Back when AT&T stopped offering unlimited wireless data, it grandfathered many of the unlimited users it had at the time. Unfortunately for those users, AT&T immediately started waging a quiet war on these customers as part of a concerted effort to drive them like cattle to more expensive plans. That included at one point blocking Facetime from working at all unless users switched to metered plans (but net neutrality is a "solution in search of a problem," am I right?) and throttling these "unlimited" LTE users after they'd consumed as little as three gigabytes of data.
Then, just about a year ago, the FCC (like it has on a number of consumer telecom issues like telco accounting fraud or municipal broadband) miraculously awoke from a deep, fifteen-year slumber and decided to do something about this kind of behavior. FCC boss Tom Wheeler started warning telcos that they can't use congestion as a bogeyman to justify cash grabs, and that network management should be used to actually manage network congestion -- not as a weapon to herd users to more expensive options. The FTC also filed suit against AT&T for false advertising over its "unlimited" claims.
"As a result of the AT&T network management process, customers on a 3G or 4G smartphone with an unlimited data plan who have exceeded 3 gigabytes of data in a billing period may experience reduced speeds when using data services at times and in areas that are experiencing network congestion. Customers on a 4G LTE smartphone will experience reduced speeds once their usage in a billing cycle exceeds 5 gigabytes of data. All such customers can still use unlimited data without incurring overage charges, and their speeds will be restored with the start of the next billing cycle."
As of this week, the policy now looks like this:
"As a result of AT&T’s network management process, customers on a 3G or 4G smartphone or on a 4G LTE smartphone with an unlimited data plan who have exceeded 3 gigabytes (3G/4G) or 5 gigabytes (4G LTE) of data in a billing period may experience reduced speeds when using data services at times and in areas that are experiencing network congestion. All such customers can still use unlimited data without incurring overage charges, and their speeds will be restored with the start of the next billing cycle."
In other words, gone are the references to throttling unlimited LTE users just because they hit a totally arbitrary threshold, and the company is now using network management to manage the damn network, not to make an extra buck. AT&T will of course find other, clever ways to annoy these users until they switch to more expensive plans, but it's at least good to see that the network congestion bogeyman (fear the exaflood!) isn't quite as effective as it used to be when it comes to justifying high rates, misleading consumers or conning regulators.
Having written about the FCC for most of my adult life, I've grown cynically accustomed to an agency that pays empty lip service to things like consumer welfare and the painful lack of broadband competition. It doesn't matter which party is in power; the FCC has, by and large, spent the lion's share of an entire generation ignoring last mile competitive problems and the resulting symptoms of that greater disease. When the agency could be bothered to actually address these issues, the policies were so tainted by the fear of upsetting campaign contributors (read: regulatory capture) they were often worse than doing nothing at all (see our $300 million broadband map that hallucinates speeds and ignores prices or 2010's loophole-filled net neutrality rules co-crafted by Verizon and Google).
Whether it was former FCC boss turned cable lobbyist Michael Powell's claims that massively deregulating the sector would magically result in telecom Utopia (tip: that didn't happen) or Julius Genachowski being utterly terrified of taking any meaningful stand whatsoever, the broadband industry has spent decades governed by an agency that, at its best, is too timid to do its job, and, at its worst, is an obvious revolving-door lap dog to an industry it's supposed to regulate.
So in 2013 when it was announced that a former lobbyist for both the wireless and cable industries would be the next FCC boss, the collective, audible sighs of disgust unsurprisingly rattled the Internet. I, like many others, believed we were bearing witness to a twisted culmination of decades of regulatory capture, a giant, living, breathing middle finger to a public hungry for a more consumer and innovator-friendly FCC. John Oliver even put Wheeler's name in lights when he infamously compared hiring the former cable lobbyist to employing a dingo as a babysitter:
Most people (with a few notable industry exceptions) believed Wheeler was the final nail in a grotesque, campaign-cash stuffed telecom coffin long under construction. We were painfully, ridiculously wrong.
In fact, if you read profiles on Wheeler, he's turned out to be a complete 180 from the thinking of a traditional revolving-door regulator, basing his decisions on all available information -- even if that data conflicts with previously-held beliefs (a unique alien indeed in 2015). And while it's true that massive grass roots advocacy helped shift Wheeler's thinking on issues like Title II, his embrace of issues like municipal broadband required little to no shoving, since the lion's share of the public had no idea the issue existed. One of the biggest reasons Wheeler's willing to stand up to the broadband industry? He's 69, and no longer biting his tongue and biding his time for the next cushy lobbyist or think tank gig. Perhaps we should make a rule that all future FCC bosses must be on the brink of retirement to avoid what we'll henceforth call Michael Powell syndrome.
Still, watching Wheeler fills me with cognitive dissonance, as if my frequently-disappointed brain isn't quite sure what to do with an FCC Commissioner capable of objective thought free of AT&T, Comcast and Verizon lobbyist detritus. As a sure sign of the looming apocalypse, last week I watched an FCC Commissioner issue a statement about protecting competition -- and actually mean it:
"Comcast and Time Warner Cable’s decision to end Comcast’s proposed acquisition of Time Warner Cable is in the best interests of consumers. The proposed transaction would have created a company with the most broadband and video subscribers in the nation alongside the ownership of significant programming interests. Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services."
Though his tenure's unfinished, it may not be a stretch to say that a man most of us believed would be the epitome of revolving door dysfunction has proven to be one of the most consumer- and startup-friendly FCC Commissioners in the agency's history. Granted that may not be saying much; caring more about consumers than Martin, Powell and Genachowski is like getting an award for beating a handful of lobotomized ducklings at a hundred yard dash. And none of this is to classify Wheeler as a saint -- the agency's net neutrality rules have some very concerning loopholes and the FCC still refuses to talk much about pricing, whether that's the problems inherent in usage caps, unreliable meters, or sneaky below the line fees.
Still, it's a lesson learned in letting your mind run on cynicism autopilot, and it's a reminder that even our very broken, campaign-cashed soaked government can still occasionally manage to give birth to consumer-friendly policies. So in short, the tl;dr version is this: I apologize to you, Tom Wheeler, for believing you were a mindless cable shill. I was wrong.
Back in 2010, AT&T eliminated the company's unlimited data plans and began offering users only plans with usage caps and overage fees. While AT&T did "grandfather" existing unlimited wireless users at the time, it has been waging a not-so-subtle war on those users ever since in the attempt to get them to switch to more expensive plans. That has included at one point blocking video services from working unless users switched to metered plans (one of several examples worth remembering the next time someone tells you net neutrality is a "solution in search of a problem").
AT&T also switched some unlimited users to its metered plans without user consent, something the carrier received a whopping $700,000 FCC fine for in 2012. But the telco's primary weapon against these users has been to throttle these users to speeds of 128 to 528 kilobits per second should they use more than a few gigabytes of data in the hopes they'd switch to metered but unthrottled plans. AT&T was sued for the practice by the FTC in October of last year, the agency claiming AT&T violated the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by "failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans."
As we noted previously, AT&T tried a rather amusing defense to try and tap dance away from the lawsuit. It claimed that because the FCC was now classifying ISPs as common carriers under Title II, the FTC no longer had the authority to police AT&T actions under the FTC Act. In other words, AT&T hates Title II -- except when it allows them to skirt lawsuits for bad behavior. In a twenty-three page ruling (pdf), Judge Edward Chen says the law is "unambiguously clear" that only AT&T wireless voice, not wireless data, was classified as common carrier when the lawsuit was filed last fall:
"Contrary to what AT&T argues, the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity."
In other words, no, AT&T can't have its cake (claim to loathe Title II with every shred of its being) and eat it too (run to Title II and common carrier protections when it suits it).
