The Federal Communications Commission said Wednesday it plans to fine AT&T Mobility $100 million for misleading customers about its "unlimited" mobile data plans, imposing the agency's largest proposed fine ever in alleging that the carrier "severely" slowed down the data speeds for customers with such plans.
AT&T failed to
adequately notify its customers that they could receive speeds slower than the
normal network speeds AT&T advertised, the FCC said. AT&T's actions
also violated the FCC's 2010 Open Internet Order, a set of rules that regulate
telecom service providers' conduct, the agency said.
If customers used more
than 5 gigabytes of data for the month, the carrier slowed its data
transmission speeds to levels that made using mobile apps difficult or
impossible, said an FCC official, who requested anonymity to discuss the
agency's actions in detail. AT&T no longer sells unlimited plans to new
customers, but those who subscribed to the plans when they were still in market
can continue to claim their right to use as much data as they want.
With demand for mobile
data exploding, wireless carriers have tightened access to their networks for
heavy users as a way to manage traffic and boost revenue.
In recent years,
they've introduced tier-pricing for varying levels of data allotments, charging
higher fees for those who go over monthly limits. And for the carriers that
still offer "unlimited" data plans, cutting back on speeds after a
certain amount of used data — a practice known as "throttling" — has
become more common, though the practice typically comes with a consumer notice.
The FCC's action
follows a lawsuit filed by the Federal Trade Commission in October, charging
AT&T for allegedly violating the FTC Act by failing to adequately disclose
the throttling of unlimited data plans. The case is still ongoing.
Shares of AT&T
rose 0.32% Wednesday to $34.80.
In a statement,
AT&T said it "will vigorously dispute the FCC's assertions."
"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. "We have
been fully transparent with our customers, providing notice in multiple ways
and going well beyond the FCC's disclosure requirements."
In a note posted on its website,
dated July 29, 2011, AT&T told customers that smartphone customers with
unlimited data plans "may experience reduced speeds once their usage in a
billing cycle reaches the level that puts them among the top 5% of heaviest
data users."
The FCC official said
the disclosure wasn't sufficient as it lacked details on when the slowdown
kicks in and to what speeds it will be reduced.
"It's important
to understand that this is not an exercise in being clever," said Harold
Feld, senior vice president of consumer advocacy group Public Knowledge.
"The FCC imposes this because people increasingly depend on broadband.
This is not a washer on a limited warranty. This is not a game."
With the FCC's
issuance of its "notice of apparent liability," AT&T has 30 days
to respond. The FCC will review the response and issue its final resolution.
AT&T then would be required to pay the fine.
"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."
In a dissenting
statement, Michael O'Rielly, one of five FCC commissioners, said the FCC's
finding that AT&T violated the Open Internet Order — particularly a
provision that requires telecom companies to clearly notify customers of
service terms — "is tenuous at best."
"The 2010 Open
Internet Order created a flexible approach by which broadband providers could
determine the best means to inform their subscribers of their service terms and
network practices," O'Rielly wrote. "However, here we are imposing a
rigid standard that is based on a subjective opinion of what notification, in
hindsight, should have been provided."
AT&T, which
introduced unlimited data plans in 2007, implemented its "maximum bit data
rate" policy four years later, capping the maximum data speeds for
unlimited customers after a certain amount of gigabytes are used, the FCC said.
The customers who were
subject to speed reductions were slowed for an average of 12 days per billing
cycle, it said.
With plans to phase
out its unlimited data plans, AT&T conducted focus group studies in 2009
and 2010 and found that customers reacted negatively to data caps, the FCC
official said.
Since AT&T's
change in 2011, the FCC says it has received "thousands of
complaints" from AT&T's unlimited data customers. Customers also
complained about being locked into long-term contracts on unlimited data plans
that throttle and having to pay early termination fees if they wanted to cancel
them.
The FCC will review
the option of possibly allowing such customers to abandon their AT&T
contracts without a penalty, the FCC official said
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