The Federal Trade Commission (FTC) goes head to head with AT&T and files a lawsuit against the mobile carrier for slowing down the data speeds of customers on grandfathered data plans in an industry practice known as throttling.
In a statement, the FTC accuses America's second biggest wireless carrier of misleading "millions" of customers and charging them for unlimited data plans but reducing their speeds by up to 80 to 90 percent. The lawsuit is not about the practice of throttling per se but about AT&T's failure to fully disclose the practice to customers who are paying for unlimited data plans.
The FTC says AT&T continuously deceived customers in its marketing materials by highlighting that they would receive "unlimited" data services, even though AT&T stopped offering unlimited data plans in 2011. The agency also alleges that AT&T failed to fully disclose its "network management" plans and explain the extent of speed reduction to unlimited customers who renewed their contract. When customers decide to terminate their contracts as a result of throttling, the FTC says AT&T charges hundreds of dollars in termination fees.
"In the advertising, sale and renewal of mobile data plans, (AT&T) entered into numerous mobile data contracts that were advertised as providing access to unlimited mobile data, and that do not provide that (AT&T) may modify, diminish or impair the service of customers who use more than a specified amount of data for permissible activities," says [pdf] the FTC in its complaint. "While such contracts were in effect, (AT&T) imposed significant data speed restrictions on customers who used more than a fixed amount of data in a given billing cycle."
On its website, AT&T says 3G and 4G customers exceeding 3GB of data "may experience reduced speeds" at times of network congestion, while LTE customers will have their data speeds slowed down once they reach 5GB.
AT&T has fired back, saying the FTC's allegations are "baseless" and "have nothing to do with the substance of our network management program." In a statement, AT&T senior executive vice president and general counsel Wayne Watts says the company informs its unlimited customers through national press conferences and bill notices. He also says that customers exceeding the 3GB or 5GB data cap are informed through SMS and advised to connect to the internet via Wi-Fi to reduce charges.
"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 contacts," says Watts.
The FTC says it stands by its complaint, and will go to court to aggressively push AT&T to offer its services as advertised.
"AT&T promised its customers 'unlimited' data, and in many instances, it has failed to deliver on that promise," says FTC Chairwoman Edith Ramirez. "The issue here is simple: 'unlimited' means unlimited."
The FTC is not alone in its fight against data throttling. Earlier this year, the Federal Communications Commission (FCC) pressured Verizon Wireless into cancelling its "network management" plans to slow down speeds for certain customers on its grandfathered unlimited plans.
