Data-Throttling Case Survives AT&T Challenge

SAN FRANCISCO (CN) - A federal judge on Tuesday turned down AT&T's bid to dismiss a Federal Trade Commission action accusing it of throttling data speeds of its biggest users, finding that the wireless giant cannot hide behind the FTC Act's common-carrier exemption to duck the lawsuit.

This past October, the FTC sued AT&T Mobility for deceiving its smartphone customers by promising unlimited data plans and then throttling network speeds for consumers using as little as two gigabytes of data a month.

The FTC alleges that beginning in July 2011, AT&T began data throttling for users on its unlimited plans. Initially, the company set the data usage threshold at 2 gigabytes in dense markets like New York and San Francisco - capping the data speed at just 128 kilobytes per second in those cities.

The carrier adjusted its throttle in March 2012, setting its usage threshold at three gigs per billing cycle for customers on slower networks and five gigs for those on its premium LTE network. The FTC claims big data users on the slow networks see speeds of 256 kilobytes per second, while LTE customers enjoy 512 kps speeds.

AT&T has allegedly used its data throttle over 25 million times since 2011 on 3.5 million unique customers, the agency says.

AT&T asked U.S. District Judge Edward Chen to dismiss the FTC's suit for lack of jurisdiction, claiming it is a common carrier for the purposes of the agency's own Communcations Act and outside its regulatory purview.

But the FTC told Chen that the Communications Act makes "unambiguously clear" that AT&T is not a common carrier, since mobile data is not a common-carrier service. And while the Federal Communications Commission has plans to make broadband data a common carrier service, it hasn't yet - so the FTC retains authority over AT&T's mobile data practices, the agency said.

In response, AT&T argued that because it is a common carrier for some services it is a common carrier in all ways for the purposes of the FTC Act.

Chen disagreed in a 23-page ruling issued Tuesday, finding that as long as the FTC's action is aimed at AT&T's non-carrier services, the exemption does not apply.

"The gravamen of the FTC's complaint is based on AT&T's failure to disclose its throttling practice to certain customers," Chen wrote. "More specifically, in Count I, the FTC asserts that AT&T's throttling program is unfair because AT&T 'entered into numerous mobile data contracts that were advertised as providing access to unlimited mobile data, and that do not provide that AT&T may modify, diminish, or impair the service of customers who use more than a specified amount of data for permissible activities.' Thus, the FTC is not arguing in the case at bar that the throttling program is unfair per se; instead it challenges AT&T's failure to disclose the practice to certain customers and afford them alternative options."

Chen also noted that because the FTC Act is a remedial statute, it must be read broadly while applying its exemptions narrowly. Furthermore, the FTC has consistently exempted only the common-carrier activities of companies that provide both types of services, he said.

As for the FCC's plans to make broadband data a common carrier service, Chen said that agency's reclassification order expressly states it will be applied prospectively only.

Retroactive application would make it impossible for aggrieved AT&T customers to seek refunds, something only the FTC can do through the courts, Chen concluded.

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