On Tuesday, the Federal Trade Commission (“FTC”) filed suit in the U.S. District Court for the Northern District of California against AT&T Mobility, LLC (“AT&T”) for engaging in unfair and deceptive acts in violation of the FTC Act by throttling the data usage of customers on its “unlimited” mobile data plans. In July 2011, AT&T announced that, effective October 1st that year, it would begin throttling data usage of unlimited data plan customers “once their usage in a billing cycle reaches the level that puts them among the top 5 percent of heaviest data users.” AT&T promised that speeds would be restored at the start of the customer’s next billing cycle and that a customer would receive “multiple notices” and be afforded a “grace period” before throttling kicked in. In March 2012, AT&T revised its throttling program, setting standard nationwide data throttling thresholds: 3 GB per billing cycle for devices on the company’s 3G network and 5 GB per billing cycle for devices on AT&T’s LTE network.
The FTC alleges that customers who have experienced data throttling have endured “drastically reduced speeds” under both throttling programs. According to the complaint, 3.5 million customers have experienced data throttling, and thousands have lodged complaints. The FTC notes that AT&T’s contracts do not identify any specified amount of data usage as a prohibited activity warranting a modification or disconnection of service, and that AT&T failed to inform customers at renewal of the limitations under the data throttling program.
The FTC claims that AT&T’s practices do not relate to real-time network congestion, and that AT&T could have used other means to manage network capacity, such as by requiring existing unlimited data customers to switch to a tiered data plan at renewal. Importantly, the complaint suggests other alternatives to the current program would include “introducing its throttling program at renewal, with disclosures at point of sale” or adopting “limited, narrowly tailored throttling programs that are consistent with [AT&T’s] contracts, advertising, and other public disclosures.” The FTC also notes that AT&T unfairly does not allow customers to cancel service after being subject to data throttling, without paying hefty early termination fees.
The FTC seeks injunctive relief, its costs in bringing the action, and other relief as the court deems appropriate, including, but not limited to rescission of contracts, payment of restitution, and issuance of refunds to customers. AT&T responded with a statement claiming that “[t]he FTC’s allegations are baseless and have nothing to do with the substance of our network management program” and that “like all major wireless providers, [AT&T] manages its network resources to provide the best possible service to all customers, and does it in a way that is fully transparent and consistent with the law and [its] contracts.”
If you have any questions regarding the issues addressed in this Advisory, please contact Jackie Hankins at jrh@commlawgroup.com.
