TECH
10/28/2014 01:31 pm ET Updated Oct 29, 2014

AT&T Sued For Reducing Speed Of 'Unlimited' Data Plans

The Federal Trade Commission announced on Tuesday that it is suing AT&T for slowing down the data speeds for some customers who thought they were getting an “unlimited” data plan.

After some customers exceeded a certain amount of data during a billing cycle, AT&T slowed, or "throttled," the customers' Internet speed, the agency claims.

"The company has misled millions of its mobile customers, charging them for so-called unlimited data plans that were in reality not unlimited at all," Edith Ramirez, chairwoman of the FTC, said during a call with reporters Tuesday afternoon.

The FTC said AT&T did not "adequately" inform customers who had signed up for the company's unlimited data plan that their speeds would be slowed if they used a certain amount of data, which was sometimes as little as 2 gigabytes during a billing cycle. Streaming one hour of Netflix in HD can use as much as 3 gigabytes.

The agency alleged that in some cases, AT&T slowed the data speeds of some of these customers by more than 90 percent, preventing people from being able to stream movies, load websites or use the phone's GPS function. The FTC said 3.5 million customers have been throttled 25 million times.

In a statement, AT&T's general counsel, Wayne Watts, called the FTC's complaint "baseless" and said that the company has been "completely transparent with customers since the very beginning” that it would throttle people with unlimited plans. The company began the practice in 2011.

"We informed all unlimited data-plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented," Watts wrote in a statement to The Huffington Post.

From 2007 to 2011, AT&T was the only carrier in the U.S. to offer the iPhone. The company stopped offering "unlimited" plans in June 2010. Customers who had previously purchased unlimited plans were "grandfathered" in when they signed new contracts, though the FTC said they weren't informed that they may be throttled.

The FTC said that AT&T got thousands of complaints from customers who said their speeds were slowing down. Then, AT&T went after people who canceled their service, the agency said

"When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars," the FTC said in a statement.

As phones and apps have become more advanced and wireless networks have gotten faster, consumers have gobbled up increasing amounts of data. The average mobile customer in the U.S. used 1.4 gigabytes per month in 2013, according to Cisco, the networking equipment company. That figure is expected to increase to 9.1 gigabytes per month by 2018.

In response to increased data consumption, wireless companies have moved to tiered data plans, which offer a fixed amount of data each month. If a person goes over their plan, they have to pay a penalty.

AT&T said that throttling has to do with managing network congestion -- there is a finite amount of spectrum, and the more people use it, the slower it gets for everyone. But Ramirez told reporters that the throttling "had no particular relation to the network's congestion at the specific time."

"It looks like AT&T was trying to push people into more expensive plans," Delara Derakhshani, policy counsel for Consumers Union, an advocacy organization, said in a statement to HuffPost. “Consumers have been complaining about throttling for years. We’re glad the feds are going after companies that are ripping people off."

"We think that millions of customers have been affected and we hope to put money back in their pockets," Ramirez told reporters.

Disclosure: The author of this post has an unlimited plan with AT&T and may be affected by any settlement that is reached.

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