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FTC Slaps AT&T With Throttling Lawsuit

Sarah Thomas
10/28/2014

Weeks after Verizon gave in to FCC criticism and canceled its LTE throttling plans, a different government agency is looking to force AT&T to do the same.

The Federal Trade Commission has filed a federal court complaint against AT&T Inc. (NYSE: T), alleging the carrier is misleading its customers by charging them for unlimited data, but throttling speeds once a certain cap is reached. AT&T, like most of its competitors, has done this for years now, but the FTC allegation is that it misled these unlimited-data customers by not adequately disclosing the policy in marketing, when consumers sign up, or when they renew their plans.

"AT&T did not adequately disclose its throttling program and did not disclose the extent to which it would be reducing speeds," FTC Chairwoman Edith Ramirez said on a call with media on Tuesday. "And when consumers would renew their contract, they did not provide adequate disclosures on the impact the program would have."

The FTC called AT&T's policy "severe" and said that it kicks in after as little as 2GB of data is used in a billing period, often reducing speeds by 80% to 90%.

AT&T, meanwhile, says it only affects around 3% of customers who use more than 5GB of LTE data or 3GB of 3G data, but the FTC claims at least 3.5 million unique customers have been throttled more than 25 million times since the practice began in 2011. Ramirez said that customers using iPhones have been most affected, but that the issue impacts others too.


For more on network optimization, head over to our dedicated SPIT content channel here on Light Reading.


The FTC said it worked closely with the Federal Communications Commission (FCC) to approve this complaint, filed in the US District Court for the Northern District of California, San Francisco Division. It is looking for monetary redress for affected customers.

The FCC itself went after Verizon Wireless for the same reason this year, causing it to end its "Network Optimization" policy for LTE throttling, although it continues to throttle 3G data. (See Verizon Nixes LTE Throttling After Backlash, Verizon Applies 3G Throttling Policy to LTE and FCC Boss 'Disturbed' By Verizon Throttling .)

AT&T General Counsel Wayne Watts called the FTC's allegations against it "baseless" and "baffling" in a statement supplied to Light Reading. In addition to a press release announcing the policy, he said AT&T also sends text messages to affected customers before their cap is reached.

"We have been completely transparent with customers since the very beginning," Watts said in the statement. "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% of our customers, and before any customer is affected, they are also notified by text message."

AT&T also said it uses throttling to best manage its network resources, but the FTC claims its investigations show the program has no direct relation to network congestion.

So what should AT&T have done? When asked several times on the call with media, the FTC's Ramirez did not elaborate on what else the Commission would have liked the operator to do to disclose the policy, maintaining only that the carrier's measures were inadequate.

— Sarah Reedy, Senior Editor, Light Reading

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Phil_Britt
Phil_Britt
10/31/2014 | 2:06:33 PM
Re: AT&T - Caught with Pants Down
True, there are numerous lawyers that look for class-action opportunities that deepen their pockets, but do little for the consumer. And no matter how often you tell a consumer something, some will claim ignorance. One thing that would help would be to put disclosures in a typeface large enough for someone to actually read.
pcharles09
pcharles09
10/30/2014 | 11:08:13 PM
Re: AT&T - Caught with Pants Down
@kq4ym,

We all know the consumer is not the focal point. It's $$$. When it comes down to it, even if we were to have a class action suit against AT&T, we'd all get a check in the mail for $6-7, which doesn't even cover an overage charge.
thebulk
thebulk
10/29/2014 | 5:54:44 PM
Re: common place
That in itself is a very scary thought. ;-)
mendyk
mendyk
10/29/2014 | 5:14:29 PM
Re: common place
I think that makes you an optimist!
thebulk
thebulk
10/29/2014 | 5:10:42 PM
Re: common place
@mendyk, i am not sure service quaility could drop any more. 
mendyk
mendyk
10/29/2014 | 5:05:40 PM
Re: common place
The problem is "investors" are programmed to expect certain outcomes, with market share being a major indicator of health and success. The reality is that companies can go and have gone out of business chasing market share. That's not likely to happen with mobile operators but continued obsession with subscriber growth can lead to further deterioration in service quality if networks aren't being improved to keep pace. This is kind of why operators see wi-fi offload as a necessary evil, at least for now.
thebulk
thebulk
10/29/2014 | 4:40:13 PM
Re: common place
I would say it seems like a catch 22, but in many ways a self inflicted one... perhaps one they do not wnat to find a way out of. 
mendyk
mendyk
10/29/2014 | 4:32:15 PM
Re: common place
In a way, yes, it's surprising because ultimately network performance is going to determine winners and losers in mobile. It looks like some (many? all?) operators are hoping that promised new technologies will solve the performance issue, and there's some reason to believe that will happen. But there's also reason to think demand will continue to grow at a huge clip, and it could be that that growth will simply outrun any gains that technology can provide. I wonder if at some point an operator will decide to focus on delivering highly reliable, high bandwidth service at a premium price, rather than chase after market share with low-price offers that end up creating performance problems that necessitate throttling in the first place.
thebulk
thebulk
10/29/2014 | 4:20:10 PM
Re: common place
@mendyk, you would expect to, but are you surprised that you do not? 
kq4ym
kq4ym
10/29/2014 | 12:32:36 PM
Re: AT&T - Caught with Pants Down
It very interesting that AT&T would claim so defensively that the lawsuit is baffling. I would think various agencies if not their own lawyers would have pre-warned them of rough waters ahead on the throttling issue. And how can there be such wide differencec in what the government says are the facts vs. AT&T? Again, the lawyers will have a field day, and customers maybe not so much even when the smoke clears.
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