Telecom will axe its "Big Time" internet plan which lets customers download as much as they are able for $69.95 a month.
Tens of thousands of customers signed up to the plan after it was launched in July, but complaints have grown about poor performance.
Telecom homes services director Ralph Brayham blamed a minority of customers who had their foot to the floor downloading thousands of movies a month, each generating "terabytes" of traffic.
Being the only internet provider offering uncapped internet plans, it had ended up with "all the vampires", he said.
Telecom reserved the right to manage Big Time traffic to de-prioritise the sharing of music and movies through "peer-to-peer" file sharing sites.
That should have ensured there was enough capacity for all Big Time customers to get a good service surfing the web and accessing email. Mr Brayham said that was easy in the beginning, but some customers began using software to stay a step ahead of tools Telecom used to ration file sharing.
"It leads to a poor customer experience if we keep playing chicken and egg with these guys. It has become very difficult for us to manage the traffic in a way that provides the right customer experience as well as being an economically viable product for us."
Telecom will stop signing up Big Time customers today and will contact people who are on the plan over the next two months, to move them on to other plans.
Telecom offers one costing $69.95 a month with a 20 gigabyte traffic cap which Mr Brayham said would suit many Big Time customers.
The other option was its "Pro" plan costing $89.95 a month that has a 40 gigabyte traffic cap.
Charges for extra data on the Pro plan have been cut from $20 to $2 a gigabyte to make it more attractive for heavy users. All the plans cost $10 less if customers have their toll calls with Telecom.
When Telecom launched Big Time it said it had done so to provide certainty to customers such as families and flatters sharing a broadband connection, who could find data caps hard to manage. Mr Brayham said he was disappointed Big Time had not worked out.
Telecommunications Users Association chief executive Ernie Newman said he sympathised with Telecom but was also disappointed.
"If you are the only restaurant in town with an `all you can eat' menu, you are going to attract the big eaters."
Mr Newman said it showed the Government was on the right track with its proposed investment in fibre-optic cable "so we can look forward to a time when bandwidth ceases to be a constraint".
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