A hot potato: On Tuesday, mobile carrier AT&T settled a lawsuit with the United States Federal Trade Commission (FTC) for the sum of $60 million. The case was over the company throttling internet speeds of customers paying for “unlimited” data plans.
FTC Commissioner Rohit Chopra bluntly referred to the company’s throttling policies as a “nationwide bait-and-switch scam” in his statement regarding the settlement.
“AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees, and then scammed them by choking off their access unless they moved to a more expensive plan. The AT&T throttling scandal is an important case study into how dominant firms operating without meaningful competition can easily renege on their contractual obligations and cheat consumers who have almost no recourse.”
Today, legal counsel for AT&T agreed to deposit $60 million into a fund earmarked for “partial refunds” for affected customers. Only those who paid for unlimited data plans before 2011 are eligible as that was the year the company initiated its data throttling policy.
The court documents further stipulate that AT&T may not market plans using speed or data limits without disclosing restrictions in an abundantly evident manner.
“For example, if an AT&T website advertises a data plan as unlimited, but AT&T may slow speeds after consumers reach a certain data cap, AT&T must prominently and clearly disclose those restrictions,” said the FTC in its press release.
“AT&T promised unlimited data—without qualification—and failed to deliver on that promise. While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”
Today’s settlement stems from an FTC lawsuit filed in 2014, where the FTC claims that the company throttled some customers by reducing their data speed by as much as 90 percent, even after as little as 2GB of use in a billing cycle. Everyday mobile tasks like web browsing, GPS navigation, and watching streaming video become nearly impossible to perform once throttled that low.
“When any business, big or small, offers an unlimited service for a fixed fee, that business is taking a risk,” said Chopra. “If customers use much more of the service than projected, the company will take a hit. Conversely, if customers use less than projected, the company will haul in even larger profits. This is how business works. AT&T wanted the rewards without the risks, so it turned its offer of an ‘unlimited’ data plan into a bait-and-switch scam that victimized millions of Americans.”
AT&T did not admit or deny any wrongdoing in the court documents, but it did issue a statement thanking the commission, while acknowledging that it stopped behaving badly “years” ago.
“We appreciate the FTC for working with us to resolve this matter,” AT&T said in an emailed statement. “Even though it has been years since we applied this network management tool in the way described by the FTC, we believe this is in the best interests of consumers.”
The company has also unveiled three new “unlimited” data packages that offer up to 100GB of unthrottled data.
The FTC estimates that over 3.5 million customers are due a partial refund. Affected parties do not need to submit claims for reimbursement. Current eligible AT&T customers will see it as a credit on their billing statements. Those who have moved on will be receiving a check.
It is unclear how much users should expect to receive, but crunching the numbers provided by the settlement shows it’s a paltry sum. It works out to about $17.14 or less for each affected consumer.