On Tuesday afternoon, the Federal Trade Commission filed a suit against AT&T alleging that the wireless carrier "misled millions of its smartphone customers" by charging them for unlimited data plans while intentionally reducing speeds.
The practice, known as "throttling," has been a frequent target of regulators at the Federal Communications Commission, but this is the first case brought by the FTC. The agency said the carrier began the practice in 2011, slowing speeds on activities such as video streaming and web navigation by as much as 90%.
In its lawsuit, the FTC disparaged AT&T for its marketing around "unlimited" data coverage.
"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."
On a call with reporters, Ms. Ramirez offered more on the suit. "What we're challenging is that AT&T marketed and sold unlimited contracts and then failed to provide unlimited service," she said. AT&T subscribers who canceled their contracts after getting throttled were charged early termination fees, according to the charges.
In its lawsuit, the agency claims the carrier was aware of consumer distaste for the practice as it conducted market research. "[T]he more consumers talked about it the more they didn't like it," the lawsuit reads, citing AT&T's consumer research.
"This led the researchers to advise that '[s]aying less is more, [so] don't say too much' in marketing communications concerning such a program," the FTC lawsuit reads.
AT&T is the nation's second-largest advertiser, spending $3.3 billion the U.S. last year, according to the Ad Age DataCenter.
In a statement, an AT&T spokesman called the charges "baseless." The carrier claims it fully notified customers of the changes in speeds. "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," the carrier's statement reads.
In response, Ms. Ramirez said the carrier's efforts at conveying its tactics were insufficient. "We believe that the disclosures provided by AT&T were inadequate," she said on the press call. "We stand by our allegations, and we aim to prove our allegations in court."
