What does AT&T's $100 million fine mean to me?

CNET's Marguerite Reardon explains to an AT&T unlimited-data customer what the FCC's historic fine against the company for misleading customers really means.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
6 min read

Subscribers to AT&T's unlimited-data plan know all too well the pain of slow broadband service. Federal regulators have stepped in to take action.

Earlier this month, the Federal Communications Commission said it intends to fine AT&T $100 million for violating a provision of the agency's Net neutrality regulations.

At a high level, Net neutrality is the idea that all traffic on the Internet should be treated equally. That means your broadband provider, which controls your access to the Internet, can't block or slow down your ability to use services or applications or view websites.

But it's one of the lesser-known parts of the rules where AT&T comes in -- one that requires broadband providers to clearly inform their customers of the details of their service.

The FCC's fine is the largest the agency has ever proposed. It sounds like a great victory for the average consumer, who's likely seen his service slowed down to the same speed as dial-up Internet access. But what does it really mean for AT&T customers? In this edition of Ask Maggie, I answer that question.

Dear Maggie,

I've been following your coverage of the FCC's Net neutrality rules. And I saw that the FCC fined AT&T a lot of money for violating those rules. I'm an AT&T customer who still has an unlimited-data plan. How will this affect me?

Thank you for your time,

Dear Ricardo,

The FCC's actions raise a lot of questions about what this means for consumers. To help you and others understand what it means, I've put together this FAQ.

CNET/Marguerite Reardon

Why is the FCC fining AT&T?

The FCC alleges that AT&T intentionally slowed service for 4G LTE subscribers to its unlimited-data service to the point where customers couldn't even use the service. The agency claims that when AT&T's unlimited-data customers used more than 5 gigabytes of data in a month, the company dropped the speeds of their service to as low as 512 kilobits per second, which is about 5 percent of what it advertised for its 4G LTE service. It's a practice known in the industry as throttling.

If you remember the painfully slow days of dial-up Internet access, that's what the connection felt like for customers whose service was slowed by AT&T.

The FCC also alleges that AT&T failed to adequately notify its customers that they could receive slower-than-advertised speeds. By "falsely labeling" these plans as allowing unlimited data usage and by not giving customers information that explained how and when their services would be slowed, AT&T violated the 2010 Open Internet Transparency Rule, the FCC said.

Did AT&T violate the new Net neutrality rules that prohibit broadband providers from slowing down Internet traffic?

No. While it may seem like AT&T broke the "no throttling rule," the truth is it didn't. The rules the FCC adopted ban network operators from slowing down or blocking specific applications, content or services. If a service provider is slowing down all traffic on the network, it's not being discriminatory. Therefore, it's not violating the rule.

Then what rule is AT&T violating?

The FCC is not accusing AT&T of violating the new Net neutrality rules voted on in February. Instead, it says AT&T violated the only piece of the 2010 Net neutrality order that survived the court challenge in 2014.

According to the FCC's information guide, the "Transparency Rule empowers consumers to make informed choices about broadband services." The FCC says this means broadband providers need to offer customers enough information about the speed and price of their service for a customer to know what they're paying for. It also requires broadband providers to offer accurate service descriptions, including expected and actual broadband speeds. It requires operators to provide accurate pricing, including monthly prices, usage-based fees and any other additional fees consumers may be charged. And it requires broadband operators to disclose network management practices, such as congestion management practices and the types of traffic subject to those practices.

Does this mean that AT&T will stop throttling my unlimited service?

Maybe. The FCC's action isn't final yet. AT&T says it hasn't violated any FCC rules. It claims it has informed customers of its its policies and therefore has complied with the Transparency Rule. The company has 30 days to appeal the FCC's enforcement action. It can can ask the commission to reduce or eliminate the fine.

But if the enforcement action goes into effect, then AT&T must notify customers of unlimited-data plans that its "disclosures were in violation of the Transparency Rule, and that AT&T is correcting, or has corrected, its violation of the rule with a revised disclosure statement."

In other words, the FCC isn't ordering AT&T to stop throttling customers. It's only telling the company to make its policy clear.

AT&T changed its policy in May. Previously, it slowed down service if a customer exceeded 5GB of data in a month, regardless of whether the network was congested. Now AT&T says heavy users on the unlimited LTE plans are throttled only when the network is congested.

A $100 million fine is a big one. Does that mean I will get a refund?

No. The FCC's enforcement bureau only has the authority to impose fines. The money will go to the US Treasury. But this doesn't mean customers won't get some relief from the government. The Federal Trade Commission is suing AT&T over the same practice. If it wins its case, it could require AT&T to pay back customers. Another possibility is that AT&T may settle with the FCC and the FTC, as the company has done in other cases. Some sort of settlement may include reimbursement for customers.

Last year, AT&T agreed to pay a fine of $105 million to the FTC and to state governments to settle charges over a practice known as "cramming," or allowing third parties to put unauthorized charges on customers' bills for unwanted text messages. On top of that, the company agreed to pay $5 million to the FCC.

What does this mean for the future of unlimited-data plans?

The days of the unlimited-data plan could be numbered. AT&T stopped offering unlimited data to new customers in 2010. It has allowed customers who had that plan before 2010 to keep it indefinitely. But that could change. AT&T isn't required to allow customers to keep their old plans once their contracts expire. It could require customers to move to one of its usage-based plans.

Verizon, which also eliminated its unlimited-data plan for new customers, allows customers to keep the plan, but only if they meet strict requirements. Under Verizon's plans, customers must pay full price for their phones if they want to keep the unlimited data. This has discouraged a lot of customers from keeping the plans. Verizon said there are few unlimited-data users left on its network.

AT&T and other wireless providers may find it too costly or simply too much trouble to keep these plans. Sprint CEO Marcelo Claure said at the Recode conference last month that the company would likely stop offering unlimited-data plans in the future. In another, more recent interview, he said the company will increase the price of unlimited-data plans near the end of the year.

Even T-Mobile, which professes to be different from all its competitors, may eventually do away with unlimited data. As the company adds new customers to its network, it may hit a limit in terms of the number of customers it can handle. The company already raised the price of its unlimited-data offer from $70 to $80 a month. There's a chance it might get rid of it entirely. Still, T-Mobile doesn't charge customers an overage penalty if they exceed their allotted data even on plans that are capped. Instead, it slows customers down for the remainder of the billing period once they reach their max.

Ask Maggie is an advice column that answers readers' wireless and broadband questions. If you have a question, I'd love to hear from you. Please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.