AT&T fined $100 Million for cheating Smartphone Users

The Wall Street Journal
AT&T fined $100 Million for cheating Smartphone Usersreported June 17, 2015 that the FCC plans to fine AT&T Inc. $100 million for cheating smartphone users. FCC accused the company of deceiving millions of smartphone customers about unlimited wireless data plans. Matthews & Associates Law Firm is investigating AT&T, Verizon and other smartphone service providers nationwide for potential smartphone lawsuits. Call us for a free legal consultation.

Less for You is More for AT&T

The WSJ wrote that, “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 slowed Data Speeds

AT&T admits that it slowed data speeds for some consumers with “unlimited plans.” (Unlimited in name only.) An AT&T  spokesman, however, said the FCC had endorsed the practice and that the company’s website also disclosed it.  AT&T plans to vigorously dispute the FCC’s assertions, according to the spokesman.

Unlimited Plans cut into AT&T Profits

About ten years ago, wireless carriers began offering unlimited plans to entice subscribers to use their smartphones to surf the web. As smartphones soared in popularity and users did what AT&T and Verizon and others had urged them to do – watch more videos on YouTube (for example), post more pictures to social-media hangouts like Facebook, that sort of thing – those unlimited plans began cutting into providers’ bottom lines. They needed expensive network upgrades to support the added traffic.  Those unlimited plans carriers had worked so hard to sell kept them from collecting additional money to keep pace with the heavier usage.

We’re the Phone Company, We don’t Care

AT&T, Verizon and other providers’ actions recall a Lilly Tomlin skit on the old Saturday Night Live. Ms. Tomlin played a sniping operator who answered people’s complaints with the line: “We don’t care. We don’t have to. We’re the phone company.”

Phone company carriers do care, of course, about their own profits. AT&T, Verizon and others  “responded by shifting to plans where subscribers paid more for bigger buckets of data. Years ago, the two biggest phone behemoths stopped offering unlimited plans to new subscribers. Smaller U.S. rivals such as Sprint and T-Mobile still offer such plans, at least for now.

Sprint doesn’t Sprint

Like AT&T and Verizon, Sprint doesn’t always sprint when it comes to user speeds. The company also admitted to slowing its heaviest users’ data speeds to relieve its network burdens, but Sprint stopped that practice Friday, according to WSJ, “when the FCC’s new net-neutrality rules went into effect.”

AT&T stopped offering unlimited data plans in 2010. The company, however, allowed millions of customers to keep the plans if they had them.

FCC Cracking Down?

On June 17, 2015, WSJ reported that “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 FCC questioned Verizon last year about slowing speeds for subscribers on unlimited data plans. Verizon at first defended its policy as a reasonable network management policy but then under pressure from FCC, the company dropped its plan to reduce data speeds in congested areas.

The Federal Trade Commission (FTC) sued AT&T in October 2014 over allegations similar to the one FCC brought. That lawsuit is still in play federal court.

Net Neutrality rules protect Consumers

The FCC’s net neutrality rules have expanded the agency’s authority, leaving it in a better position to protect consumers. Its latest actions are part of a new regulatory aggressiveness.

Net neutrality rules expand the FCC’s authority to regulate wireless broadband providers and practices like data capping. They also – for the first time – ban service providers from blocking, slowing down or speeding up access to specific websites. (The pitfalls of such actions are clear if one takes a moment to consider the matter.) Wireless carriers are arguing  in court that the net neutrality rules create too much uncertainty (Uncertainty about what?) and the rules give FCC power to veto new business plans. (Uh, maybe the agency needs such power whenever some for-profit corporation comes up with a business plan that hurts consumers. Anyone remember Enron? Worldcom? How about Chase Bank’s predatory lending practices? Goldman Sachs shenanigans? How about the BCCI banking scandal? Would less regulation or more have helped prevent such scandalous behavior by “innovators.”)

AT&T deceives Consumers

FCC Chariman Tom Wheeler said, “Consumers deserve to get what they pay for.”  He said broadband providers must be up front and transparent about their services. “The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.”

The FTC lawsuit was filed in federal court in San Francisco. It seeks compensation for customers and seeks to bar AT&T from misleading them.

AT&T violated Transparency Rule

The FCC says that by labeling its plans as “unlimited,” AT&T violated the transparency rule passed as part of its 2010 open-Internet rules. A federal court upheld the transparency rule in Jan. 2014.

A senior FCC official said AT&T made billions of dollars by advertising unlimited data plans that were not unlimited. An AT&T spokesman argued that without those “unlimited” plans, users would have paid far more in overage charges, based on their data usage. How AT&T draws the line on “usage” and decides to start throttling one’s speeds is anybody’s guess.

First Transparency Rule Fine

The proposed fine against AT&T,  the first FCC-enforcement case under the transparency rule, is the FCC’s largest proposed fine in its history.

AT&T will likely contest the penalty. It will request an administrative hearing with the FCC. Failing there, it will likely take the case to court.

A senior official told WSJ the fine could be reduced as part of FCC administrative process. In making any determination, the agency will consider whether AT&T corrects statements FCC believes misleading, or whether AT&T offers users the chance to opt out of the “unlimited” plans without penalty.

The FCC will additionally order AT&T to explain how it intends to make consumers whole.

Thousands of Consumer Complaints

The FCC said it received thousands of customer complaints over AT&T’s “unlimited” data plan.  The people said they were surprised and misled by AT&T’s throttling their data speeds.

Unlimited means Unlimited (not)

“Unlimited means unlimited,” said FCC Enforcement Bureau Chief Travis LeBlanc. “[T]he commission is committed to holding accountable those broadband providers who fail to be fully transparent about data limits.”

In a dissenting statement, Republican FCC Commissioner Ajit Pai argued AT&T repeatedly told customers they could face slower speeds after using a certain amount of data. Pai said that several AT&T customers confirmed receiving text message alerts when they were close to the five-gigabyte threshold.

Stay tuned. . .

•  AT&T fined $100 Million for Cheating Smartphone Users

•  Smartphone Lawsuits

•  Verizon Lawsuits

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