FTC Sues AT&T for Throttling Subscribers on Unlimited Data Plans

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The Federal Trade Commission on Tuesday accused AT&T of shenanigans by slowing down, or “throttling,” the data speeds of wireless customers who subscribed to unlimited data plans.

AT&T Mobility failed to adequately reveal to customers that they would suffer a reduction in data speeds if they used a certain amount of data in a billing cycle, and a number of customers using 3G devices have suffered between a 65 percent and 90 percentage reduction in data speeds under AT&T’s throttling programs, according to a lawsuit filed against AT&T by the FTC.

“As a result, under both versions, many everyday applications, such as Web browsing, GPS navigation and streaming video, are significantly slower, and in some cases are severely impaired or rendered practically inoperable,” FTC claimed in the lawsuit.

To date, AT&T has reduced the speeds of 3.5 million subscribers on unlimited plans more than 25 million times, according to the government agency.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” FTC Chairwoman Edith Ramirez said Tuesday in a press release announcing the lawsuit. “The issue here is simple: ‘unlimited’ means unlimited.”

Responding to the lawsuit, an AT&T executive characterized FTC’s allegations as “baseless” and said the company has been honest with its customers from the get-go.

Wayne Watts, AT&T’s senior executive vice president and general counsel, referenced a July 29, 2011, press release in which AT&T disclosed plans to reduce data for a small percentage of smartphone customers who were the heaviest users in a billing cycle. AT&T’s program has only impacted about 3 percent of customers, and subscribers are informed via text message before the changes take place, Watts said.

AT&T began offering unlimited data plans to iPhone users seven years ago for $20 per month, according to the FTC. That was when AT&T had an exclusive right with Apple to carry the device. AT&T increased the fee to $30 per month in 2008 when the iPhone 3G was released, and two years later, the company discontinued offering unlimited data plans but grandfathered in the millions of customers who had already subscribed to an unlimited data plan, FTC said.

“In the advertising, sale and renewal of mobile data plans, Defendant [AT&T] entered into numerous mobile data contracts that were advertised as providing access to unlimited mobile data, and that do not provide that Defendant may modify, diminish, or impair the service of customers who use more than a specified amount of data for permissible activities,” FTC alleged in the lawsuit.

FTC filed its complaint against AT&T in the U.S. District Court for the Northern District of California, San Francisco Division. The agency accused AT&T of violating the FTC Act by changing the terms of subscribers’ unlimited data plans while they were still under contract, and by neglecting to adequately reveal the throttling program to consumers who renewed their unlimited data plans.

Thousands of customers have submitted written complaints concerning AT&T’s throttling program to AT&T, the Better Business Bureau and government agencies, the lawsuit said. AT&T also received more than 190,000 customer calls in connection with the program, according to the FTC.

“No company should promise one thing and deliver another,” said Michael Weinberg, Vice President of Public Knowledge, a consumer advocacy group, in a statement commenting on the lawsuit. “We support the FTC in stepping up to prevent data throttling of ‘unlimited’ plans.”

On a website detailing its network management practices, AT&T explains “customers on a 3G or 4G smartphone who have exceeded 3 gigabytes of data in a billing period may experience reduced speeds when using data services at times and in areas that are experiencing network congestion.”

“Customers on a 4G LTE smartphone will experience reduced speeds once their usage in a billing cycle exceeds 5 gigabytes of data,” AT&T notes.