Because they know they can get at least two more “upgrades” out of you. They know they can increase the bitrate from 256 kbps to 320 kbps (while calling it CD “quality”, equivocating on quality – here meaning perceived quality), and then from there to lossless compression (mathematically equivalent to CD “quality”). Each time they might charge you an upgrade fee (or “forgo” it to increase loyalty) to alter your purchased music licenses to the latest standard and cover the relatively small cost of serving music downloads.
They also both sell transducers (loudspeakers, headphones), and profit from the belief that buying more expensive equipment will result in higher perceived audio quality than will using source files with lower compression levels. While this may prove true for some (using the absolute worst DACs/transducers, or for those with impaired hearing), I doubt it is true for the majority of their clientele. Even on iPhone headphones or my Honda’s stock radio/paper-cone speakers, migrating from compressed to uncompressed music has yielded audible improvements.
It’s definitely not bandwidth or bandwidth cap issues.
With AT&T’s 20GB bandwidth cap, you can download 27 uncompressed CDs, or 54 losslessly compressed CDs, or 150 lossy (256 kbps) compressed CDs. That’s assuming each CD is full length (700 MiB).
For AT&T’s 150GB cap, those numbers change to 204, 408, and 1126 CDs respectively.
For Comcast’s 250GB cap, those numbers change to 340, 681, and 1877 CDs respectively.
Dynamic Range Compression
Online music stores also have an opportunity to continue differentiating themselves by pressuring labels to release “organic” remasters – forgoing, or with reduced dynamic range compression. Since music is increasingly consumed privately (as opposed to in ice cream parlors or on analog (tuned) radios half a century ago), they can fight the Loudness War. This differentiation complements increases in music quality as higher dynamic ranges benefit from decreases in compression.