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FTC Sues AT&T Over Bandwidth-Throttled 'Unlimited' Data Plans

By Mark Wilson, Esq. | Last updated on

That "unlimited" data plan your cell phone provider offers is probably anything but, and the FTC isn't happy about it -- so unhappy that it's filed a complaint in federal court.

See, back in 2007, when AT&T was the only carrier offering the iPhone, it enticed customers with promises of "unlimited" data. Because, really, how much data could people possibly use?

Turns out it was a lot. Previous "smart" phones had Internet capability, but those Web browsers were simple training-wheels browsers, and there was no other reason to use cell data other than for email. The iPhone, with its functional browser and applications, changed all that -- and then streaming video changed all that some more.

That Depends on Your Definition of 'Unlimited'

In 2010, AT&T stopped offering an unlimited data plan but allowed people who had the unlimited plan to keep it in lieu of forcing them into a tiered plan. According to the FTC's complaint, about 2011, AT&T allegedly began implementing a company policy of throttling the connection speed of unlimited data users when their monthly data usage went over a certain threshold.

The FTC claims that AT&T didn't tell users what this threshold was when they reached it. The only notification the FTC says AT&T provided was a statement in customers' July or August 2011 phone bill saying that data caps would be instituted for the top 5 percent of data users, though it also said those users would be notified that they were in the top 5 percent.

How bad could it be? AT&T throttles users' bandwidth by as much as 90 percent if they exceed the unknowable, unilateral data cap. There is no throttling if a user signs up for a tiered plan.

Add This Complaint to the Pile

The FTC is calling this a deceptive trade practice. It has evidence from AT&T's own internal research and focus groups showing that customers think "its throttling program was inconsistent with consumer understanding of an 'unlimited' data plan."

Predictably, AT&T claims it did nothing wrong. In a statement, it said that it informed all customers of the policy and throttles bandwidth of affected customers only after notifying them via text message.

If you feel like you heard about AT&T already this month, you're right: AT&T settled with the FCC and FTC for $105 million for the practice of "cramming"; that is, billing customers for unwanted services like ring tones without disclosing what the charges were for.

Data throttling is a controversial practice. While companies like AT&T and Verizon claim that they need to slow down the heaviest users in order to operate their networks efficiently, even FCC Chairman Tom Wheeler suspects the slow-downs are a naked attempt to coerce users into purchasing a more expensive tiered data plan. But no one has provided any evidence thus far that the cost of increased data usage is equal to what companies charge for it.

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