As AT&T found out rather forcefully, in the U.S. there are consequences to seemingly over-promise and under delivery. The Federal Trade Commission (FTC (News - Alert)), the regulatory entity responsible to for protecting consumers from deceptive practices, has filed a complaint against AT&T (News - Alert) Mobility, LLC, charging that the mobile operator has misled what the Commission says are “millions” of consumers by charging them for “unlimited” data plans when in fact AT&T has in practice reduced data speeds of upwards of 90 percent in some cases.
The crux of the matter
Using the link above, you are invited to read the complaint in its entirety. It involves first the offering of unlimited data plans in 2007, the subsequent decision to move customers to tiered ones upon purchase of a new smartphone, and the grandfathering of unlimited data plan customers to keep said plans when getting a new device even as AT&T Mobile continued to push its tiered offers. It is a course of action, as the FTC says, that millions of customers
The pertinent section of the complaint is as follows regarding the behavior being questioned by the FTC:
In July 2011, Defendant decided to begin reducing the data speed for unlimited
mobile data plan customers, a practice commonly known as “data throttling.” Under
Defendant’s throttling program, if an unlimited mobile data plan customer exceeds the limit set
by Defendant during a billing cycle, Defendant substantially reduces the speed at which the
customer’s device receives data for the rest of that customer’s billing cycle.
Source (News - Alert): Page 4, Section 15 of FTC FEDERAL TRADE COMMISSION, Plaintiff, v. AT&T MOBILITY LLC, a limited liability company, Defendant.
What follows this section is a discussion of further AT&T Mobility subsequent actions to refine this throttling activity, which the FTC says saw customers of the original grandfathering as well as revised programs experiencing greatly decreased service quality.
Putting all of the legalese aside, what the complaint is about is that consumers who opted to keep their unlimited plans were penalized for exercising that option, i.e., they did not get what they thought they had paid for. What the FTC also found was that AT&T persisted with this activity despite the results of focus groups it had conducted that indicated that throttling was, “inconsistent with consumer understanding of an ‘unlimited’ data plan.
According the FTC such practices violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or deceptive acts or practices in or affecting commerce.” It cites several counts regarding misconduct which include:
To wit the FTC concludes that: “Consumers have suffered and will continue to suffer substantial injury as a result of Defendant’s violations of the FTC Act. In addition, Defendant has been unjustly enriched as a result of its unlawful acts or practices. Absent injunctive relief by this Court, Defendant is likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.” It recommends that the court provide such injunctive relief in the form of ancillary relief that can include recession or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.
As to be expected, in a statement, AT&T's general counsel, Wayne Watts, called the FTC's complaint "baseless" and said that the company has been "completely transparent with customers since the very beginning." In short, “see you in court!”
It is not surprising that this has become a bit of a flashpoint. Whether it is throttling or advertising 4G capabilities while delivering 3G services, the U.S. mobile industry has been in the policy-maker cross-hairs for quite some time. The Federal Communications Commission for example says most of the complaints it gets are about billing practices of fixed as well as mobile service providers, and there has been proposed legislation in Congress that has yet to move despite a few attempts that says communications companies need to be much more transparent in their billing practices so that consumers get what they think they pay for. This means paying only for the quality of service provided, although as the FTC complaint highlights it is also about not paying for poor quality service which was not stipulated as a term or condition of a service offer.
To say the least, this one has certainly caught the attention of consumer groups, and the AT&T Mobile defense is sure to create headlines in the future. It should be noted, however, that these types of actions take time and making predictions about outcomes is problematic at best. What impact this ends up having on industry billing practices in general also is an open question, which is why this is going to be something to keep tabs on.