The Federal Communications Commission on Wednesday said it
plans to fine AT&T Inc. $100 million for allegedly deceiving
millions of smartphone customers about unlimited wireless data plans. The FCC
alleges AT&T sold consumers data plans advertised as unlimited, then capped
data speeds for those subscribers after they used five gigabytes of data within
a billing cycle. Those capped speeds, the agency said, were more than 20 times
slower than the normal network speeds advertised by AT&T, and hurt consumers’
ability to access the Internet or use applications.
AT&T doesn’t dispute that it slowed data speeds for some
consumers with unlimited plans, but a spokesman said the FCC previously
endorsed the practice as legitimate and pointed to a disclosure on the
company’s website as evidence that AT&T had been candid with customers. He
said AT&T plans on “vigorously disputing the FCC’s assertions.”
Wireless carriers started to offer unlimited plans during
the previous decade to encourage subscribers to surf the Internet on their
smartphones. But as smartphones became more popular and users began watching
more video on sites like YouTube and posting more photos to social-media sites
like Facebook, the economics of unlimited plans soured. The surge in data
traffic required expensive network upgrades, and unlimited plans prevented
carriers from collecting more money as usage rose.
Carriers responded by shifting to plans where subscribers
paid more for bigger buckets of data. AT&T and Verizon Communications Inc.
stopped offering unlimited plans to new subscribers years ago. Their smaller
national rivals, T-Mobile US Inc. and Sprint Corp., still
offer such plans, but their executives have indicated they might not last
forever.
After AT&T stopped offering unlimited data plans in 2010
it allowed millions of customers that already had the plans to keep them. On
Wednesday, senior FCC officials indicated on a conference call that more
carriers might face penalties if they advertised unlimited data plans but
capped the amount of data consumers could use at full speed.
The Federal Trade Commission sued AT&T in October over
allegations similar to the FCC’s; that lawsuit is still winding its way through
federal court. The actions are part of a new aggressiveness by the agencies in
their regulation of wireless carriers, as these services have become
increasingly vital in consumers’ lives. Mobile broadband providers can expect
this regulatory trend to continue: The FCC reclassified the services as common
carriers in February as part of its net-neutrality rules, expanding the
agency’s authority over the industry.
The rules expand the FCC’s authority to regulate wireless
broadband providers and practices like data capping. They also for the first
time ban the providers from blocking, slowing down or speeding up access to
specific websites. Wireless carriers are challenging the rules in court,
arguing they create too much uncertainty and give the FCC the power to veto new
business plans.
The FCC says AT&T violated the transparency rule passed
as part of its 2010 open-Internet rules by labeling its plans as unlimited. A
federal court struck down most of those rules last January, but the
transparency rule was upheld. The senior FCC official said AT&T made
billions of dollars from unlimited data plans that weren’t, in fact, unlimited.
An AT&T spokesman said that without those plans, customers would have had
to pay far more in overage charges based on their data usage.
The proposed fine against AT&T is the FCC’s first
enforcement case under the transparency rule. It is the largest proposed fine
in FCC history, according to the agency. FCC officials said part of its purpose
was to deter future violations. AT&T plans to contest the penalty, first
during an administrative hearing in the FCC and, if necessary, in court.
The fine could be reduced as part of the FCC’s
administrative process, according to the senior official. He said the agency
will take into account whether AT&T corrects statements the agency believes
are misleading or whether it offers consumers the ability to opt out of the
unlimited plans without facing any penalties. The FCC said it got thousands of
complaints from customers with AT&T’s unlimited data plan who said they
were surprised and misled by AT&T throttling their data speeds.
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