Sprint: Unlimited still means unlimited

Sprint CEO Dan Hesse

Updated. Sprint(s S) is walking back comments from CEO Dan Hesse on Thursday about Sprint ‘throttling’ data speeds of its heaviest data users even though they subscribe to unlimited plans. At a Citigroup (s C) conference on Thursday, Hesse clearly stated Sprint was reining in bandwidth for its greediest smartphone customers, who Hesse described as abusing the network. But Sprint executive Bill White told Cnet (s cbs) Hesse was referring only to roaming customers off of Sprint’s primary networks – a policy that has been in place for some time. For any smartphone on Sprint’s 3G or 4G networks, unlimited still means unlimited, White said.

Like all operators, Sprint doesn’t run networks everywhere it offers service. It contracts out with dozens of smaller regional carriers to provide coverage in smaller towns and rural highways, allowing it to focus on cities and major traffic corridors. Those roaming agreements aren’t free, though. Sprint has to pay those operators for every MB its customers consume, leading it to cap data out-of-network at 300 MB per month. Sprint also places caps and use restrictions on its data modem plans, hotspot features in smartphones, and on its Virgin Mobile and Boost Mobile prepaid services. Sprint, however, has kept its smartphone unlimited plans restriction-free because of the competitive advantage they give it over its competitors, all of whom cap or throttle data.

Unlimited staying unlimited has to be a relief to Sprint’s customers, many of whom gravitated to the operator precisely because it’s the only major carrier to offer data plans restriction-free. The question is how long Sprint can maintain that policy. Darrell just wrote about how the iPhone(s aapl) 4S is slurping up two to three times the data of its predecessors. Sprint just landed the iconic device, which is sure to flood to its 3G network with tons of new traffic.

And if Sprint is concerned about data abuse, then it has the worst policy imaginable to combat it. The most heavy-handed smartphone customers who found their data use curtailed or capped by AT&T(s T) and Verizon Wireless (s VZ)(s VOD) will likely migrate to Sprint where they face no restrictions on consuming 20, 30 even 100 GB of data a month. The only thing preventing a mass exodus are the limitations of Sprint networks. The iPhone has to cope with Sprint’s slower EV-DO 3G network. Meanwhile, its 4G WiMAX network is fast, but it only covers a third of the country.

Update: Sprint issued a statement on its blog claiming Hesse wasn’t referring to throttling customers when he spoke of managing abusive data users, but rather booting those customers off its network. Here’s the text:

Sprint does not throttle any postpaid phone data users for on-network or off-network usage. Sprint is the only national carrier offering smartphone users truly unlimited data with no throttling, metering or overages while on the Sprint network.

Sprint does have terms and conditions which prohibit certain types of data use that may impair other customers’ usage or harm or interfere with the network. At yesterday’s investor conference, Sprint CEO Dan Hesse was referring to Sprint’s right to terminate service of data abusers who violate Sprint’s terms and conditions. Customers who abuse our network by violating the terms and conditions will be contacted by Sprint in an effort to have the customer change their usage to comply with their subscriber agreement. Customers who do not change their usage and remain in violation of the terms and conditions may be subject to actions reserved by Sprint, including but not limited to termination. Consistent with our advertising, engaging in such uses will not result in throttling for customers on unlimited data-included plans for phones.

Termination is most certainly different from throttling, but in his speech, Hesse said 98 to 99 percent of its customers would be unaffected by such policies. Hopefully, Hesse was just speaking figuratively rather than literally. If Sprint is considering suspending 1 to 2 percent of its subscriber base over their data usage, then it will have a much bigger customer relations nightmare than if it was dealing with mere throttling.