What they could be talking about is the modem part of the gateway. Claiming it is not compatible in some way with the slower service. This may or may not be true. They could also be saying that the equipment you have rented from them is not provided under the slower plan.
They could also be trying to tell you that you won't be happy with the slower service, which may or may not be true too, but only you can decide that.
It sounds like an incomplete explanation. Ask for specific details and say "why?" whenever something doesn't make sense to you. Ask them what they are going to do about it, such as provide you with the proper equipment for the plan. I suspect they will grudgingly determine your equipment will actually work...