FTC Sues AT&T For Selling 'Unlimited' Data Plans That Were Actually Throttled

Broadband

from the well,-that-gets-interesting dept

AT&T — a company with one of the most powerful DC lobbying operations around — is not having a very good month. Just weeks after being fined by both the FTC and the FCC for SMS cramming, the FTC has also filed a lawsuit against AT&T for lying to consumers about “unlimited” data plans, and then… throttling those same plans. The issue was that, while AT&T stopped offering an unlimited data plan, it did promise to grandfather in those users, so long as they didn’t change plans. However, it didn’t take long for AT&T to start throttling just those users on unlimited plans in an effort to get them to switch away from an unlimited data plan. From the complaint:

In July 2011, Defendant decided to begin reducing the data speed for unlimited mobile data plan customers, a practice commonly known as ?data throttling.? Under Defendant?s throttling program, if an unlimited mobile data plan customer exceeds the limit set by Defendant during a billing cycle, Defendant substantially reduces the speed at which the customer?s device receives data for the re st of that customer?s billing cycle.

In October 2011, Defendant began restricting the data speed for unlimited mobile data plan customers whose data usage exceeded thresholds imposed by Defendant. Initially, the data usage threshold at which Defendant throttled customers varied across geographic markets. The threshold was as low as 2 GB per billing cycle in dense markets like New York City and the San Francisco Bay Area.

In March 2012, Defendant modified its data throttling program. Under the revised version, Defendant set a uniform nationwide data usage threshold of 3 GB per billing cycle for devices using Defendant?s 3G network (e.g., iPhone 3G, 3GS, 4) and HSPA+ network (e.g., iPhone 4S), and 5 GB per billing cycle for devices using Defendant?s LTE network (e.g., iPhone 5, 5S, 6, 6 Plus).

Under the original version of Defendant?s throttling program, from October 2011 through February 2012, Defendant capped the data speed at 128 Kbps for customers who exceeded the data usage threshold. Under the revised version, starting in March 2012 and continuing to the present, Defendant caps the data speed at 256 Kbps for customers with 3G and HSPA+ devices and 512 Kbps for customers with LTE devices.

As the FTC notes, this throttling was drastic, decreasing speeds up to 90 to 95% in some cases. The complaint also notes that AT&T knew — via internal focus group research — that basically no one thinks a throttled connection is “unlimited.”

When it implemented its throttling program, Defendant possessed internal focus group research indicating that its throttling program was inconsistent with consumer understanding of an ?unlimited? data plan. The researchers concluded that, ?[a]s we?d expect, the reaction to [a proposed da ta throttling program] was negative; consumers felt ?unlimited should mean unlimited[.?]? The focus group participants thought the idea was ?clearly unfair.? The researchers highlighted a consumer?s comment that ?[i]t seems a bit misleading to call it Unlimited.? The researchers observed that ?[t]he more consumers talked about it the more they didn?t like it.? This led the researchers to advise that ?[s]aying less is more, [so] don?t say too much? in marketing communications concerning such a program.

The FTC further points out that the throttling wasn’t because of any network concerns, pointing out that it went into effect even when the network had “ample capacity” and its network was not congested. All in all, AT&T throttled 3.5 million different customers more than 25 million times.

It’s worth pointing out that the FTC is not saying that AT&T can’t throttle — just that it can’t sell a plan as unlimited and then throttle it.

AT&T has already claimed the whole thing is baseless, but its argument doesn’t make much sense:

?The FTC?s allegations are baseless and have nothing to do with the substance of our network management program. It?s baffling as to why the FTC would choose to take this action against a company that, like all major wireless providers, manages its network resources to provide the best possible service to all customers, and does it in a way that is fully transparent and consistent with the law and our contracts.

?We have been completely transparent with customers since the very beginning. We informed all unlimited data-plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented. In addition, this program has affected only about 3% of our customers, and before any customer is affected, they are also notified by text message.?

Yeah, but none of that changes the fact that the company sold an “unlimited” plan, and then made it very, very limited.

Of course, it’s interesting to see that it’s the FTC that filed this particular lawsuit. Some (mainly on the telco/anti-net neutrality side) have been trying to suggest that there’s something of an ongoing turf war over regulating telcos lately between the FCC and the FTC. The earlier fine this month was done together, but this was just under the FTC’s authority by itself — though, in its press release, the FTC notes that it “worked closely on this matter with the staff” of the FCC. Just a few months ago, we know that the FCC was investigating Verizon’s similar throttling plans — under a similar theory. The FCC was concerned that Verizon’s throttling was targeted based on what data plan customers were on, rather than whether or not they were heavy users on a congested network.

Furthermore, underlying all of that, there’s been continuing debate over the larger “net neutrality / open internet” debate, as to whether or not the FCC should be handling it or the FTC — with some arguing that new rules might limit one or the other’s ability to step in. For the most part, those conversations have basically been some parties trying to drive a wedge between the two agencies that may not exist in reality, but it’s still worth noting that the two agencies appear to be swimming in similar waters at times, but so far, they seem to be able to work together pretty well.

Filed Under: fcc, ftc, throttled, unlimited
Companies: at&t