Last month, BlackBerry CEO John Chen tried to kiss up to major wireless carriers on the issue of net neutrality with a truly bizarre missive that received ample mockery in the technology press. Basically, Chen tried to argue that we don't need tough neutrality rules -- but we really should consider rules that force app developers to make content for unpopular mobile platforms. Like oh, BlackBerry, which after endless missteps now controls just 2% of the smartphone market. This was, to hear Chen tell it, because when companies refuse to make apps for unpopular platforms they're violating something Chen called "app neutrality":
"Netflix, which has forcefully advocated for carrier neutrality, has discriminated against BlackBerry customers by refusing to make its streaming movie service available to them. Many other applications providers similarly offer service only to iPhone and Android users. This dynamic has created a two-tiered wireless broadband ecosystem, in which iPhone and Android users are able to access far more content and applications than customers using devices running other operating systems. These are precisely the sort of discriminatory practices that neutrality advocates have criticized at the carrier level."
Of course, as we pointed out at the time, Netflix isn't discriminating against anybody. If BlackBerry wasn't currently a train wreck and had a big enough market share to justify their time, Netflix would surely develop an app for BlackBerry users as well. As most of you know, net neutrality is about protecting the Internet from the bad behavior of companies that have built massive last-mile broadband monopolies courtesy of regulatory capture. In contrast, developers aren't making apps for BlackBerry simply because people aren't using BlackBerry's products. And while Google and Apple do dominate the smartphone market, the primary reason is because they offer a good product. That's in contrast to say, AT&T or Comcast, which offer a crap product because they have a government-protected monopoly over the last mile and have no incentive to improve.
I have no idea from the bowels of which ISP think tank or telco meeting room this "app neutrality" talking point originated; Chen and BlackBerry's incoherent tirade dominates the search results for the term. But it's worth noting that Mark Cuban actually argued a very similar point two days earlier, but, fortunately for Cuban, the media was too busy mocking BlackBerry to notice. Here's a snippet of Cuban's insight on the issue of app neutrality:
"There are basically 2 doors that control the availability of apps to the vast majority of smart phones in this country. They are owned and controlled by 2 of the largest tech companies in the world, Apple and Google. If you want your app to reach any type of audience (yes there are other app platforms supporting phones on the margin, but they are tiny by comparison), you have to make Google and Apple happy."
Again, this ignores that Apple and Google have come to dominate the smartphone market because they make a kickass product. Not to say either of those companies doesn't engage in anti-competitive behavior, and I don't think anybody would argue Apple's app approval process isn't bizarre. But that has nothing to do with net neutrality, and Apple and Google are a far, far cry from government-pampered duopolists like AT&T and Comcast. Still, Cuban proceeds to insist that net neutrality rules need to ensure Apple and Google play nice too:
"The mobile app economy is far from open. It’s dominated by two companies. It is in the best interest of the entire mobile eco-system to address this duopoly while we are re-examining net neutrality. We should seriously consider requiring Apple to to allow and support 3rd party app stores and to require that Google continues to support and enable 3rd party stores and more importantly to integrate them into the Play Store, much as Amazon does with Marketplace integration."
Cuban is again showing he doesn't quite understand how the broadband industry works or what net neutrality actually is. Consumers actually do have a choice of what kind of smartphone to buy or what apps to install. While there are some smartphone freedom constraints (usually imposed by the aforementioned carriers, mind you), users still can buy a Windows phone, or a BlackBerry phone, or some offshoot hackable Android ROM that provides greater application freedom and allows them to install whatever unsigned applications they'd like. They can also access something called the Internet for even greater freedom. That's in contrast to a Comcast customer who, if they want decent broadband, usually doesn't have any other choice. The two discussions are nothing alike, and I don't think that's a particularly complicated point to understand.
Still, like "search neutrality" before it, somebody somewhere pretty clearly hopes that the idea of "app neutrality" will shift people's attention away from what the net neutrality conversation is actually about: highly-tactical telecom carrier abuse of an uncompetitive broadband market. Fred Campbell of the Center for Boundless Innovation in Technology (a policy group dedicated to "liberate the ingenuity and creative spirit of America’s high-tech entrepreneurs and enterprises through market-oriented government policies") also rushed to the "app neutrality" argument when the group recently suffered a small stroke over the FCC's Title II plans:
"Chairman Wheeler’s description of his plan in Wired is disingenuous. His proposal will not ‘ensure the rights of innovators to introduce new products without asking anyone’s permission.’ Some of the biggest gatekeepers on the mobile Internet today are using their power over mobile operating systems to deny access to application developers, yet these behemoths are exempted from the FCC proposal. The fact is, application developers will still have to ask someone for permission before they can access the mobile Internet.
