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The FCC Aims to Fine AT&T $100 Million for its Misleading 'Unlimited' Data Plans

It's a record fine.

by Sam Gustin
Jun 17 2015, 6:19pm

Image: Mike Mozart/Flickr

As if AT&T didn't already have enough to worry about with the FCC.

The US government announced Wednesday that it wants to slap AT&T with a whopping $100 million fine, the single largest penalty the FCC has ever pursued, a US government official told reporters.

The Federal Communication Commission says AT&T misled its customers about unlimited mobile data plans and "severely slowed down" the speeds for customers with those plans. Perhaps most importantly, the company "failed to adequately notify" its customers that they could receive speeds slower than the normal AT&T network speeds if they went over a certain (unknown) data usage threshold.

The blockbuster FCC action is just the latest example of the FCC's tough new line against industry titans. But surprisingly, the telecom regulator didn't use the most powerful tool in its arsenal—the agency's powerful new net neutrality rules, which would seem to be the most obvious path toward cracking down on such apparent throttling.

Instead, the FCC is relying on existing legal authority from the now-defunct 2010 open internet order—the so-called "Transparency Rule"—that the DC Circuit didn't strike down last January, when the court threw out the FCC's previous open internet protections.

The FCC is charging AT&T with violating the 2010 Open Internet Transparency Rule by "falsely labeling plans as 'unlimited'" and by "failing to sufficiently inform customers of the maximum speed they would receive."

For four years, AT&T offered unlimited data plans to its smartphone customers. Though it stopped offering those plans to new customers, certain existing customers have been grandfathered, allowing them to continue receiving "unlimited" data.

"Since 2011, the Commission has received thousands of complaints from AT&T's unlimited data plan customers stating that they were surprised and felt misled by AT&T's policy of intentionally reducing their speeds," the FCC said. "Consumers also complained about being locked into a long-term AT&T contract, subject to early termination fees, for an unlimited data plan that wasn't actually unlimited."

"It's highly significant that they used the 2010 transparency order," a veteran industry source told Motherboard. "I read this as a signal to all parties: we still have the much stronger 2015 enhanced transparency rules on the table."

AT&T is currently trying to convince the FCC to approve its $50 billion merger with satellite giant DirecTV. The combined company would offer bundled packages of broadband, video and phone service to consumers. Wall Street thinks the tie-up will boost the combined company's profit margins.

"We will vigorously dispute the FCC's assertions," AT&T said in a statement. "The FCC 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. We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC's disclosure requirements."

AT&T clearly has a trust issue with FCC Chairman Tom Wheeler, which could pose an obstacle to the merger's success.

"Customers deserve to get what they pay for," Wheeler said Wednesday in a statement. "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."