A divided FCC on Wednesday fined AT&T Mobility $100 million for offering “unlimited” data plans and then slowing access speed after consumers hit a certain amount. But AT&T said it will fight the fine.
Also, two of the five FCC commissioners dissented from the move.
The Federal Communications Commission, which regulates the telecommunications industry, says the company misled consumers with the plans. Officials say the company would slow speeds dramatically at times, to levels lower than advertised.
“Consumers deserve to get what they pay for,” said FCC Chairman Tom Wheeler. “Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.”
AT&T, which already is arguing with the FCC about Internet “net neutrality” and regulation and also is seeking FCC approval of its merger with DirecTV, said in a statement that it will “vigorously dispute” the allegations.
The company says it has been upfront with consumers and that the FCC had “known for years” that major carriers slow data as a reasonable way to manage their networks.
“The FCC has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it,” the company said in a statement released to reporters. “We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”
The hefty fine by the FCC comes on the heels of a federal lawsuit filed against the company last fall. The Federal Trade Commission, which enforces rules against deceptive advertising, said it wants to refund customers who were offered the unlimited data packages, only to be given slower data speeds than advertised. That lawsuit is still working its way through a federal court in California.
The FCC case
Earlier this year, the FTC accused TracFone Wireless of similar tactics. TracFone agreed to settle the case for $40 million.
“AT&T began offering unlimited data plans in 2007, allowing customers to use unrestricted amounts of data. Although the company no longer offers unlimited plans to new customers, it allows current unlimited customers to renew their plans and has sold millions of existing unlimited customers new term contracts for data plans that continue to be labeled as ‘unlimited,'” the FCC said.
“In 2011, AT&T implemented a ‘Maximum Bit Rate’ policy and capped the maximum data speeds for unlimited customers after they used a set amount of data within a billing cycle. The capped speeds were much slower than the normal network speeds AT&T advertised and significantly impaired the ability of AT&T customers to access the Internet or use data
applications for the remainder of the billing cycle.”
The action violated the 2010 Open Internet Transparency Rule by “falsely labeling these plans as ‘unlimited’ and by failing to sufficiently inform customers of the maximum speed they would receive under the Maximum Bit Rate policy.”
However, two of the five FCC commissioners disagreed.
Declared Ajit Paj:
“Because the Commission simply ignores many of the disclosures AT&T made; because it refuses to grapple with the few disclosures it does acknowledge; because it essentially rewrites the transparency rule ex post by imposing specific requirements found nowhere in the 2010 Net Neutrality Order; because it disregards specific language in that order and related precedents that condone AT&T’s conduct; because the penalty assessed is drawn out of thin air; in short, because the justice dispensed here condemns a private actor not only in innocence but also in ignorance, I dissent.”
Michael O’Reilly added in a separate statement:
“In fact, AT&T took several steps to ensure that its unlimited data subscribers were aware of the MBR [maximum bit rate] policy. Yet the Commission casts these efforts aside, and relies on a focus group study finding that consumers generally did not support the idea of intentionally slowing traffic to conclude that AT&T meant to deceive its subscribers. Would a company trying to mislead its subscribers create a website, send e-mails and text messages, and add language to its customer agreement about this very policy? I don’t think so.”