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FTC says AT&T 'misled millions', charging for unlimited data but throttling speeds

The cellular giant gets a second slap on the wrist by the federal regulator after the FTC accuses the company of misleading millions of its customers over unlimited data.
Written by Zack Whittaker, Contributor
Image: CNET/CBS Interactive

The U.S. Federal Trade Commission is suing cellular giant AT&T after it allegedly "misled" millions of its smartphone customers over its unlimited data plans.

The FTC said on Tuesday that the second-largest U.S. cellular phone network charged its customers for "unlimited data," but nevertheless reduced their browsing speeds. In some cases, speeds dropped by close to 90 percent.

Filed in the U.S. District Court of Northern California [PDF], the federal agency charged with protecting consumer's rights said the company had performed a "deceptive failure" to disclose its mobile throttling plan.

FTC chairwoman Edith Ramirez summed up her sentiment in three words: "Unlimited means unlimited."

She added: "AT&T promised its customers 'unlimited' data, and in many instances, it has failed to deliver on that promise."

Here's the nutshell to the FTC's complaint.

The FTC said despite "unequivocal promises" by the company to its customers that they would receive unlimited data, AT&T began in 2011 throttling data after they used just 2GB of data in a billing cycle — which most average users can go through quite easily.

About 3.5 million individual customers may have been throttled more than two-dozen times, the agency claims.

Simply put: AT&T broke the law by changing the terms of the customers' unlimited data plans while they were still under contract. And, AT&T didn't "adequately" disclose its throttling program. 

Although AT&T falls within the realm of the Federal Communications Commission's jurisdiction, FCC staff were consulted and worked closely with the FTC on bringing charges.

In response shortly after the allegations surfaced, AT&T called the FTC's complaint "baseless" and said it was "baffling" why the FTC would go after the company.

AT&T general counsel Wayne Watts said in selected remarks:

“The FTC’s allegations are baseless and have nothing to do with the substance of our network management program. 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.

It's the second time this month the company has been bitten by the federal government.

Earlier in October, AT&T was forced to pay $80 million back to consumers after it billed customers for unauthorized third-party charges.

The FTC claimed the company billed for "hundreds of millions of dollars in charges originated by other companies," usually in amounts of about $10, for subscriptions to ringtones and other text message-based content.

AT&T was said to have kept at least 35 percent of the charges it billed to its customers in a practice known as "mobile cramming."

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