AT&T Faces $100M Fine for Slowing Speeds

(CN) - Telecom giant AT&T will be fined $100 million for not adequately disclosing the throttling of mobile customers with unlimited data plans, the Federal Communications Commission announced Wednesday.

The agency said its investigation showed the Dallas-based company "severely slowed down the data speeds" for unlimited data customers and "failed to adequately notify its customers" of the reduction in violation of the 2010 Open Internet Transparency Rule.

"Consumers deserve to get what they pay for," FCC Chairman Tom Wheeler said in a statement. "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 said it will "vigorously dispute" the agency's claims.

"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," AT&T said in a statement. "We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC's disclosure requirements."

AT&T first offered the unlimited data plans in 2007 and has allowed existing users to renew their plan in spite of it no longer offering the plan to new customers. The FCC says AT&T implemented a "Maximum Bit Rate" policy in 2011, capping the maximum data speeds for unlimited customers after they use a predetermined amount of data within a billing cycle.

"Since 2011, the Commission has received thousands of complaints from AT&T's unlimited data plan customers stating that they were surprised and felt misled by AT&T's policy of intentionally reducing their speeds," the FCC said in a statement. "Consumers also complained about being locked into a long-term AT&T contract, subject to early termination fees, for an unlimited data plan that wasn't actually unlimited ... The customers who were subject to speed reductions were slowed for an average of 12 days per billing cycle, significantly impeding their ability to use common data applications such as GPS mapping or streaming video."

The agency's Transparency Rule requires broadband providers to publicly disclose sufficient and accurate information about their networks and services so consumers can make informed decisions about their Internet access. The rule went into effect in 2011 and has since been upheld by the D.C. Circuit in a federal lawsuit by Verizon.

The Federal Trade Commission sued AT&T in 2013 in San Francisco Federal Court, claiming the company fails to adequately disclose to customers when throttling occurs - in some cases, just 2 gigabytes in a billing cycle. A group of AT&T shareholders sued the company in Dallas County Court in 2014, angry that the FTC's claims exposes the company to billions of dollars in potential claims.

Follow @davejourno

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit