Two U.S. government agencies are suing AT&T Mobility for allegedly throttling down service speeds for at least 3.5 million mobile phone customers despite contracts that allowed the customers to enjoy unlimited data use under their service plans.
In a 14-page lawsuit, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) allege that the AT&T would throttle, or reduce the data speeds, of a customer's mobile device, which allegedly violated the service terms of unlimited data plan holders. The company allegedly failed to adequately explain to customers that if they would reach a certain amount of data use in each billing period that they could be subject to service slowdowns, the government argued.
"AT&T promised its customers 'unlimited' data, and in many instances, it has failed to deliver on that promise," FTC Chairwoman Edith Ramirez said in an Oct. 28 statement. "The issue here is simple: 'unlimited' means unlimited."
The data speed reductions by AT&T were in some cases by up to nearly 90 percent for users, according to the FTC.
"AT&T's marketing materials emphasized the 'unlimited' amount of data that would be available to consumers who signed up for its unlimited plans," the agency stated. "The complaint alleges that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars."
AT&T's alleged practices in connection with throttling data began in 2011 for unlimited data plan customers after they used as little as 2GB of data in a billing period, the government stated. "Thus far, according to the FTC, AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times."
The FTC received consumer complaints about the practice, which eventually led to the lawsuit by the FTC and the FCC.
"AT&T documents also showed that the company received thousands of complaints about the slow data speeds under the throttling program," according to the FTC. "Some consumers quoted the definition of the word 'unlimited,' while others called AT&T's throttling program a 'bait and switch.' Many consumers also complained about the effect the throttling program had on their ability to use GPS navigation, watch streaming videos, listen to streaming music and browse the Web."
The two-count lawsuit, filed in the U.S. District Court for the Northern District of California, San Francisco Division, charges AT&T with one count of maintaining an "Unfair Mobile Data Throttling Program" and one count of "Deceptive Failure to Disclose Mobile Data Throttling Program."
The government alleges 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 program to consumers who renewed their unlimited data plans," according to the complaint.
In response to the government's lawsuit, Wayne Watts, AT&T's senior executive vice president and general counsel, told eWEEK in an email reply on Oct. 29 that the lawsuit's "allegations are baseless" and have nothing to do with the substance of AT&T's network management 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, and does it in a way that is fully transparent and consistent with the law and our contracts," wrote Watts. "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 program was implemented. In addition, this program has affected only about 3 percent of our customers, and before any customer is affected, they are also notified by text message."
In an unrelated case, AT&T Mobility was fined a record $105 million by the FCC and FTC earlier this month for illegally "cramming" customer cell phone bills with extra, unauthorized charges and for refusing to adequately remove the charges when users complained. That $105 million fine included $80 million for direct refunds to customers as well as $25 million in penalties to be paid to the FCC, the FTC and to attorneys general across the United States. It was the largest fine in the history of the FCC, according to the agency.