The Federal Trade Commission, a U.S. regulatory agency, has filed a complaint in federal court against AT&T, alleging that the U.S. operator misled subscribers by selling them “unlimited” data plans and then dramatically reducing (or “throttling”) internet speeds after usage limits were reached. The complaint charges that since 2011, when AT&T began the practice, throttling has occurred 25 million times, decreasing speeds by as much as 90 percent for 3.5 million customers. “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.” The FTC stated that AT&T changed the nature of plans mid-contract and failed to adequately inform subscribers about the terms of the throttling. AT&T countered that it did inform subscribers and sent them emails and texts indicating when data limits had been reached. It further stated that throttling is a universal practice among mobile operators.

Tarifica’s Take

The FTC is taking aim at what is indeed a universal practice, and its suit against AT&T may be the first shot fired in an upcoming war against throttling that will target all U.S. mobile operators. In July, another U.S. regulator, the Federal Communications Commission (FCC), criticized Verizon Wireless for a plan to throttle heavy data users during peak-consumption periods—a plan that Verizon abandoned.

The case in U.S. federal court against AT&T will likely hinge on the definition of “adequately informing” subscribers about throttling, since the FTC complaint is based on the alleged deceptive nature of the practice. But even if AT&T can establish that it informed its subscribers in a way that complies with the law, MNOs should probably take this case as a warning about customer relations. According to the FTC, AT&T has received 190,000 calls from customers complaining about throttling. Aside from the legal issues, MNOs should take note of the fact that if enough customers view throttling as unfair and abusive, the practice is likely to cost operators more money than it could save them. Reducing speeds to the point where users cannot meaningfully use the services—such as surfing the web, sending and receiving email, streaming music and videos—that they subscribe for could negatively affect satisfaction and loyalty and open the door for enterprising competitors to lure customers away.