Lawsuit claims AT&T cheats iPhone, iPad owners on data

Computerworld - AT&T has "systematically" overcharged iPhone and iPad owners with capped data plans by inflating the amount of data they download and adding "phantom traffic," a lawsuit claimed last week.

AT&T said it would "vigorously" fight the suit.

The complaint, filed by Patrick Hendricks in federal court in California, claims that a "significant portion" of AT&T's $1.1 billion of wireless revenue gains in the last quarter came from the bogus charges and overbilling.

Hendricks' lawyers asked a judge to grant the lawsuit class-action status; if that happens, the case would be open to millions of iPhone and iPad owners in the U.S.

Citing evidence obtained by a consulting firm hired by Henricks' attorneys, the lawsuit contends that AT&T regularly overstates incoming data by 7% to 14%, and in some cases by as much as 300%.

"AT&T's billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car's tank," the complaint states.

Hendricks' suit also alleges that AT&T bills for data transfers that never took place. During a 10-day stretch, the same consulting firm found that AT&T billed a new iPhone's account for approximately 2.2MB of data transfers, even though the smartphone had had all push notification and location services disabled, no e-mail account configured, and no active apps.

"This is like a rigged gas pump charging you when you never even pulled your car into the station," the lawsuit states.

Henricks uses AT&T's $15-per-month data plan, which allows him to consume 200MB of data monthly but requires him to pay an additional $15 for each additional 200MB over the standard allowance.

That plan is one of two -- the other is a $25-per-month deal that allows 2GB of data per month -- that AT&T debuted in June 2010 when it dumped its three-year-old $30 unlimited data plan. AT&T let existing iPhone customers retain the unlimited plan but required new iPhone customers, and all but the earliest 3G iPad owners, to sign up with one of the capped plans.

Hendricks said he was charged a $15 overage fee last fall when his data usage was 223MB, or 11% more than the plan's limit.

"Many of these charges were phantom data transactions that never happened or were never initiated or experienced by Mr. Hendricks," the lawsuit claims. "The remainder of these charges were systematically inflated in terms of the actual amount of data used."

The lawsuit not only contends that Hendricks was overcharged by AT&T, but also states that the carrier's alleged practice of overestimating data traffic forced him to "[curtail] his data usage to attempt to avoid incurring such fees, which prevented him from making full, or nearly full, use of the 200MB of data that he pays for every month."

Only AT&T customers who use one of the capped data plans would be eligible to join the lawsuit if it's granted class-action status.

Hendricks is not the only person who has complained of mysterious data plan charges.

"It was the next-to-last day of my billing cycle and I had used 150MB of the 200," said a user identified as MoodyMare11 in a Jan. 2 posting to Apple's support forum. "But when I woke up in the morning, I had a text stating that I had used 100% of my data and was now being charged for extra. I know apps can drain data, but 50MB literally overnight?

"Today I did not use data at all, I only used my phone when I was on Wifi and I checked the Wireless app out of curiosity," MoodyMare11 continued. "It said I had used 17MB of data today. What the heck?"

When asked for comment on Hendricks' lawsuit, an AT&T spokesman said, "We have only recently learned of the complaint, but I can tell you that we intend to defend ourselves vigorously. Transparent and accurate billing is a top priority for AT&T."

Hendricks' complaint spelled out five counts, including unjust enrichment, unfair business practices and violating the federal law that prohibits "unjust and unreasonable" telecommunication charges. It seeks restitution and class damages, which would be set by a jury.

Unlike several other lawsuits filed against AT&T by iPhone owners, Apple was not named in Hendricks' complaint.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

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