FCC Moves To Fine AT&T $100 Million For Throttling ‘Unlimited’ Plan Users

This new FCC is really quite interesting. After years and years of never actually doing anything to push back against anti-consumer policies by the big telcos, in the last few months it seems like that’s all the FCC does. Today’s move? Proposing a $100 million fine against AT&T for its bogus practice of throttling “unlimited” customers. As you may recall, AT&T offered “unlimited” mobile data connections, but eventually killed off that offering. To avoid getting in trouble for bait and switch, AT&T grandfathered in those who previously had the unlimited plan… but then started throttling those accounts to try to pressure people into moving to a different plan. The FTC is already suing AT&T over this, and just last month we noted that AT&T had made some changes in response to FCC pressure.

However, this new move by the FCC is a big one — saying that it thinks the company’s throttling practice flat out broke the old open internet rules (the transparency part of the rules — which the court did not throw out). AT&T, as it’s doing with the FTC case, has already indicated that it’s going to fight this fine, so expect years to go by before any fine is actually paid. The full FCC notice is worth a read. The key point is pretty basic: don’t call it unlimited when it’s very, very limited:

The imposition of set data thresholds and speed reductions is antithetical to the term “unlimited.” AT&T was aware that its continued use of the word unlimited to describe its data plans was likely to mislead consumers, as evidenced by the focus group studies conducted by AT&T around the time the Company implemented its MBR [maximum bit rate] policy. Further, since its MBR policy was implemented, the Commission and the Company itself received many complaints from AT&T unlimited data plan customers who felt misled about the services they expected to receive when they purchased unlimited data plans.

We find that AT&T’s use of the term “unlimited” to label plans that were, in fact, subject to significant speed restrictions after subscribers used a specific amount of data is apparently inaccurate and misleading to consumers. As evidenced by the many complaints we have received about the MBR policy, consumers entered into contracts for these “unlimited” plans with the mistaken belief that they had unlimited amounts of high speed data sufficient to use any website or application, regardless of how much data they used in a month. We thus conclude that every time AT&T described such a plan to a customer as “unlimited,” it misrepresented the nature of its service. It did so in every monthly billing statement for an unlimited plan and every time a term contract for an unlimited plan was renewed. The Transparency Rule requires accuracy in all statements regarding broadband provider’s network management practices, performance, and commercial terms, and providers are prohibited from “making assertions about their service that contain errors, are inconsistent with the provider’s disclosure statement, or are misleading or deceptive.”

We further find that AT&T’s apparently misleading use of the term “unlimited” to label its plan impeded competition because it prevented consumers from fully comparing AT&T’s plan to other similar plans. This inured to AT&T’s benefit and to the disadvantage of its competitors. While AT&T describes its plan as “unlimited,” its competitors describe almost identical plans as offering “unlimited talk and text” with a set amount of LTE data. Without adequate disclosures, the average consumer would consider these plans to be significantly different, when in fact they are not. A consumer was likely to mistakenly assume that the AT&T “unlimited” plan offers more high-speed data than the competing plan, thus hindering fair competition between AT&T and its competitors. Continuing to offer the plan to renewing customers under the original “unlimited” label falsely advertised that the data plan was the same plan customers originally bought before the MBR policy was implemented.

You can also read FCC Commissioner Ajit Pai’s dissent in which he (really) quotes Kafka’s The Trial and claims that the FCC is changing the rules as it goes.

A government “rule” suddenly revised, yet retroactive. Inconvenient facts ignored. A business practice sanctioned after years of implied approval. A penalty conjured from the executioner’s imagination. These and more Kafkaesque badges adorn this Notice of Apparent Liability (NAL), in which the Federal Communications Commission seeks to impose a $100 million fine against AT&T for failing to comply with the apparently opaque “transparency” rule the FCC adopted in its 2010 Net Neutrality Order. In particular, the NAL alleges that AT&T failed to disclose that unlimited-data-plan customers could have their data speeds reduced temporarily as part of the company’s approach to managing network congestion.

Because the Commission simply ignores many of the disclosures AT&T made; because it refuses to grapple with the few disclosures it does acknowledge; because it essentially rewrites the transparency rule ex post by imposing specific requirements found nowhere in the 2010 Net Neutrality Order; because it disregards specific language in that order and related precedents that condone AT&T’s conduct; because the penalty assessed is drawn out of thin air; in short, because the justice dispensed here condemns a private actor not only in innocence but also in ignorance, I dissent.

Pai points out that AT&T did put out a number of warnings that its plan might include reduced speeds… but it still called the plans unlimited.

Either way, this should keep plenty of telco lawyers employed for many years…

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