AT&T will pay $60 million to settle a federal complaint that accused the telecommunications company of misleading millions of customers by charging them for supposedly "unlimited" data plans while slowing their service.
The Federal Trade Commission announced Tuesday that AT&T will offer partial refunds to current and former customers as part of the deal. The company is also barred from making marketing claims about unlimited data without prominently displaying any restrictions on speeds or data usage. That restriction may not be confined to the fine print of printed advertisements or a link on AT&T's website, for example, the FTC said.
"AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees and then scammed them by choking off their access unless they moved to a more expensive plan," FTC Commissioner Rohit Chopra said in a statement. "The AT&T throttling scandal is an important case study into how dominant firms operating without meaningful competition can easily renege on their contractual obligations and cheat consumers who have almost no recourse."
A spokesman for AT&T took issue with Chopra's claims.
"We couldn't disagree more with Commissioner Chopra's baseless characterization of the case," AT&T spokesman Jim Greer said in a statement. "None of his allegations were ever proved in court. We were fully prepared to defend ourselves, but decided settling was in the best interests of consumers."
FTC officials said AT&T offered unlimited data to customers, but in 2011 began slowing down the data transmission speeds — a practice known as throttling — as soon as customers reached two gigabytes of data within a billing cycle. Throttling data means it takes a user longer to check emails, stream a video or browse the web on their mobile device.
"AT&T promised unlimited data — without qualification — and failed to deliver on that promise," Andrew Smith, FTC consumer protection bureau director said in a statement. "While it seems obvious, it bears repeating that internet providers must tell people about any restrictions on the speed or amount of data promised."
AT&T customers who purchased a service plan before 2011 are eligible for a partial refund. Former customers don't need to submit a claim and will receive a check with the appropriate amount. Current customers will get a credit on their monthly bill.
The throttling settlement comes five years after AT&T agreed to pay $80 million in a case where customers had extra charges added to their bill for text messaging with their consent.
A recent study found that the four largest U.S. wireless carriers slow the speed at which some video content is streamed on the internet. A number of carriers — including AT&T, Sprint, T-Mobile and Verizon — throttle content even at off-peak times, according to researchers from Northeastern University and the University of Massachusetts Amherst. AT&T disputes the study's findings.