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The Federal Trade Commission announced today that it has filed a lawsuit against mobile phone carrier AT&T for allegedly misleading customers by charging them for "unlimited" data plans while reducing their data speeds significantly.
In its complaint filed in U.S. District Court, the FTC alleges that AT&T failed to disclose to customers with unlimited mobile data plans that once a certain amount of data had been used during a single billing cycle, AT&T reduces the speed of that user's data. This speed reduction, known as "throttling" often results in users being unable to use popular web applications such as web browsing, streaming video, or using GPS navigation on their mobile devices.
AT&T Data Throttling Program
According to the FTC's complaint, AT&T stopped offering unlimited data plans for smartphone customers in June of 2010. However, in order to keep customers from changing carriers, AT&T allowed the millions of customers who had signed up for unlimited data to be "grandfathered in" and continue under the terms of their previous plan, giving them unlimited data usage for $30 a month.
In July 2011, AT&T began throttling the speeds of unlimited mobile data plan customers. The threshold at which AT&T would begin throttling data speeds varied depending on geographic region, with customers in urban markets often being the first to be throttled. The reduction in speed also varied. According to the FTC's complaint, some users experienced speeds up to 95% slower than they would have absent the throttling.
The FTC alleges that AT&T did not properly disclose this throttling to unlimited mobile data plan customers, in violation of the section of the FTC Act prohibiting "unfair or deceptive acts or practices in or affecting commerce." Although the company did announce its data-speed throttling in customer bills, a national press release, and text messages or emails sent directly to some customers, these FTC's complaint alleges that these methods failed to notify a large number of customers or disclose the degree of the speed reduction.
Small Claims Lawsuit
The FTC's lawsuit isn't the first lawsuit regarding AT&T's reduction of unlimited data plan customers' data speeds. In 2012, a California man successfully sued AT&T in small claims court, winning $850 after alleging that AT&T's throttling violated his contract with the carrier.
With an estimated 3.5 million AT&T unlimited data plan customers who may have been affected by the speed reductions, the amount of damages at stake in this lawsuit are likely to be much higher.