The FCC announced today that it is planning to fine AT&T a hefty $100 million as punishment for AT&T's misleading claims around its "unlimited" data plans.
Even though AT&T has not offered new customers unlimited data plans since 2007, many existing customers have stuck with AT&T to keep these perceived valuable grandfathered plans active.
But few customers ever realized that these plans were actually not particularly valuable after all - with throttling in place since 2010 which limits speeds severely after just 5GB of LTE usage each month.
The FTC has a lawsuit against AT&T pending over this issue, and FCC is now joining in as well using its regulatory oversight role to bring down the hammer.
The record fine and the statements attached to the announcement make it clear that the FCC is not messing around:
“Consumers deserve to get what they pay for. Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.” - FCC Chairman Tom Wheeler
“Unlimited means unlimited. As today’s action demonstrates, the Commission is committed to holding accountable those broadband providers who fail to be fully transparent about data limits.” - FCC Enforcement Bureau Chief Travis LeBlanc
The FCC's investigation discovered that millions of customers had been subject to the speed throttle, with the average throttled customer cut back to a 512kbps crawl for 12 days out of their billing cycle.
With a potential fine of up to $16,000 per occurrence, some have pointed out that perhaps the FCC is letting AT&T off easy with just a $100 million penalty. But the record fine is sure to make a point that AT&T will find hard to ignore.
Congestion Management OK - Punitive Throttling Not
Other carriers have implemented throttling plans against "unlimited" users, but the rest only do it when a cellular tower is congested and under heavy load. Up until recently however, AT&T throttled all "unlimited" smartphone users who crossed 5GB - slowing service for the remainder of the month regardless of network congestion.
The FCC seems to be OK with congestion management plans, and with clearly disclosed limits (like T-Mobile's limited buckets of "high speed" data), but the FCC is clearly not happy with punitive speed limits that are not based upon network load.
What's Next For Unlimited Data Plans?
AT&T has 30 days to send a check, or to appeal the FCC's "Notice of Apparent Liability".
In addition to paying the fine, AT&T is being called on to investigate issuing refunds to misled customers, and to allow customers currently under contract with one of these plans to cancel service without any early termination penalties.
Better disclosure and employee training is being called for too.
AT&T of course claims that they are fully in compliance with the rules, and that they have given ample notice to customers about their throttling policies. But we have coached dozens of AT&T customers over the years who have had these plans, and essentially none have understood the throttling they were subject to and that their "unlimited" plan was anything but.
Going forward - this punishment may be short term good news for those with grandfathered unlimited plans, who have seen the speed limits fade away.
But longer term - since they can't throttle them, carriers may be feeling pressure to start actively phasing out these grandfathered unlimited plans.
It will be interesting to see if any carrier is willing to risk the backlash to do so.
Further Reading:
Network Management (aka ‘Throttling’) Practices for Cellular Data Carriers (MIA Members-Only Content)
FCC Notice of Apparent Liability (worth reading the dissent as well as the majority decision)
Mobile Internet Resource Center (dba Two Steps Beyond LLC) is founded by Chris & Cherie of