling. Or if you choose, an unlimited allowance is available for purchase as an optional bolt-on to your Internet service for an additional $30/mo.”

Notice how AT&T cleverly attempts to use marketing to ease the pain of this message. AT&T starts by giving the “good news” that data allowances have increased. Of course, customers had no idea AT&T had a data allowance in the first place. Next, AT&T positions the $30 price increase for unlimited internet as an added value of choosing a bundled option. Bottom-line, cord-cutting just got a lot more expensive!

I will very likely abandon ship and cut over to Comcast (CMCSA), aka Xfinity, for internet service. However, I strongly suspect Comcast will one day adopt AT&T’s anti-cord-cutting pricing model. For now, cord-cutters can get Comcast’s internet service minimally good enough for streaming for $50. For another $10, customers can get 10 local TV channels. For a limited time, customers who order this package online will also get HBO streaming through the Xfinity app. Given the issues I have had with my HD antenna’s ability to receive local TV channels, I just MIGHT consider spending the extra $10 bucks….but I doubt I will go there anytime soon.

The stock for AT&T (T) recently broke out to a new post-recession high but has yet to achieve the glory of past years.

Cord-cutters are clearly not disturbing the business of Comcast (CMCSA). Its stock has soared for years and is at all-time highs.

Source: FreeStockCharts.com