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AT&T Will Offer Unlimited Data -- But There's a Catch

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Now that the wireless industry has turned its back on unlimited data, AT&T has found a way to bring it back.

Reuters | Mario Anzuoni

The wireless company on Monday announced that wireless subscribers who have or add DirecTV or the company’s U-verse TV service to their lineup of offerings will be able to get unlimited data for their smartphone plans. The AT&T Unlimited Plan includes unlimited data, talk and text, and will cost customers $100 per month. Additional lines will go for $40 per month, though a fourth smartphone can be added free of charge.

AT&T’s announcement comes as the wireless industry tries to move customers away from unlimited data.

Unlimited data was once the standard in the wireless industry, allowing smartphone users to consume as much of the Internet as they wanted without fear of being charged an additional fee for overusage. As smartphones boomed and tablets grew in popularity, however, wireless carrier networks became overburdened by customers consuming massive amounts of data.

To address that, and as they claim, to deliver a better wireless “experience” to customers, the companies instituted tiered-based plans. Those plans force customers to pay a monthly fee for a certain amount of data. If customers go over their monthly allotment, they’re charged an additional fee to use extra data.

Meanwhile, carriers have largely abandoned unlimited data and have tried to oust those who are grandfathered in to such plans. Indeed, it was AT&T in November that announced it would increase its monthly fee on grandfathered unlimited data plan holders from $30 per month to $35. Its competitors, Verizon, T-Mobile and Sprint, have similarly made it far less cost-effective to be an unlimited plan holder, ultimately leading to many switching to cheaper tiered data plans.

Still, the move to limit data usage has come under fire from critics who argue customers should be able to consume as much data as they’d like. Like the recent disintegration of two-year contracts, they argue that eliminating unlimited data plans is self-serving and not nearly as beneficial to consumers as the companies argue. Carriers, however, say that heavy data users are just a small fraction of their customer base and the tiered plans do not negatively impact their customers.

Regardless, unlimited data plans have been on life support for years with no signs of staging a comeback.

AT&T’s decision Monday, therefore, is somewhat surprising, but perhaps illustrates why the company had interest in DirecTV in the first place. AT&T acquired DirecTV last year for $49 billion. The move was seen as a way for the wireless carrier to expand its offerings and activities to attract customers in the exceedingly competitive wireless space. Through a mix of cross-selling, some analysts said, both AT&T and DirecTV could benefit.

The unlimited plan offering is just one of those attempts. With this latest move, AT&T is effectively making the idea of switching to DirecTV more palatable for customers, and for current DirecTV subscribers to move their wireless service to AT&T. Indeed, AT&T said Monday that existing DirecTV or U-verse customers who are not yet AT&T subscribers can receive $500 in credits if they switch to the new unlimited plan and buy a smartphone from the company.

AT&T’s new offer is available now. In addition to smartphones, customers who want to put a tablet on the unlimited plan can do so for $40 per month. A smartwatch will cost $10 per month.

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Don Reisinger has been a contributing writer for Fortune since 2015.