A federal judge in San Francisco has rejected AT&T's attempt to dismiss a Federal Trade Commission lawsuit charging that the company misled consumers by selling “unlimited” data plans and then throttling data speeds. Specifically, the judge ruled that AT&T cannot hide behind common-carrier exemptions to avoid the lawsuit, as Courthouse News Service reports.
The FTC first filed its suit late last October, alleging that AT&T misled consumers by promising “unlimited” data plans while engaging in data throttling to reduce their data speeds, sometimes by up to 90%.
As its name suggests, “data throttling” is when someone's network connection is deliberately slowed down, or throttled, sometimes to the point where streaming videos and other common online activities become impossible until the throttling stops.
Granted, it's true that sometimes, when networks are congested from heavy use, some level of throttling the heaviest users genuinely is necessary to keep the network running.
On a related note, that's why when hurricanes or other natural disasters damage infrastructure and knock out utilities over a wide area, cell phone and smartphone users are asked to use text messages rather than voice or video calls to contact friends and family: because texts use far less bandwidth and are less likely to overwhelm the system.
Should you ever have the misfortune to find yourself in a literal disaster area someday, don't be surprised to discover that everybody's wireless connections have been throttled so that streaming video and other data-heavy online activity is impossible for the duration.
But that's not what AT&T is allegedly doing. Long before the FTC filed its lawsuit, AT&T's critics have claimed that the company uses data throttling not for network management reasons but for revenue enhancement — and pointed to the company's own advertised pricing policies as evidence.
For example: in January 2014, AT&T launched its then-new “Sponsored Data” program, which it said would shift “mobile data costs from the consumer to the content provider.” (In other words, websites would have to pay in order to ensure AT&T mobile visitors could access them in a timely fashion, in complete opposition to proposed “net neutrality” rules.)
At the time, TechDirt called the program “an admission that data caps have nothing to do with congestion.”
And last September, a month before the FTC filed its data-throttling suit against AT&T, the company ran another promotion called the “Mobile Share Value plan,” which offered to double the data limits of new subscribers who signed up for it. Data throttling isn't used on all AT&T mobile customers, only those who signed up for unlimited data plans before the company stopped offering them.
The FTC's suit alleges that in July 2011, AT&T first started throttling data for customers with unlimited data plans. In densely populated markets such as San Francisco and New York City, “unlimited” plans were actually given 2 gigabyte thresholds, with data speeds capped at only 128 kilobytes per second (kps). The FTC says that AT&T raised the threshold to 3 gigabytes in March 2012, but even with the increase, unlimited data-plan users are on slow networks with top speeds of 256 kps, whereas LTE customers have doubly fast connections at 512 kps.
AT&T's courtroom counter-argument disputed none of this. Instead, the company asked U.S. District Judge Edward Chen to dismiss the suit on the grounds that it fell beyond the FTC's jurisdiction, since AT&T is a “common carrier” according to the Communications Act, which exempts common carriers from FTC oversight (since that jurisdiction goes to the Federal Communications Commission).
The FTC countered that, according to the Communications Act, AT&T does not qualify as a “common carrier” in this instance, because mobile data isn't considered common carrier (the way old-fashioned landline phone connections are). AT&T in turn argued that, since some of its services have common carrier status, all of its services should be considered that way for FTC purposes.
But Judge Chen disagreed with that argument. In the 23-page ruling he released, he noted that “Contrary to what AT&T argues, the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity.”
Chen's ruling also states that:
The gravamen of the FTC's complaint is based on AT&T's failure to disclose its throttling practice to certain customers. More specifically, in Count I, the FTC asserts that AT&T's throttling program is unfair because AT&T 'entered into numerous mobile data contracts that were advertised as providing access to unlimited mobile data, and that do not provide that AT&T may modify, diminish, or impair the service of customers who use more than a specified amount of data for permissible activities.' Thus, the FTC is not arguing in the case at bar that the throttling program is unfair per se; instead it challenges AT&T's failure to disclose the practice to certain customers and afford them alternative options.
Since yesterday's ruling allows the FTC to continue its suit against AT&T, FTC Chairperson Edith Ramirez said that the agency intends to seek refunds on behalf of millions of AT&T's “unlimited” data customers.