The Federal Trade Commission (FTC) charged AT&T with misleading millions of its smartphone customers on Tuesday, claiming the telecoms giant charged them for “unlimited” data plans while reducing their data speeds, in some cases by nearly 90%.
The FTC’s federal court complaint alleges that the company failed to adequately disclose to its unlimited data customers it would “throttle” their data speeds once they reached a certain limit to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video – become difficult or “practically inoperable”, said the FTC chairwoman, Edith Ramirez.
“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said Ramirez. “The issue here is simple: ‘unlimited’ means unlimited.”
The FTC has recently shown a keen interest in the promises made by telecoms and tech companies. Google and Apple have both been sanctioned by the regulator over charges on mobile apps.
Ramirez said the FTC was defending a “bedrock principle” of customer protection that companies had to deliver on their promises. “If you make a promise about unlimited service, we expect you to fulfil those promises,” she said.
According to the FTC’s complaint, AT&T’s marketing materials emphasised the “unlimited” amount of data that would be available to consumers but failed to alert them to the data speed cap. Customers who cancelled their contracts after being throttled were charged early termination fees, typically amounting to hundreds of dollars.
AT&T became the exclusive telecoms carrier for Apple’s iPhone in 2007, offering “unlimited” data for $20 a month. It dropped the unlimited plan in 2010 for new customers but by then millions of customers had taken up the plan.
The company began throttling data speeds in 2011 after customers used as little as 2 gigabytes of data in a billing period, the FTC charges. The regulator estimated that AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times.
The FTC said millions of unlimited mobile data plan customers had elected to keep their unlimited mobile data plan rather than switch to a tiered mobile data plan or obtain service from another provider.
“Numerous customers using 3G devices have experienced an 80–90% decrease in speed when throttled under the original version of defendant’s throttling programme, and a 60–85% decrease under the revised version,” the FTC said in the complaint.
Consumers in AT&T focus groups strongly objected to the idea of a throttling programme and felt “unlimited should mean unlimited” and the company received thousands of complaints about the slow data speeds under the programme, according to company documents obtained by the FTC.
Some consumers quoted the definition of the word “unlimited,” while others called AT&T’s throttling programme a “bait and switch”. Many consumers also complained about the effect the throttling programme had on their ability to use GPS navigation, watch streaming videos, listen to streaming music and browse the web.
The complaint charges that 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 programme to consumers who renewed their unlimited data plans.
“The FTC’s allegations are baseless and have nothing to do with the substance of our network management programme. 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,” Wayne Watts, AT&T senior executive vice-president and general counsel, said in a written statement.
“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 programme was implemented.”