The Chairman’s plan is also discriminatory. He is proposing to apply privacy limitations on Internet service providers through ‘Section 222′ while exempting Internet ‘edge’ companies whose fundamental business model is to profit from collecting and selling personal information about consumers. The Chairman’s discriminatory decision to exempt the Internet’s biggest data collectors from this privacy provision appears designed to protect the Administration’s political allies in Silicon Valley, not consumer privacy."
You see, Google, Apple and Netflix's domination of the smartphone and streaming video market is bad, even though consumers still actually have an organic market choice when it comes to those services. AT&T, Comcast and Verizon's stranglehold on the broadband market is to be ignored -- even praised -- because, uh, well, I'm not sure. You'd think those endlessly espousing the value of "free markets" would find the latter situation equally untenable, since it often involves companies literally writing state telecom law to further insulate government-protected duopolies from said market freedom. Unless of course it's not really about loving free markets or meaningful personal values at all, and it's really just about offering any old flimsy, inconsistent argument to help carriers protect the revenues received from uncompetitive (and certainly not free) markets?
One of the very first things new FCC boss Tom Wheeler did when he entered office was to get wireless carriers to agree to a list of voluntary cell phone unlocking guidelines. The six "demands" are largely common sense and uncontroversial, and include requiring that carriers offer unlocked devices to active overseas service members, make their postpaid and prepaid unlocking policies as clear as possible, respond to unlocking requests within two business days, and automatically notify customers when their contract period ends and their phone can be unlocked.
I'd heard that carrier lobbyists balked at this last request fearing it would "advertise" unlocking, but ultimately acquiesced out of fear of tougher, non-voluntary rules coming down the pike. Note this is entirely separate from the fight over keeping cell phone unlocking legal and the need for DMCA exemption process reform. The rules also don't require that carriers simply sell unlocked phones outright, since that would probably make a little too much sense. After agreeing to the rules, carriers had more than a year to adhere to all six requirements, and the final deadline arrived last Wednesday.
Interestingly it's Verizon and AT&T, arguably the worst of the major carriers when it comes to attempts to stifle openness over the years, that come out ahead in adhering to all six guidelines (though your mileage may vary, and since the rules don't require much, this may not mean much). For Verizon, that's in part thanks to the Carterfone conditions placed on its 700 MHz spectrum, though that hasn't stopped the company from fighting openness in general tooth and nail in other ways. As I've noted previously the conditions have plenty of loopholes -- and anti-competitive behavior is allowed just as long as companies ambiguously insist that what they're doing (like blocking Google Wallet, or locking bootloaders) is for the "safety and security of the network."
Similarly interesting is the fact that T-Mobile, despite a recent reputation for being a fierce consumer advocate, sits right alongside Sprint when it comes to failing to adhere to the fairly simple requirements after a year's head start. Khanifar notes T-Mobile saddles prepaid and postpaid users with a number of strange restrictions, including the fact that users can't unlock more than 2 devices per line of service in a 12 month period. Between this, the company's opposition to Title II and its failure to understand the problems with zero rated apps, T-Mobile's showing it still needs to actually earn that ultra-consumer-friendly reputation.
Khanifar proceeds to note that despite carrier struggles this is at least a step in the right direction, even if we still need DCMA reform to ensure unlocking remains perfectly legal. That said, he quite justly highlights how cell locking no longer makes any coherent sense, for anybody:
"It's worth taking a step back and examining the absurdity of these locks. If you've paid for your AT&T phone, committed to a 2-year contract, and agreed to an "early termination fee," what purpose does a lock really serve? If you've paid cash to purchase a prepaid device, why should it come locked to just one carrier? There's plenty of evidence that locks serve little real commercial purpose. Verizon's business hasn't suffered since they stopped locking their phones. Countries like China and Israel have made locking devices outright illegal with no harm to their wireless industries and plenty of gain for consumers. But unfortunately it's unlikely that Congress or the FCC will take action to implement a similar policy here in the US."
