FTC Lawsuit Alleges AT&T 'Misled' Customers, 'Throttles' Speeds Of Unlimited Data Plans

The Federal Trade Commission is suing AT&T Mobility, alleging in federal court documents that the carrier has "misled millions of consumers" subscribing to their unlimited data plan by reducing their data speeds up to 90 percent.

The FTC said in its complaint that AT&T has failed to disclose the cut in data speed to its customers. The FTC alleged that when subscribers of the unlimited plan reach a certain amount of data use in a billing cycle, AT&T "throttles" the data speeds to the point that basic mobile apps, including GPS navigation, web browsing and video streaming, become nearly impossible.

"AT&T promised its customers 'unlimited' data, and in many instances, it has failed to deliver on that promise," said FTC Chairwoman Edith Ramirez in a statement. "The issue here is simple: 'unlimited' means unlimited."

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The FTC alleged that AT&T began cutting down data speeds for unlimited plan subscribers in 2011 after customers reached 2GB of data in a billing period. The complaint said AT&T has done this more than 25 million times to at least 3.5 million unique customers.

AT&T was quick to shoot down the allegations in their response also issued Tuesday.

’The FTC’s allegations are baseless and have nothing to do with the substance of our network management program," an AT&T spokesperson said in an email. "It’s baffling as to why the FTC would choose to take this action against a company that, like all major wireless providers, manages its network resources to provide the best possible service to all customers, and does it in a way that is fully transparent and consistent with the law and our contracts.

"We have been completely transparent with customers since the very beginning. 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. 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.’

In the statement, AT&T referenced a company press release dated July 29, 2011, forewarning its unlimited plan subscribers that they may experience reduced performance.

"Smartphone customers with unlimited data plans may experience reduced speeds once their usage in a billing cycle reaches the level that puts them among the top 5 percent of heaviest data users," the 2011 release read. "These customers can still use unlimited data and their speeds will be restored with the start of the next billing cycle. Before you are affected, we will provide multiple notices, including a grace period."

AT&T is the second largest carrier in the United States and has over 116.6 million customers worldwide, according to the company.

"This definitely has a negative impact on their credibility," Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based solutions provider. "If [AT&T] is selling and portraying a connectivity package with unlimited data and that's not the case, it yells out false advertising. If you're going to call it 'unlimited,' then how can you limit the data? Their customers are going to lose faith, and especially in the United States, that's a dangerous game to play. There are a lot of other options for consumers to choose from."

PUBLISHED OCT. 28, 2014