The Federal Trade Commission on Tuesday launched a federal lawsuit against AT&T Wireless, alleging that the wireless carrier defrauded consumers when it limited their unlimited data plans. The issue: AT&T never informed customers of the degree to which it would limit bandwidth and it did so unilaterally and without regard to network congestion.
"AT&T promised its customers unlimited data, and in many instances it has failed to deliver on that promise," FCC chairperson Edith Ramirez said. "The issue here is simple: 'Unlimited' means unlimited."
Unless of course you're AT&T Wireless.
At AT&T, unlimited means unlimited up until a customer in a densely populated urban area hits a secret 2 GB data consumption threshold. (The normal threshold is 3 GB.) At that point, their bandwidth is reduced by as much as 95 percent, making Internet access more theory than reality. And it is reduced for the remainder of the monthly billing cycle, an average of 12 days per month for the impacted users. And that bandwidth reduction occurs 24 hours a day, regardless of the network congestion or any other factors. Once you hit the limit, you're blocked for the remainder of the billing period.
"The main point is that the way the program was implemented, was not tailored to accomplishing any legitimate network management objective," the FTC's Ms. Ramirez claims.
AT&T Wireless says the complaint is "baseless."
"We informed all unlimited data plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented," AT&T senior executive vice president and general counsel Wayne Watts said. "In addition, this program has affected only about 3 percent of our customers, and before any customer is affected, they are also notified by text message."
But as the FTC points out, this change actually impacted fully 25 percent of customers who were paying extra for "unlimited" data, or about 3.5 million people. The FTC says that AT&T reduced its customers' wireless bandwidth over 25 million times since the plan went into effect three years ago.
The FTC first approached AT&T with its complaint over a year ago and says that AT&T has turned down several settlement attempts. And of course, AT&T was aware that is customers were unhappy with the changes. The FTC points to AT&T's own internal research group studies, which showed that customers felt that "unlimited should be unlimited" and that AT&T's change was "unfair" to customers. AT&T received over 190,000 customer complaints about the change via phone and "thousands" of written complaints. The Better Business Bureau and other government agencies have also received complaints, the FTC says.
The FTC can't fine AT&T Wireless, but it is asking the court to force AT&T to repay the customers it defrauded. "We hope to put money back in [AT&T's customers'] pockets," Ms. Ramirez said Tuesday.
AT&T isn't the only US-based wireless carrier accused of defrauding customers over supposedly unlimited data plans. In August, the Federal Communications Commission accused Verizon of the same, and while Verizon defended the practice, saying it was common and non-controversial, it later silently dropped its plans to throttle unlimited 4G data users.