The U.S. Federal Trade Commission (FTC) has charged that TracFone, the largest U.S. prepaid mobile provider, slowed or cut off customers' mobile data after customers exceeded fixed limits in a period of 30 days.
The practice was questioned by the commission since the mobile provider had initially promised to deliver unlimited prepaid service and charged customers a monthly fee of $45.
According to the commission, customers' data service was generally slowed down after a 1GB to 3GB usage. When the usage reached 4GB to 5GB, customers experienced a suspension of the service.
"The issue here is simple: When you promise consumers unlimited, that means unlimited," said Jessica Rich, director of FTC's Bureau of Consumer Protection. "This case is about false advertising."
TracFone was charged with throttling consumers or cutting their unlimited service, which began in 2009. The commission said that the company had no technical reason that would support its action on limiting the data plans or slowing down speeds as a result of network congestion. Based on internal documents, the throttling had to be done as a way to cut down costs brought on by unlimited data service.
In the case of AT&T and Verizon, the two largest carriers have already ceased offering unlimited data plans to new subscribers. AT&T itself has been sued by the commission on the same issue. The carrier denied that it misled customers over its unlimited data plans. The case is yet to arrive at a conclusion.
Other carriers, Sprint and T-Mobile, still offer unlimited data plans.
Verizon, along with other major carriers, said that its service has to be slowed down in order to manage congestion.
"It's not about throttling," said Rich. "We're not challenging throttling in and of itself. If it's clearly disclosed, if a company advertises unlimited, but very clearly discloses their practices with regard to throttling we would not challenge that action."
TracFone and all the other carriers are reminded that slowing down the unlimited plans of their customers could place them in hot water. Likewise, TracFone customers who have purchased the plans and have noted that their speeds were slowed down are eligible to get a refund. These include customers of Net10, Telcel America, Straight Talk and Simple Mobile unlimited plan.
The settlement terms have required the mobile service provider not only to pay a refund but also to provide a full and clearer disclosure on how the company places a limit on its data plans.
"We have worked with the FTC to reach an amicable settlement and we have no further comment at this time," said a spokesman for TracFone.
