FTC: Throttling 'Unlimited' Data Is Illegal

"Unlimited" cell phone data plans have been a myth for several years now, with many of the larger carriers starting to slow down internet traffic for heavy users after they hit a certain threshold. Today, the Federal Trade Commission took the first step toward making carriers put their money where their mouth is (or at least stop misleading consumers)—it's suing AT&T for its "deceptive" throttling practices.

A complaint filed by the FTC against AT&T Mobility in US District Court in San Francisco alleges that throttling "unlimited" data isn't just annoying, it's flat out illegal.

With throttling, "many everyday applications, such as web browsing, GPS navigation, and streaming video, are significantly slower, and in some cases are severely impaired or rendered practically inoperable," the complaint said.

Lesson to mobile companies from FTC's 1st data throttling case: If u promise unlimited data, ur on hook to deliver: http://t.co/Q29FL8Am2V

— FTC (@FTC) October 28, 2014

The FTC says that internal AT&T documents and its own investigation show that after unlimited contract holders passed a certain threshold, often as low as 2GB per month, customers would see data speeds decline by as much as 95 percent. Throttling occurred even during times when the network was unlikely to be busy.

Customers—at least 3.5 million were affected, according to the complaint—weren't told their data was going to be throttled, and even when AT&T eventually did tell them, in 2011, it was vague about when throttling would occur.

"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."

In a statement, the company said it had done nothing wrong.

"The FTC's allegations are baseless and have nothing to do with the substance of our network management program," Wayne Watts, AT&T's senior executive vice president said.

"It's baffling as to why the FTC would choose to take this action against a company that, like all major wireless providers, manages its network resources to provide the best possible service to all customers, and does it in a way that is fully transparent and consistent with the law and our contracts," he added.

The complaint says that AT&T engaged in false advertising and that its throttling program was "unfair." It's seeking to fine AT&T and pay out some of it to affected customers.

That's all well and good if you're an AT&T customer. But  what about Verizon, T-Mobile, and Sprint? All have been accused of throttling unlimited customers' data (some are more transparent than others). It's doubtful those companies are going to get off scot-free: The FTC called this its "first data throttling case," and already this year the agency has been going after mobile carriers for deceptive advertising.

Already this year, the FTC and Federal Communications Commission  have gone after T-Mobile and AT&T for deceptive billing practices in which charges for third party services are hidden in customers' bills (called "cramming"). Those cases have unfolded much like this one did: The FTC starts off with one enforcement action and then moves on to others.

So, why are companies still offering unlimited data plans, anyway? Because they're afraid to lose customers: "Defendant has offered to grandfather customers' existing unlimited mobile data plan to induce customers who have this plan not to switch mobile data providers," the complaint notes.

So, AT&T allegedly misled them instead: According to the FTC, an internal AT&T report noted that it "seems a bit misleading to call it 'Unlimited,' and noted that "the more consumers talked about it the more they didn't like it," the complaint stated. AT&T may be the first, but don't expect it to be the last.