Of course unlocked, open devices widens the competitive door, and with the kind of lobbying power AT&T, Verizon and the entertainment industry wield over Congress, getting real DMCA reform or mandated unlock-at-sale rules in play will likely be nothing short of a miracle.
Back in October we noted how the FCC had fined Marriott $600,000 for using deauth man in the middle attacks to prevent customers from using tethered modems or mobile hotspots at the company's Gaylord Opryland Hotel and Convention Center in Nashville. Marriott's ingenious plan involved blocking visitors and convention attendees from using their own cellular connections so they'd be forced to use Marriott's historically abysmal and incredibly expensive wireless services (in some cases running up to $1,000 per device).
When pressed by the FCC, Marriott pretended this was all to protect the safety and security of their customers. The company also tried to claim that what it was doing was technically legal under the anti-jamming provisions of section 333 of the Communications Act, since the deauth attacks being used (which confuse devices into thinking they're connecting to bogus, friendly routers) weren't technically jamming cellular signals. The FCC didn't agree, and neither did industry giants like Microsoft, Google, AT&T and Verizon, who collectively filed opposition documents with the FCC arguing that Marriott was clearly violating the law.
After carefully surveying a battlefield scattered with millions of pissed off consumers, annoyed regulators, and angry, bottomless-pocketed technology giants, Marriott has apparently concluded that maybe its shallow ploy to make an extra buck isn't worth fighting over. In a statement posted to the company's website, Marriott states it's going to stop acting like a nitwit, maybe:
"Marriott International listens to its customers, and we will not block guests from using their personal Wi-Fi devices at any of our managed hotels. Marriott remains committed to protecting the security of Wi-Fi access in meeting and conference areas at our hotels. We will continue to look to the FCC to clarify appropriate security measures network operators can take to protect customer data, and will continue to work with the industry and others to find appropriate market solutions that do not involve the blocking of Wi-Fi devices."
You'll notice the selectively-worded statement doesn't completely put the issue to rest, and clings fast to the argument that Marriott is just really concerned about visitor security, suggesting this may not be the last we hear of this.
While any respectable company can be good at PR and legal bullshitting, cable and phone companies, having navigated and built their pampered duopoly empire over a generation of regulatory capture, are exceptionally good at it. And among broadband and cable operators, nobody is better at bullshit (or worse at it, depending on where your interests lie) than AT&T. Whether it's AT&T's claim that gutting all state consumer protections will result in magic networks of tomorrow, or claiming that acquiring T-Mobile would create jobs and magically improve competition, AT&T's a master at trying to convince the government (and press and public) that up is down and that snow is piping hot.
The latest gem from AT&T comes as the company is under fire by the FTC for throttling the company's "unlimited" data after customers reach 5 GB of usage (regardless of whether the network is even congested). AT&T has been waging a quiet war on these unlimited customers for years in the hopes of getting them on capped plans, at one point going so far as to block Apple FaceTime from working unless users give up unlimited data. In a motion to dismiss (pdf) an FTC lawsuit over the practice, AT&T tries to argue that because only wireless voice has common carrier status under Section 201(b) of the Communications Act of 1934 (aka Title II), the FTC can't technically tell AT&T what to do when it comes to throttling data:
"AT&T plainly qualifies as a ‘common carrier’ for purposes of Section 5 because it provides mobile voice services subject to common-carrier regulation under Title II of the Communications Act. The fact that AT&T’s mobile data services are not regulated as common-carrier services under the Communications Act is irrelevant. The text, structure, history, and purpose of Section 5 leave no doubt that its common-carrier exemption turns on an entity’s ‘status as a common carrier subject to [an Act to regulate commerce],’ not its ‘activities subject to regulation under that Act.’"..."The FTC cannot rewrite the statute to expand its own jurisdiction."
