FTC Sues AT&T for Misleading Customers Over Unlimited Data

Randall Stephenson, president and CEO of AT&T.

Photo by Alex Wong/Getty Images

The Federal Trade Commission seems to have had it with AT&T. Three weeks ago, the regulator ordered AT&T to pony up $105 million for bogus “cramming” charges on customer bills. Today, the FTC is slamming the wireless carrier with a lawsuit for allegedly misleading millions of its users about their unlimited data plans.

The FTC’s complaint is this: AT&T did not deliver truly unlimited data to customers on unlimited data plans. At issue here is something the industry refers to as “throttling,” which occurs when carriers decide to slow data speeds for consumers after they hit a certain usage threshold in a given billing period. (For example, imagine AT&T serves a customer’s first 3 GB of monthly data at normal speeds but drastically reduces the pace for anything beyond that—that’s throttling.)

The way the FTC sees it, an unlimited data plan with throttling is not an unlimited data plan. In its complaint, the FTC notes that customers on AT&T devices have had their data speeds reduced by between 60 percent and 95 percent after using as little as 2 GB. “Many everyday applications, such as web browsing, GPS navigation, and streaming video, are significantly slower, and in some cases are severely impaired or rendered practically inoperable,” the FTC writes.

In a statement on its website, AT&T dismissed the FTC’s allegations as “baseless” and “baffling.” AT&T argues that it has been “completely transparent with customers since the very beginning” of its throttling program, informing them of changes in billing statements and through a national press release. AT&T stopped offering unlimited data plans to new customers in 2010; it has allowed existing customers with unlimited data to stay on grandfathered versions of those plans but has made it increasingly difficult for them to maintain the arrangement.

As consumer frustration with throttling has grown, regulators have taken note. In late July, FCC Chairman Tom Wheeler wrote a letter to Verizon saying he was “deeply troubled” by the company’s intention to start throttling its heaviest data users. On Oct. 2, Verizon abruptly backed away from its plan.

The FTC’s case against AT&T will largely hinge on whether the carrier adequately disclosed its throttling program. So far, the FTC is being careful to note that “data throttling isn’t always illegal” but that “when it’s done in a way that’s deceptive or unfair, it most certainly is.” It argues that AT&T’s customer agreements do not state that AT&T may “modify, diminish, or impair the service of unlimited mobile data plan customers” if they use more than a certain amount of data. The FTC also alleges that most AT&T customers with unlimited data plans have “never been sent a text message or email” about the company’s throttling program.

What’s unclear is why the FTC is bringing its case now, after several years of throttling on AT&T’s part. The FTC has been on something of a roll with wireless regulation lately, including its early-October settlement with AT&T and a July complaint that accused T-Mobile of cramming. FTC officials didn’t address on a conference call why the mobile industry has suddenly caught their interest. But all the same, other wireless carriers might want to watch out.