The Federal Communications Commission is planning to whack wireless leader AT&T with the largest fine the Commission has ever levied, some $100 million, a senior FCC official stated in media briefing on June 17.
The proposed fine, outlined in a Notice of Apparent Liability, is for alleged violations of the FCC’s Transparency Rule. The FCC is asserting that the company violated that rule when it limited the wireless speeds of users paying for unlimited data plans to a very slow 512KB per second once that user had used 5GB of data in a billing period.
For its part, AT&T disagrees with the FCC. “We will vigorously dispute the FCC’s assertions,” AT&T spokesperson Jim Greer told eWEEK in an email.
“The FCC has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it. We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”
In its presentation to the FCC, the company said that the FCC had specifically allowed what it calls its Maximum Bit Rate Program as a way to handle network congestion. The FCC doesn’t dispute that, but it asserts that it isn’t fining AT&T for this practice, it’s penalizing AT&T for the lack of notice to customers and the fact that by calling it’s plan unlimited, they misled customers when they placed limits on it.
“Unlimited means unlimited,” Travis LeBlanc, the FCC’s chief of the enforcement bureau, said in a prepared statement in an FCC press release. “As today’s action demonstrates, the commission is committed to holding accountable those broadband providers who fail to be fully transparent about data limits.”
It is apparent that AT&T and the FCC aren’t actually talking about the same thing. AT&T is talking about a means of handling network congestion, while the FCC is talking about transparency. AT&T, however, claims that it has notified customers about the data limits. The FCC says that it has not.
While this will ultimately boil down to what constitutes notice to customers, this is one of those cases where there’s truth on both sides, but as is sometimes the case with wireless companies and the public, exactly what the company means may not match what the customer thinks they mean.
When Apple’s iPhone first came out and AT&T was the only carrier to sell it, AT&T started offering what it called unlimited data plans. However, the carrier soon learned that iPhone users can suck up truly astonishing amount of data.
The company discovered after a couple of years experience that about 1 percent of its customers were using around 25 percent of its data bandwidth.
FCC to Fine AT&T $100 Million for Lying to Customers About Data Plans
That’s when AT&T stopped offering unlimited data, instead offering plans with a data cap. Customers who wanted more data could buy a higher data cap.
But the customers who had already purchased an unlimited data plan were grandfathered in. They were given and paid for unlimited data—or so they thought.
What really happened is that AT&T issued a press release that announced its revised data plans and said rather vaguely that customers with unlimited data plans might be affected. The company also sent some notices to its customers about the plan.
But those notices didn’t mention how much data was allowed. In particular, they didn’t say what would happen when customers exceeded the 5 GB limit. In addition, AT&T continued to call those grandfathered unlimited plans “unlimited” when they clearly weren’t.
Meanwhile, back in Washington a familiar pattern has emerged. The enforcement action was approved by three FCC Commissioners and two Commissioners dissented. Once again, the three Commissioners who agreed with the action are the Democrat appointees, while the two dissenters are the Republicans. Both of the dissents said that the fine was out of proportion to the violation.
However, when I asked a question about the size of the fine during the FCC press conference, I was told that the amount could have been substantially larger and that the amount was moderated because it was being done for the first time.
A senior FCC official speaking on background said that the amount of the fine was small in relation to the billions of dollars that AT&T reaped from those unlimited contracts that weren’t unlimited. His comment was that the FCC wanted the fine to be large enough that AT&T didn’t see it as a “cost of doing business.”
So what’s really going on here? It would appear from some background comments that the FCC has been trying to negotiate a settlement with AT&T, and that the carrier hasn’t been willing to meet the Commission’s demands.
The $100 million fine isn’t really what the FCC expects to get from AT&T. Rather, it’s the government’s way of getting AT&T’s attention and making sure the carrier knows it’s serious.
What will likely happen now is that negotiations will resume after a required amount of legal theater in which both sides make stuffy pronouncements, wave their arms the required number of times, and loudly assert the righteousness of their position and then they will quietly come to an agreement.
Once that happens, AT&T will pay some nominal fine, unlimited customers will either get a real unlimited plan or it will stop being called an unlimited plan or those customers who need access to unlimited data will switch to another carrier.
Since all of this insanity was ultimately about customer retention, AT&T will likely return the unlimited plan to being really unlimited and then start charging accordingly.