In short, AT&T is arguing that because it's classified as a common carrier under the Communications Act, the company is exempt from FTC jurisdiction according to Section 5 of the FTC Act. Or even more to the point, AT&T is using the same Title II classification it breathlessly claims to loathe as a way to dodge a lawsuit for being misleading. Except, as we've highlighted recently, the FTC just got done imposing the biggest fine the government has ever given out for AT&T's aiding and protecting of crammers and scammers, using authority granted under Title II. AT&T didn't make a single peep about the FTC's authority in that instance.
AT&T doesn't seem too interested in expanding on its logic here. Jon Brodkin at Ars Technica asked AT&T about its position, and the telco absolutely refused to clarify on the record:
"We’ve asked AT&T why it accepted the FTC’s jurisdiction in the text messaging case but not the data one, and the company said it would provide a response today. (The FCC was also involved in that case and invoked its authority over common carriers despite never classifying text messaging as a common carrier service—AT&T did not object to that, either, TechDirt wrote at the time.)...AT&T did not directly answer our question but pointed to a statement the company made on the day of its cramming settlement."
The statement AT&T points to offers no further illumination of the company's logic. What's AT&T thinking? With legal pressure mounting, the jig was up in the case of cramming, and after a decade in which AT&T likely made billions off of the scams, even a record $105 million fine was small potatoes. Throttling and manipulating data to make an extra buck though? There's still potentially billions to be made being sneaky and obnoxious there, which is why AT&T's changing its tune and putting on its very best tap dancing shoes to flit between, over and under common carrier law and FCC/FTC jurisdictional distinctions.
AT&T lawyers likely want FCC jurisdiction here so the company can fight the throttling charges under the larger umbrella of the net neutrality fight alongside Comcast and Verizon. Back in October 2014, the FCC sent AT&T a Letter of Inquiry investigating AT&T's throttling of "unlimited" users, and the agency is contemplating a Notice of Apparent Liability (read: fine) for violating FCC transparency rules. But at the same time AT&T is telling the FTC only the FCC has authority over the company, AT&T lawyers are telling the FCC mobile data can't be treated as a common carrier service. Sweet dance moves, dude.
In short, that's an awful lot of legal tap dancing just so AT&T can pretend limited user connections are "unlimited," but again, with billions in potential revenues at stake, AT&T's going to do whatever's necessary to thwart Title II classification, where solid neutrality rules could hamstring the company's "creativity." As we've noted previously, Title II rules are only going to be a problem for ISPs that are doing something wrong, and AT&T's a master at concocting an endless stream of awful, anti-consumer ideas, then out-maneuvering regulators when they finally wake up from their naps to realize broadband consumers are getting the shaft.
Most people are familiar with the practice of cramming -- or suddenly waking up one day to find your wireless phone bill stocked with $10 per month services (usually horoscopes, "premium text message" or ringtones) you didn't ask for and don't want. While the government has occasionally come down hard on the small companies engaging in these scams because they're easy legal wins, it has historically left the big carriers (and campaign contributors) alone, despite the fact that AT&T, Verizon, T-Mobile and Sprint all turn a blind eye to the practice in exchange for up to 40% of the proceeds. After a deep slumber, the government has finally started taking bigger companies to task, even if it's a day late and more than a few dollars short.
Back in October, the FTC announced it had struck a $105 million settlement with AT&T, with an investigation finding that not only did AT&T turn a blind eye to crammers and the mountains of consumer complaints, it actively worked to make getting refunds more difficult. The telco also intentionally made bills more confusing so customers would have a harder time figuring out that they were being ripped off:
"The structure of AT&T’s consumer bills compounded the problem of the unauthorized charges, according to the complaint, by making it very difficult for customers to know that third-party charges were being placed on their bills. On both the first page of printed bills and the summary of bills viewed online, consumers saw only a total amount due and due date with no indication the amount included charges placed on their bill by a third party. The complaint alleges that within online and printed bills, the fees were listed as “AT&T Monthly Subscriptions,” leaving consumers to believe the charges were part of services provided by AT&T."
