AT&T Mobility (T) was sued by the Federal Trade Commission on Tuesday, accused of unfairly throttling users who paid for unlimited data plans by slowing their data-transfer speed when they hit certain limits.
The FTC said the practice wasn't disclosed to AT&T customers, who often found themselves unable to watch video, surf the Web or use their GPS for directions because the company lowered their data flow by up to 90%.
The agency, which worked with the Federal Communications Commission on the case, said the practice was deceptive and used on at least 3.5 million customers.
"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."
AT&T disagreed with the FTC's characterization.
"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."
Watts maintained that AT&T has been up-front regarding its policies and publicly announced that it would throttle its heaviest data users.
"We have been completely transparent with customers since the very beginning," he said. "We informed all unlimited data-plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented. In addition, this program has affected only about 3% of our customers, and before any customer is affected, they are also notified by text message."
The FTC disagreed that consumers were properly notified or that the practice was proper. AT&T had opportunities to disclose its practice to its customers, including when their "unlimited" contracts were renewed, the FTC said. Instead, the company quietly went about slowing down customers who used as little as 2 GB of data starting in 2011, the FTC said.
Complaints about data being slowed poured in, the agency said, and those who canceled their service after noting they weren't getting what they paid for were hit with stiff early termination fees.
Consumers groups applauded the lawsuit.
"Consumers have been complaining about throttling for years," said Delara Derakhshani, policy counsel for Consumers Union. "We're glad the feds are going after companies that are ripping people off. As the FTC said, unlimited means unlimited. If you charge someone for an unlimited data plan and then slow down their speeds, that sounds deceptive to us."