AT&T is getting rid of Internet Preferences, the controversial program that analyzes home Internet customers' Web browsing habits in order to serve up targeted ads.

“To simplify our offering for our customers, we plan to end the optional Internet Preferences advertising program related to our fastest Internet speed tiers," an AT&T spokesperson confirmed to Ars today. "As a result, all customers on these tiers will receive the best rate we have available for their speed tier in their area. We’ll begin communicating this update to customers early next week.”

Data collection and targeted ads will be shut off, AT&T also confirmed.

Since AT&T introduced Internet Preferences for its GigaPower fiber Internet service in 2013, customers had to opt into the traffic scanning program in order to receive the lowest available rate. Customers who wanted more privacy had to pay another $29 a month for standalone Internet access; bundles including TV or phone service could cost more than $60 extra when customers didn't opt in.

The lowest price depends on how much competition is in each city. AT&T tended to match Google Fiber's $70 price for gigabit Internet in cities where both ISPs operate, while charging more elsewhere. Last year, AT&T customers outside Google Fiber areas had to pay an extra $40 a month, even with Internet Preferences enabled, though more recently it's been an extra $20.

AT&T never detailed exactly how it was scanning customer traffic, but the program likely uses deep packet inspection. The program collects data regardless of a Web browser's privacy settings for cookies, do-not-track, and private browsing. Customers could encrypt their traffic with a VPN, but that requires signing up for a separate service that might slow down their Web browsing.

“Your ISP handles all of your network traffic”

AT&T told us it will "sunset the Internet Preferences program beginning in October," but didn't offer any further explanation of why it's making the change. Perhaps the program wasn't as profitable as AT&T hoped. The company could also be wary of a Federal Communications Commission proceeding that may implement stricter privacy rules before the end of the year, though those rules are expected to allow ISPs to use targeted ads as long as customers provide their consent.

Internet users will continue to see plenty of targeted ads from individual websites, but FCC Chairman Tom Wheeler has argued that ISPs are uniquely capable of inspecting a customer's entire Web browsing history. "Your ISP handles all of your network traffic," Wheeler wrote in March, when introducing his proposed rules. "That means it has a broad view of all of your unencrypted online activity—when you are online, the websites you visit, and the apps you use. If you have a mobile device, your provider can track your physical location throughout the day in real time. Even when data is encrypted, your broadband provider can piece together significant amounts of information about you—including private information such as a chronic medical condition or financial problems—based on your online activity."

AT&T's targeted ads generally appeared on websites, but the program also included e-mail marketing and postal mailings. Even as AT&T plans to end Internet Preferences, it has spoken out against the FCC's proposed regulations, arguing that ISPs shouldn't face stricter rules than websites like Google and Facebook.

Some AT&T customer service representatives have already told subscribers of the advertising program's impending demise. We contacted AT&T about its plans for Internet Preferences yesterday, after a reader pointed us to a DSLReports forum thread on the topic.

"I was just on the phone with someone at AT&T sorting out billing issues. She read an internal memo that said that they were going to do away with the Internet Preference for Gigapower users on October 2," one DSLReports forum member wrote. "To clarify, 'Internet Preferences' is what they call the 'deep packet inspection to target ads at us, the customers.'"

Another customer who just signed up for AT&T Internet service reported being told something similar.

"Sir, if I were you I would be concerned about this as well," an AT&T rep told the customer, according to a forum post. "But on October 2, the [Internet] Preferences will be going away. We will still be selling (Gigapower) at $70 and applying the discount, but we will be discontinuing the option to opt-in to Internet Preferences."

The forum thread also includes what appears to be an AT&T internal memo that said the company will sunset Internet Preferences "and automatically offer all customers the same low rate available in their area." The memo said the "vast majority" of fiber customers had opted into the program.