The FTC is suing AT&T for throttling its unlimited data customers
The FTC is suing AT&T for throttling its unlimited data customers
(about 3 hours later)
AT&T broke the law when it slowed down mobile Internet speeds among customers who've paid for unlimited data, federal regulators said in a complaint unveiled Tuesday.
Federal officials on Tuesday sued AT&T, the nation’s second-largest cellular carrier, for allegedly deceiving millions of customers by selling them “unlimited” data plans that the company later aggressively controlled by slowing Internet speeds when customers surfed the Web too much.
As many as 3.5 million individual AT&T customers were hit by the throttling more than 25 million times over the course of several years, the Federal Trade Commission alleges in its suit. In some cases, users' speeds were cut by more than 90 percent.
The Federal Trade Commission said the practice, called “throttling” and used by AT&T since 2011, resulted in slower speeds for customers on at least 25 million occasions – in some cases cutting user Internet speeds by 90 percent, to the point where they resembled dial-up services of old. The 3.5 million affected customers experienced these slowdowns an average of 12 days each month, said the FTC, which received thousands of complaints about the practice.
.@ATT promised its customers ‘unlimited’ data, & failed to deliver on that promise. The issue is simple: unlimited means unlimited. — Edith Ramirez (@EdithRamirezFTC) October 28, 2014
The move, approved unanimously by the five-member commission, is one of the most aggressive yet by the FTC under chairwoman Edith Ramirez, a reserved former corporate lawyer who took office last year. In challenging one of the nation’s largest cellular providers, she also tread close to the jurisdiction of a sister agency, the Federal Communications Commission, which more regularly handles telecommunications issues but long has been criticized by consumer groups as being too cozy with industry and not aggressive enough in protecting customers’ privacy and pocketbooks.
.@ATT promised its customers ‘unlimited’ data, & failed to deliver on that promise. The issue is simple: unlimited means unlimited.
“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said Ramirez in a statement. “The issue here is simple: ‘unlimited’ means unlimited.”
— Edith Ramirez (@EdithRamirezFTC) October 28, 2014
The FTC, which filed its suit in San Francisco federal court, found in its investigation that AT&T was aware that consumers saw throttling as inconsistent with promises of “unlimited” data. When the concept was explained to company focus groups, the FTC reported in its suit, customers grew upset. The researchers urged AT&T that “saying less is more” when it comes to marketing of such services.
On occasion, AT&T notified some customers by text message or e-mail that they'd used too much data and would be throttled. But not everyone got the notices who was eligible for them, said the FTC — nor did AT&T make clear in its marketing materials that users would be slowed down after a certain point set by the carrier.
The FTC lawsuit, which rested on its power to police deceptive marketing practices, prompted praise from consumer advocates, who long have complained that cellular carriers have larded the bills of their customers with unnecessary and deceptive bills as a way to fatten profits. Throttling, they said, deprived customers of data they believed they had paid for, and with little recourse against AT&T. The company received 190,000 customer calls regarding throttling, according to the FTC.
For an average of 12 days out of the month, AT&T unlimited data customers who were affected by the throttling program had their speeds trimmed to dial-up levels, according to the complaint. The punitive action didn't appear connected to real-time network conditions, as customers were slowed down regardless whether they were near a cell site with lots of traffic or relatively little.
“It’s absolutely outrageous,” said John Bergmayer, a senior staff attorney and Public Knowledge, an advocacy group based in Washington. “They’re not allowed to promise one thing and deliver another… Unlimited is not unlimited when you put limits on it.”
AT&T allegedly knew that its throttling practice was unfair, because its internal research told them as much, according to the FTC. From the complaint:
AT&T responded by calling the FTC’s allegations “baseless” and an intrusion into the normal network management required by telecommunications providers. The company also noted that it had alerted customers about the throttling, by sending e-mails or texts notifying customers that they had crossed pre-set limits and would experience slower data speeds for the balance of the billing period.
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 data 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.
“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,” said AT&T senior executive vice president Wayne Watts, “and does it in a way that is fully transparent and consistent with the law and our contracts.”
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 data 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’s investigations take place behind closed doors and often result in out-of-court settlements. But the fact that this investigation led to a lawsuit suggests AT&T intends to fight regulators on what’s become a central part of its business: Providing and charging for access to mobile data.
The FTC can take action against company practices that it deems "unfair or deceptive." In this case, the agency said AT&T's public statements misleadingly contradicted its actual policies.
AT&T's top lawyer fired back Tuesday that the FTC's allegations were "baseless."
"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," said AT&T senior executive vice president Wayne Watts, "and does it in a way that is fully transparent and consistent with the law and our contracts."
Michael Weinberg, vice president of the consumer group Public Knowledge, disputed the characterization of the policy as a matter of network management.
"From a transparency standpoint," said Weinberg, "even if for the sake of argument you were to concede that the underlying network management was okay — and that's a big if — even if you were to concede that, there are a lot of ways they fell short on the disclosure of what they were doing to subscribers."
The lawsuit marks the second time this year that a major wireless carrier has been targeted for singling out its unlimited data users for special treatment. Earlier this year, the Federal Communications Commission went after Verizon for unveiling a plan to selectively slow down its unlimited data customers during periods of peak congestion. (Verizon later backed down on that plan.) The FCC said Tuesday that it had coordinated with the FTC on investigations into carriers slowing down unlimited data.
"Wireless customers across the country are complaining that their supposedly ‘unlimited’ data plans are not truly unlimited, because they are being throttled and they have not received appropriate notice," said Neil Grace, an FCC spokesman. "We encourage customers should contact the FCC if they are being throttled by AT&T or other cellular providers."
