Today, the Federal Communications Commission (FCC), on a three-to-two vote, found that AT&T violated federal regulations by failing to disclose that it was throttling certain wireless customers on an “unlimited” data plan. The FCC claims AT&T owes a $100 million fine. This announcement follows a lawsuit filed in October 2014 by another federal agency, the Federal Trade Commission (FTC), arguing that AT&T violated federal consumer protection law by throttling its unlimited data plan customers. AT&T has pledged to take both agencies to court to defend itself against these allegations.
By way of background, for many years, AT&T and many other wireless providers offered data plans—used for Internet browsing, email, video, and so forth—on an all-you-can eat, unlimited basis. These plans let customers transmit and receive as much information as they wish, without facing overage charges for downloading too much data.
However, in mid-2010, AT&T stopped offering unlimited data plans to new customers. For existing customers on an unlimited plan, AT&T allowed them to stay “grandfathered” on their old plans. Then, in 2011, AT&T began throttling the throughput—commonly known as “speed”—of its highest users of unlimited data plans. This throttling didn’t stop any customers from using as much data as they wanted, but it did substantially degrade a fraction of AT&T customers’ connectivity.
Had AT&T not told anybody about this throttling, it would clearly run afoul the FCC’s transparency rule, which was issued in 2010 and upheld on judicial review by the Court of Appeals for the D.C. Circuit in 2014.
Yet AT&T did disclose its behavior to customers and the public through various means:
A majority FCC, however, found that none of these disclosures were enough, because some customers might have missed all of them and simply assumed that “unlimited” meant not only unlimited usage, but unlimited throughput, too. But as dissenting FCC Commissioner Ajit Pai argued in his dissent, unlimited data and unlimitedspeed aren’t the same—and AT&T never promised its customers they would enjoy both.
Moreover, as Commissioner Pai noted, when the FCC adopted its transparency rule, it pledged to give providers like AT&T the ”flexibility to determine what information to disclose and how to disclose it.” If the FCC wanted to impose rigid rules on providers’ network management disclosures, the FCC could have done so. Instead, the agency elected to do the opposite—yet, today, even after AT&T provided myriad disclosures across numerous media, the FCC has decided that AT&T didn’t do enough.
This argument might make sense if AT&T did nothing to inform customers but tweak the fine print of its service contracts. For that matter, perhaps if AT&T had only employed one of the many methods it used to communicate its policy shift to customers, the FCC would have a case. But four years after AT&T’s throttling began, how many AT&T customers who are heavy users yet remain grandfathered on an unlimited data plan are still unaware of this policy? It’s hard to imagine users haven’t noticed degradation of their speeds, given that the FCC found that a throttled user would have difficulty watching Internet video or using Facetime.
Ultimately, the FCC’s decision to pursue this notice of apparent liability reflects the agency’s lack of commitment to providing the entities it regulates with fair notice of the rules of the road. Interpreting the transparency rule as an open-ended mandate invites the FCC to penalize companies for harmless conduct, discouraging innovation in network management and promoting monotonous behavior instead of competitive dynamism.
If some unlimited data plan customers tried to cancel their AT&T plans when its throttling policy began, but the company didn’t allow such customers to exit their contracts without paying an early termination fee, that’s a potential violation of theFTC Act. But the proper venue for addressing this concern is through the FTC, which has a lawsuit pending against AT&T for its throttling practices.
This article originally appeared in Competitive Interprise Institute’s OpenMarket.