To do so, AT&T will have to beat back the FCC’s assertions that it has misled millions of its wireless customers since 2011, when it began slowing the speeds of customers who were taking most advantage of unlimited monthly data plans.
The outcome of the case could affect millions of AT&T’s wireless customers, as the FCC also wants to require the company to let customers who currently pay for unlimited data plans to change plans without any penalty. The company keeps confidential how many of the 122 million devices connected to AT&T wireless service are on unlimited plans.
AT&T immediately rejected the FCC’s assertions Wednesday, saying it was clear with customers in 2011 when it began slowing the download speeds when users of its unlimited plan used more than stipulated amounts of data in a given month.
“We will vigorously dispute the FCC’s assertions,” the company said in a statement. “The FCC has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it. We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”
But so far those arguments haven’t worked. The Federal Trade Commission sued AT&T over the so-called throttling last fall, and Wednesday’s action makes clear that regulators view the company’s response since then as inadequate.
Before announcing its proposed fine, the FCC voted 3-2 to move forward with the case and seek a record fine.
On Wednesday, the FCC said AT&T’s error was not in imposing the speed reductions, but in failing to be upfront with its customers. It promised unlimited data plans, the FCC argues, but didn’t fully inform customers that using such plans would require them putting up with downloads speeds that were a fraction of what AT&T advertised.
“Consumers deserve to get what they pay for,” FCC Chairman Tom Wheeler said Wednesday as the commission’s enforcement action was announced. “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.”
The allegations
AT&T began offering unlimited plans in 2007. But by 2010, the Internet was moving increasingly to mobile devices. It had become clear that a rising number of always-on apps and video streaming services could cause some of its heaviest users to use far more data than the company had envisioned in 2007. As a result, it dropped that option for new customers.Existing customers were allowed to keep their unlimited data plans.
But as Internet users continued to rely more and more on their mobile devices for video and other data-hogging activities, AT&T moved to put brakes on users who consumed the most data.
The FCC says that between 2011 and late 2014, AT&T earned billions of dollars in revenue each year as a result of keeping millions of customers signed up for unlimited data plans. In the first quarter of 2014, AT&T’s wireless division earned $4.4 billion in income against $18 billion in sales of wireless service and devices.
A senior FCC official, speaking on background with reporters Wednesday, said those sales figures meant that any fine proposed by the FCC had to be extremely large or else the company would just brush it off as the cost of doing business.
The FCC noted that last month, AT&T made small changes to its throttling policy. The company no longer automatically imposes speed reductions if a customer on its 4G LTE network uses a set amount of data.
Decisions to slow a customer’s download speeds, the FCC said, can now be based on the overall demand for data upon an area’s wireless network. The FCC dismissed AT&T’s assertions that its throttling policies are primarily aimed at managing its network capacity.
The agency said AT&T customers still can’t be sure they will get what they pay for.
Reaction
Still, the vote to proceed with the case was a narrow one. Both Republican commissioners voted against moving forward. Both released scathing statements of dissent Wednesday.The size of the proposed fine is “draconian,” wrote Commissioner Michael O’Reilly.
Commissioner Ajit Pai began his dissent by quoting Franz Kafka’s 1925 novel The Trial, about a man who finds himself on trial for a crime but is never told what his offense was.
“It is an essential part of the justice dispensed here that you should be condemned not only in innocence but also in ignorance,” Pai’s statement begins.
TechFreedom, an industry trade group, blasted the FCC in still broader terms. “Almost 800 years to the day after Magna Carta was signed, the FCC makes clear that it doesn’t give two figs about basic Anglo-Saxon legal principles,” said its president, Berin Szoka. “This settlement imposes massive penalties for conduct that was not illegal at the time.”
The FCC and its critics agree on this much: The agency under Wheeler’s leadership has been an aggressive one, unafraid of tangling with the largest tech companies.
©2015 The Dallas Morning News, Distributed by Tribune Content Agency, LLC.
