AT&T Charged $100 Million For Throttling Data Plans

AT&T, one of America’s largest wireless service providers, was charged a fine of $100 million by the FCC (Federal Communications Commission), America’s regulatory agency of interstate and international communication.

As per the report, AT&T started offering unlimited data plans to its customers from mid 2007, with the highlight being that it did not throttle users after a certain data cap, in effect, providing a consistent experience regarding speeds. While the company stopped offering this unlimited data plan to new customers in 2010, old customers could be grandfathered on term or monthly basis.

However, in 2011, the company implemented the Maximum Bit Rate policy on unlimited data plans, according to which, customers would be throttled down once they reached a set amount of data in a billing cycle (5GB for LTE customers, and 3GB for 3G and 4G customers).

What’s more, the report states that the post-cap speeds offered to the customers under the MBR policy were “orders of magnitude slower than the normal network speeds AT&T advertises”. The report goes on to give examples on the advertised LTE speeds being 5-12 Mbps while post-cap speeds were throttled down to a meagre 512 kbps, while the non-LTE speeds were advertised as 1.7-6 Mbps but were throttled down to 256 kbps.

These reduced speeds—256 kbps or 512 kbps—significantly impaired the ability of AT&T’s customers to use their data service. Although a customer may be able to send an email at these speeds, he or she may find it impossible to use AT&T’s data service in ways that most people today use smartphones—for instance, using mapping applications to get from one place to the next, streaming online video to catch up on television or news, or using video chat applications to stay connected with friends and family. A minimum download speed of approximately 700 kbps is necessary to use FaceTime or another video calling application, and 3.5 Mbps is necessary to watch standard-definition television. Further, at 512 kbps, a ten megabyte file would take nearly three minutes to download. At AT&T’s widely advertised speed of 12 Mbps, it would take less than 10 seconds.

The report further goes on state that on an average, customers were subjected to throttled speeds for 12 days per billing cycle. Further aggravating the complaint was the fact that this throttling was intentional and not directly based off network congestion and affected the remainder of the billing cycle, while the current network congestion based throttling was put into effect only in June 2014.

In its defense, AT&T stated that the change in the MBR policy for unlimited data users was notified through various means, including a press release and update to its website. AT&T also sent text message to these unlimited plan users when they first reached their data cap informing them about the capped speeds and directing to the webpage with updated information about the MBR policy. However, the FCC noted that this text message was not sent subsequent times upon reaching the data cap irrespective of the time between two such instances.

The FCC states that it has received thousands of complaints from customers about AT&T’s unlimited data plans, even after a fair few years have passed since the change in MBR policy and the responsibility of full disclosure to concerned customers. Allegations range from having speeds intentionally reduced to misrepresentation and not providing services that people had paid for. Snippets from the complaints included in the report:

I entered into a contract believing I was paying for unlimited data at 4[G] speeds. Providing me less than that seems disingenuous at the least. They say this is because of overloaded networks but then offer ‘double data’ promotions up to 100 [gigabytes] for new customers.

I have received text messages from AT&T stating my data would be throttled back if I went over 3GB . . . with no standard reasoning other than [I] have a unlimited data account . . . I was not told of this ‘throttling’ when I signed this contract.

After I purchased these plans, A[T]&T changed their policy about what ‘unlimited’ meant. They would begin to throttle my connection if they felt a set amount of data [was exceeded] during a specific billing cycle. I disagreed with this policy since it was not what I had signed up for.

 

The FCC’s investigation and discussion led to the decision that AT&T willfully violated rules of the FCC by “using the term “unlimited” in a misleading and inaccurate way to label a data plan that was in fact subject to prolonged speed reductions after a customer used a set amount of data” as well as “failing to disclose the data throughput speed caps it imposed on customers under the MBR policy“. The disclosures that AT&T did make regarding the change in the MBR policy were found to be inadequate and in violation of the Open Internet Transparency Rule, 2010 [1]. Collectively, the misleading disclosures and non-disclosures made regarding these unlimited data plans “impaired consumers’ ability to make informed choices regarding the purchase and use of broadband services and impeded competition.”

The FCC concluded that every time AT&T described their “unlimited” plans as such to a customer, it misrepresented the nature of its service. Another conclusion that came about was that AT&T’s misleading use of the term “unlimited” to label its plan obstructed fair competition as it prevented customers from fully comparing AT&T’s plans to other similar plans from competitors.

While AT&T describes its plan as “unlimited,” its competitors describe almost identical plans as offering “unlimited talk and text” with a set amount of LTE data. Without adequate disclosures, the average consumer would consider these plans to be significantly different, when in fact they are not. A consumer was likely to mistakenly assume that the AT&T “unlimited” plan offers more high-speed data than the competing plan, thus hindering fair competition between AT&T and its competitors. Continuing to offer the plan to renewing customers under the original “unlimited” label falsely advertised that the data plan was the same plan customers originally bought before the MBR policy was implemented.

There are more violations stated in the 31 page long report, which can be found here.

Corrective Action

For corrective action, the FCC has ruled that AT&T’s action violated the Transparency Rule [1], and as a result, the company has to first correct all misinformation regarding its unlimited plans. Then, the company also has to individually inform all of its unlimited data plan customers that the disclosures were in violation and have since been corrected. Furthermore, AT&T also has to inform these users that those who choose to cancel such “unlimited” plans after reading through the revised disclosures can do so without any penalty.

Also, in order to deter future violations, the FCC has also imposed a penalty of $100 Million as sufficient deterrent and as punishment for clear knowledge of misleading customers over a prolonged period of time.

[1] The Open Internet Transparency Rule was adopted by the FCC in 2010. The rule mandates that broadband access providers should disclose accurate information sufficient to enable consumers to make informed choices regarding their use of broadband Internet services and to ensure they are not misled or surprised by the quality or cost of the services they actually receive.

As a customer, it is reassuring to see that a government regulatory authority has stepped up for the greater good of consumer interests. Such a move will only help retain the faith of the general public on regulatory authorities and discourage malpractices in the communications industry.

What do you think of this decision by the FCC? Was justice finally served to the customers? Or is it another case of too-little-too-late? Let us know your thoughts in the comments below!

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