AT&T's not alone. Rumors indicate that Sprint is about to face similar penalties, and it seems like only a matter of time before Verizon joins the party. The FTC has also struck a settlement deal with T-Mobile that has the "uncarrier" paying $90 million in consumer refunds, $18 million in fines and penalties to the attorneys general of all 50 states, and another $5 million in fines to the FCC. Despite their recent reputation for consumer friendly behavior (the company said the FTC's allegations were "unfounded and without merit" earlier this year), T-Mobile, like AT&T, made getting refunds nearly impossible and intentionally made the charges hard to see on consumer bills:
"According to the FTC’s July complaint, T-Mobile’s phone bills made it nearly impossible for consumers to find and understand third-party subscription charges. The FTC’s complaint against T-Mobile noted that in many instances information about the third-party charges crammed on to customers’ bills was buried deep in phone bills that totaled more than 50 pages in length."
Of course if you figure out that carriers were getting 40% of $10 per month charged to tens of millions of customers for more than a decade, the fines don't even come close to the amount of money these companies made by ripping off their subscribers. Better late than never?
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 alsofiled 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.
“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.
You may have heard the story a few weeks ago about how the FCC and FTC teamed up to fine AT&T $105 million for mobile cramming (allowing unauthorized mobile charges for premium -- costly -- SMS, of which AT&T kept 35% of all money made). As the FCC noted:
The Enforcement Bureau launched its investigation after receiving consumer complaints alleging that AT&T customers had been billed with months of unauthorized charges for third-party services that they did not request. In some cases, complaints alleged that AT&T Mobility refused to issue refunds or would only refund one or two months' worth of such charges, leaving consumers on the hook for the rest. Until January 2014, AT&T Mobility included charges for third-party services -- such as monthly subscriptions for ringtones, wallpaper, and text messages providing horoscopes, flirting tips, celebrity gossip, and other information -- on its customers' telephone bills. The charge for each of these types of subscriptions was typically $9.99 per month.
This was the largest fine the FCC has ever given out. Some, quite reasonably, pointed out that it took the FCC (and the FTC) quite a long time to catch up on this, as such practices had been called out for years and years.
However, there was a much more interesting element to this fine, as it relates to the current net neutrality "Title II" fight. Remember, the telcos (including AT&T) are pretty adamant that if broadband is classified under Title II it will be the death of all good things. It will be a huge regulatory burden and companies like AT&T are likely to cease all investment and such. Similarly, AT&T and others insist that there's enough competition in the market to prevent anti-consumer practices, and that Title II simply isn't necessary in such a "competitive" market.
So, um, what authority did the FCC use to fine AT&T this time? Well, buried in the official filing, we see that it was done under Section 201(b) of the Communications Act of 1934. You can see 47 USC 201 and read it for yourself, but it's mostly important to know that 47 USC 201 is Title II. In other words, despite an even more "competitive" mobile market than broadband, the FCC had to break out Title II regulations to protect consumers from a years-long scam in which AT&T profited massively, scamming millions from consumers.
And... notice that AT&T accepted the fine and isn't complaining about it. Nor is it challenging the use of the Title II authority, despite SMS being considered something of a service in "limbo" in which it hasn't been definitively classified under Title II or Title I.
And yet, the mobile world has not collapsed. AT&T and other mobile operators aren't screaming to the heavens about how this use of Title II will chill all investment, create massive problems and lead to the end of all that is beautiful and innovative, as they claim about broadband. Instead, they're basically admitting that they helped out with and profited from this scam for years, and that the FCC needed to make use of this authority to protect the consumers that AT&T did nothing to protect, despite knowing full well what was going on for many, many years.
So, from all this, we sense two things: (1) these big telcos can be nasty scammers, cheating people out of money even when there is competition and (2) Title II is not so horrible after all and can actually be quite helpful (eventually!) in getting the big telcos to eventually stop their scammy practices and pay up...