AT&T to Reimburse Grandfathered Subscribrs Wrongly Kicked Off Plans

UPDATED: AT&T, after the FCC found it to have wrongly transitioned some customers to new plans, will reimburse those customers and pay the FCC $700,000.  

AT&T has acknowledged that in 2009 it wrongly began switching some customers who were entitled to remain on pay-as-you-go data plans to monthly wireless data plans. As part of a mea culpa, following an investigation by the Federal Communications Commission, it has agreed to pay the FCC $700,000 and to refund excess charges to customers.

Customers may have overpaid by as much as $25 or $35 a month, depending on their data usage, the FCC said in a Nov. 6 statement.

"Today's action sends a clear signal that wireless carriers can't wrongfully charge consumers," said FCC Chairman Julius Genachowski. "These strong FCC accountability measures will ensure customers are not overcharged. I am pleased that AT&T is taking the appropriate steps to resolve this issue."

When AT&T made monthly plans mandatory in September 2009, smartphone customers who had pay-as-you-go plans and kept their phones had the option to keep their data plans. These users were dubbed "Grandfathered Subscribers” and the phones "Grandfathered Devices." Should they have upgraded their devices, they would have broken the "Grandfather Code" and been ineligible to stick with the plan.

The FCC, in a consent decree, explained:

[AT&T] began mechanized enforcement of its Monthly Data Plan requirements on November 1, 2009. As part of the Company’s mechanized enforcement process, AT&T added a Monthly Data Plan to the accounts of Smartphone subscribers whose accounts did not bear the Grandfather Code and who transmitted and/or received billable data on AT&T’s wireless network if those subscribers did not already have a Monthly Data Plan. Shortly after AT&T began mechanized enforcement of its Monthly Data Plan requirements, the FCC began receiving complaints from AT&T subscribers about AT&T’s addition of Monthly Data Plans to their accounts. Some of the complaining subscribers alleged that they were, or otherwise appeared to be, Grandfathered Subscribers who should not have been subject to AT&T’s mandatory Monthly Data Plan requirement.

Under the terms of the decree, AT&T has also agreed to a compliance plan that includes notifying consumers, training customer care representatives, periodically submitting compliance reports to the FCC and conducting searches of its records to "identify improperly switched consumers and ensure appropriate funds."

Michele Ellison, chief of the FCC's Enforcement Bureau, added to the statement that the FCC strongly encourages AT&T subscribers to "check their bills closely" and contact the carrier if they spot any overcharges related to wireless data.

AT&T, in a response to the FCC's Nov. 6 release of the decree, said that it involves "less than 0.03 percent of our wireless customers, who inadvertently had a monthly data plan added to their account after getting a new smartphone through a warranty or insurance exchange or after relocating."
Marty Richter, a spokesperson for AT&T, continued:

We had already discovered and corrected the issue by Nov. 2010, and had given refunds to customers who contacted us. Based on a review of our refund process, we believe a vast majority of those customers affected by the billing error have already been made whole. But as part of the decree we’ll be providing a bill-page notice to affected customers, offering refunds, and giving them the option to return to a data pay-per-use plan, or to have a data block applied to their phone.

Today, the majority of AT&T customers are on tiered pricing plans—roughly two-thirds of them, the carrier said during a Nov. 7 event—while more than 2 million have moved to its new shared data plans, in which a contract is connected to a data allotment that's shared by several devices, such as smartphones and tablets.

At the event, AT&T also introduced its Project Velocity IP (VIP) investment plan, which includes spending $14 billion on wireless and wireline initiatives over the next three years. AT&T expects that that investment, which will go to everything from building out its LTE and U-verse offerings to future offerings like the "Connected Car," will help it to grow revenue and meet customers' growing needs for more wireless data.

At one point during the event, AT&T CEO of Mobility Ralph de la Vega remarked, "It's going to be raining tablets, [which represents] a tremendous growth opportunity for us to monetize that data."

Editor's Note: This article has been updated to include a statement from AT&T.