WASHINGTON, DC, October 29, 2014 – On Tuesday, officials with the Federal Trade Commission (FTC) sued AT&T, America’s second largest cellular provider, for allegedly misleading customers by selling them “unlimited” data plans that were then “throttled” by the company by slowing internet speeds of customers who consumed an excess of data past a certain point.
The FTC claims AT&T has used this practice since 2011 and estimates that it has affected over 3.5 million customers on at least 25 million occasions.
Customers experienced these data slow downs an average of 12 days a month and in some cases internet speeds were cut up to 90%. The FTC reportedly received thousands of complaints about the practice.
FTC Chairwoman Edith Ramirez stated, “AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise. The issue here is simple: ‘unlimited’ means unlimited.”
According to the FTC’s complaint, AT&T emphasized the unlimited amount of data available to consumers who signed up for their unlimited plans. When these unlimited plan consumers renewed their contracts the company failed to inform them of the throttling program. Customers who later attempted to cancel their contracts after experiencing the throttling were charged early termination fees, often amounting to several hundred dollars.
Ramirez stated, “They stopped providing the service that customers understood they had purchased when they entered into their contract. Customers would be subject to an early termination fee if they wanted to get out of their existing contract.”
In a statement AT&T’s general counsel Wayne Watts called the FTC’s complaint “baseless” and stated, “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.”
Watts also stated, “ 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.”
However, the FTC found in its investigation that AT&T was aware consumers found the throttling practice inconsistent with the promise of unlimited data. According to the FTC’s complaint, AT&T received over 190,000 customer calls complaining about the throttling practice. Consumers in AT&T focus groups strongly objected to the practice and felt “unlimited should mean unlimited.”
After the findings of the focus group, AT&T’s own researchers urged the company’s marketers to change their verbiage, cautioning that “saying less is more” when selling related services.
The FTC worked closely with the Federal Communications Commission on this issue. The FTC voted 5-0 authorizing the staff to file the complaint. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco Division.
The official complaint charges state 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.”