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FCC Fining AT&T $100 Million for Misleading Unlimited Data Plans

The FCC's action follows a lawsuit filed last year by the FTC about AT&T's unlimited data throttling.

Rob Wilson/Shutterstock

Federal Communications Commission officials announced plans Wednesday to fine AT&T $100 million for misleading subscribers about unlimited data plans.

It’s the largest such fine the agency has ever proposed under rules that require broadband providers to clearly disclose information about their services to consumers.

On Wednesday, the FCC alleged AT&T’s practice of slowing the speeds of unlimited data plan users and failing to tell them that their speeds could be slower than other customers violated transparency obligations under the agency’s old net neutrality rules, which have been in effect since 2010.

(While a federal appeals court threw out most of the 2010 net neutrality rules last year, it upheld the section that requires Internet providers to clearly tell subscribers about data speeds and other details of their service.)

A senior FCC official said that unlimited data customers who used more than 5 gigabytes of data experienced a drop in speed to just 512 kbps for the rest of the month. On average, those customers experienced reduced speeds for an average of 12 days, the official said.

“Consumers deserve to get what they pay for,” said FCC Chairman Tom Wheeler, in a prepared statement. “Broadband providers must be upfront and transparent about the services they provide.”

The FCC alleges AT&T violated the 2010 Open Internet rules by “falsely labeling these plans as ‘unlimited’ and by failing to sufficiently inform customers of the maximum speed they would receive” under the company’s new throttling policy, which was announced in 2011. The agency said it has received “thousands” of complaints from AT&T’s unlimited data plan customers since the policy took effect four years ago.

The Federal Trade Commission sued AT&T last year over the same issue, saying the company’s plan to cut subscriber speeds if they downloaded too much data during a billing cycle wasn’t clearly disclosed and violated the concept of having an “unlimited data” plan.

In a statement, AT&T said it will “vigorously dispute the FCC’s assertions.”

The company said the FCC had previously “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.” The company added it has been “fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”

In response, an FCC senior official said that AT&T’s consumer notifications were not sufficiently detailed enough to allow subscribers to make informed decisions.

While the proposed $100 million fine is the largest in FCC history, there’s a good chance it could drop in size as the complaint goes through the FCC’s internal judicial process and a likely court fight.

Any money recovered by the government won’t go to AT&T subscribers, however, it will be kept by the U.S. Treasury. A senior FCC official said the agency has asked AT&T to come up with a plan to compensate affected unlimited data subscribers.

The FCC’s two Republican members voted against the proposed fine, making arguments that it wasn’t clear AT&T actually violated the agency’s transparency rules or that the alleged violations warranted such a large fine.

(Updated: with more details about the alleged violations, historical context and the dissent by the agency’s two Republican members.)

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