AT&T has misled millions of its mobile customers by promising unlimited data plans, then charging them and reducing their data speeds after they reach a monthly cap, the U.S. Federal Trade Commission said in a complaint announced Tuesday.
Some AT&T mobile customers had their data speeds reduced by nearly 90 percent after reaching a monthly data cap, the FTC said.
The company failed to adequately disclose to customers on "unlimited" data plans that it would reduce speeds after they reach the monthly cap, the FTC said in a news release. AT&T reduced data speeds to the point that many common mobile phone applications, including Web browsing, GPS navigation and streaming video, became difficult or nearly impossible, the agency alleged.
"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."
The FTC, in its lawsuit, is asking AT&T to repay millions of dollars in charges related to the data caps, Ramirez said during a press conference.
AT&T questioned the allegations in the FTC complaint, filed in U.S. District Court for the Northern District of California in San Francisco.
"The FTC's allegations are baseless and have nothing to do with the substance of our network management program," AT&T general counsel Wayne Watts said in a statement. "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."
AT&T has been transparent with its customers, Watts added. The company has informed customers about its network management practices on their bills, and AT&T issued a press release about its network management methods in July 2011, he said.
AT&T uses the data-throttling program with only about 3 percent of its mobile customers, and the company notifies affected customers by text message, the company said.
The FTC contends that AT&T's disclosures to customers were "inadequate," Ramirez said. AT&T informed unlimited-plan customers of the new data caps in "inconspicuous" places on two monthly bills, and the company didn't adequately inform renewing customers about the data caps, she said.
The data-throttling plan has generated "thousands" of complaints, she added. About 14 million AT&T mobile customers subscribed to unlimited plans when the company began capping monthly data use, the FTC said.
AT&T began throttling data speeds in 2011 for unlimited plan customers, after they used as little as 2GB of data in a billing period, the FTC alleged. Since then, AT&T has throttled the data speeds of about 3.5 million mobile customers, the agency said.
AT&T's marketing materials emphasized that an unlimited amount of data that would be available to consumers on those plans, the FTC alleged. But even when unlimited plan customers renewed their contracts, the company failed to inform them of its data throttling program, the agency said.
Then, when customers cancelled their contracts after having their data throttled, AT&T charged them early termination fees, the FTC said.
The FTC's complaint charges that AT&T violated U.S. consumer protection law by changing the terms of customers' unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.
The FTC worked closely with the U.S. Federal Communications Commission while readying its complaint against AT&T, the agency said. In July, FCC Chairman Tom Wheeler raised his own concerns about mobile data throttling practices, when he questioned a Verizon plan. The FCC also issued an enforcement advisory about network management transparency in July.