AT&T Inc. was accused in a lawsuit by the U.S. Federal Trade Commission of deceiving at least 3.5 million smartphone customers by reducing speeds offered under unlimited-data plans, a practice known as “data throttling.”
AT&T in 2011 began throttling speeds for those customers with unlimited data plans even though it had made “unequivocal” promises to consumers, the FTC said.
AT&T “has failed to disclose, or has failed to disclose adequately, that it imposes significant and material data-speed restrictions on unlimited mobile-data plan customers who use more than a fixed amount of data in a given billing cycle,” the FTC said in a complaint that called the conduct “deceptive.”
AT&T, the second-largest U.S. wireless carrier, last week missed profit estimates and cut its sales forecast as promotions and price cuts took a toll. Chief Executive Officer John Stephens said last month that there were shortages of the new iPhone6 in the company’s stores.
AT&T said Tuesday it informed unlimited data-plan customers of the new policy in billing notices and a news release before implementing reduced data speeds, which affect 3 percent of customers.
“The FTC’s allegations are baseless and have nothing to do with the substance of our network management program,” Wayne Watts, general counsel for Dallas-based AT&T, said in an email. “It’s baffling as to why the FTC would choose to take this action.”
The FTC alleged in its complaint that AT&T “throttled” at least 3.5 million customers a total of 25 million times. Speeds for some customers were reduced as much as 90 percent, the agency said.
“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” FTC Chairwoman Edith Ramirez said in a statement. “The issue here is simple: ‘unlimited’ means unlimited.”
Earlier this month, AT&T agreed to pay $105 million to settle claims by the FTC, the Federal Communications Commission and state officials over allegations of “mobile cramming” – that is, unlawfully billing customers for charges originated by other companies for services such as horoscopes and ring tones.