FTC sues AT&T for limiting speeds on unlimited-data customers

AT&T says the Federal Trade Commission's allegations are "baseless" and insists that it's been transparent about its network management policies.

The Federal Trade Commission says AT&T's practice of slowing down the connection speeds of unlimited-data customers who tap excessive amounts of data is a failure to deliver on the promise of "unlimited."

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The Federal Trade Commission says AT&T violated the FTC Act by changing the terms of its unlimited-data plan while customers were under contract, and failing to alert them. The carrier denies this. AT&T

As a result, the FTC on Tuesday filed a federal court complaint against AT&T, charging the wireless provider with misleading customers who signed up for an unlimited-data plan only to see their connection slowed in an industry process called "throttling."

"AT&T promised its customers 'unlimited' data, and in many instances, it has failed to deliver on that promise," FTC Chairwoman Edith Ramirez said in a statement. "The issue here is simple: 'unlimited' means unlimited."

AT&T denies the claims.

"The FTC's allegations are baseless and have nothing to do with the substance of our network management program," the company said in a statement. "It's baffling as to why the FTC would choose to take this action against a company that, like all major wireless providers, 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 our contracts."

AT&T, like Verizon Wireless, has long claimed that its wireless network can't handle the small percentage of users with unlimited plans who consume excessive data, either by streaming video or music, or by gaming. In July 2011, AT&T took the unpopular step of placing speed limits on those unlimited plans, slowing them down from a high-speed LTE connection to a 2G connection, the speed of which is akin to that of a dial-up modem. At the time, it said it would limit only the top 5 percent of its heaviest users, but it later clarified that to say those who access 5 gigabytes of data in a billing period.

There are far fewer unlimited-data customers still on AT&T, the second-largest wireless provider in the US after Verizon, though there's no real way of telling the number. AT&T stopped offering unlimited-data plans in 2010, instead pushing consumers into various tiered plans with set amounts, or buckets, of data. The move was the result of the immense growth in data consumption from smartphones such as Apple's iPhone, which caused network quality issues for the carrier. Shortly after, Verizon followed suit with its own tiered plans.

The FTC complaint claims AT&T emphasized "unlimited" in its marketing materials but then failed to inform customers of the throttling program. The FTC said the throttling results in an 80 percent to 90 percent reduction in network speeds. The commission believes AT&T violated the FTC Act by changing the terms of the plan while customers were under contract, and failing to alert them of the change.

AT&T has throttled at least 3.5 million unique customers a total of more than 25 million times, according to the FTC.

AT&T argues that it sent customers bill notices and that it also sent out a national press release alerting consumers of the changes.

"We have been completely transparent with customers since the very beginning," the company said.

There's been a lot of controversy over wireless unlimited plans recently. In August, Verizon and the Federal Communications Commission traded barbs over Verizon's plans to slow down the connection speed of select heavy LTE data users, with the FCC firmly against the move. At the beginning of this month, Verizon backed off of its plans.

As with AT&T, there are few unlimited-data customers left on Verizon, all of them grandfathered in from older plans. Sprint and T-Mobile, which are far smaller than AT&T and Verizon, have attempted to set themselves apart by offering the option of unlimited data with no throttling.

"The FCC has been actively investigating throttling practices since this summer, when Chairman [Tom] Wheeler sent letters to major nationwide wireless carriers about these practices," said an FCC spokesman. "We continue to work on this important issue, including with our partners at the FTC, and we encourage customers to contact the FCC if they are being throttled by AT&T or other cellular providers."

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