Last week the Federal Communications Commission (FCC) accused AT&T Mobility of a practice known as “throttling” – severely reducing data speeds after a customer reaches a certain limit on data usage in a single billing period, even though a customer purchased an “unlimited” data plan. The FCC claims that AT&T did not provide adequate notice to its customers and plans to fine AT&T $100 million.
AT&T has offered unlimited data plans since 2007. According to the FCC, AT&T began throttling mobile customers in 2011. In many instances, customers received as low as 5% of the speed they anticipated. On average, data speed was reduced approximately 12 days each month.
AT&T defends “throttling,” claiming it is a legitimate business practice that the FCC is well-aware of. According to an AT&T spokesman, “The F.C.C. 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.” Apparently, AT&T posted a notice that it was throttling mobile customers’ accounts on its website.
The FCC claims AT&T violated the 2010 Open Internet Order which required greater disclosure. AT&T is the first to be accused of violating the rule. “Consumers deserve to get what they pay for,” the FCC Chairman said. “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 FCC action follows that of the Federal Trade Commission (FTC). Last October, the FTC sued AT&T for violations of the FTC Act based on its practice of throttling unlimited data plans. That lawsuit is still pending.
Victims of AT&T’s throttling practices might be wondering what recourse they have. The answer depends in large part on the terms of their customer agreement. AT&T’s standard customer agreement contains an arbitration provision foreclosing access to the courts and requiring any disputes to be heard in an arbitration setting. The agreement also forbids bringing a dispute as a class action, which usually is the only practical way to resolve what are often relatively small, individual claims (but large in the aggregate). To read more about arbitration clauses, click the links below.
In 2011, the US Supreme Court held that the Federal Arbitration Act of 1925 preempted states from disallowing class-wide arbitration. AT&T Mobility v. Concepcion, 563 U.S. 321. Simply put, “businesses that include arbitration agreements with class action waivers can require consumers to bring claims only in individual arbitrations, rather than in court as part of a class action.” https://en.wikipedia.org/wiki/AT%26T_Mobility_LLC_v._Concepcion. After the Supreme Court’s decision, companies such as AT&T began to introduce arbitration clauses or amend existing clauses in their consumer contracts.
Pro-consumer organizations are uniform in their belief that arbitration clauses that restrict access to the courts are harmful to consumers. The consumer’s options may be limited for now, but the Supreme Court’s 5-4 decision was close, so there may be hope.