After reaching terms of a settlement this summer, the Federal Trade Commission disclosed on Tuesday that AT&T will pay $60 million for misleading millions of customers by obscuring its throttling practices while charging them for so-called "unlimited" data plans.
AT&T approved final terms of the settlement back in August, but the carrier’s penalty was only revealed yesterday, after the FTC voted to approve the stipulated final order, which still needs the signature of a District Court judge in California.
The FTC in 2014 accused AT&T of promising consumers unlimited data but failing to make clear that speeds would be reduced, sometimes after customers had only used as little as 2GB of data. The practice started back in 2011, and according to the FTC affected more than 3.5 million customers.
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The $60 million fine will be used to partially refund current and former customers that signed up for unlimited plans before 2011, but were throttled by AT&T. Consumers don’t need to do anything to get the refund, according to the FTC. Current AT&T subscribers will automatically receive a credit on their bills and former customers will get checks in the mail.
AT&T is also required to prominently disclose any speed or data restrictions on unlimited plans, and not hide the information in fine print or behind hyperlinks.
“AT&T promised unlimited data—without qualification—and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection, in a statement. “While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”
FTC Commissioner Rohit Chopra on Tuesday condemned AT&T for its “bait-and-switch scam that victimized millions of Americans,” trapping them in multi-year contracts with severe termination fees, and forcing them to more expensive tiered plans.
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Millions of customers saw their speeds decrease by as much as 95%, according to the FTC, including subscribers who signed up for newer phones with unlimited service and were likely the ones that planned to use the most data.
“Instead, these subscribers were throttled the most, and ended up receiving the slowest, most unreliable data coverage,” wrote Chopra. “The iPhone’s internet-intensive functions were practically unusable on AT&T’s network at the diminished speeds. This Swiss-cheese service was not the unlimited deal that was promised.”
Chopra said he was glad to see money being returned to customers, but acknowledged no settlement is perfect.
“While I would have liked to see AT&T pay more for the company’s scheme, I fully appreciate the risks and resources associated with litigation,” Chopra said in his statement.
AT&T had said it was “completely transparent” with customers since it started throttling unlimited customers in 2011, and fought to have the FTC lawsuit thrown out. The carrier had argued the FTC didn’t have authority for enforcement actions against common-carrier services providers. In 2015 the Federal Communications Commission had voted for net neutrality rules, and reclassified broadband as a common carrier telecommunications service with providers regulated under Title II of the Communications Act.
In 2016 the FTC appealed the decision of a three-judge panel that sided with AT&T, and in early 2018 the U.S. Court of Appeals for the Ninth Circuit ruled (PDF) the FTC did have jurisdiction and authority to challenge AT&T’s marketing practices.
AT&T then said it would work to negotiate with the FTC to resolve the issue, rather than take the case to the Supreme Court.