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President & CEO of AT&T Mobility and Consumer Markets Ralph de la Vega speaks during the Windows Phone 7 launch in New York, October 11, 2010.
Reuters/Jessica Rinaldi
Let me tell you about the limits on my unlimited plan.

The US government is suing AT&T for unfairly and deceptively cutting mobile internet speed

Tim Fernholz
By Tim Fernholz

Senior reporter

Some 3.5 million customers who bought unlimited data service from AT&T received a surprise in 2011: After using more than 2 gigabytes of data in a month, AT&T would dramatically throttle back data speeds, leaving customers facing degraded or denied service for everything from GPS navigation to streaming music. When angry customers cancelled their contracts, AT&T collected early termination fees.

Now, following a raft of complaints, the US government is suing the company for the practice, alleging that AT&T knew all along its advertising around the plan was deceptive. The Federal Trade Commission, an agency charged with protecting consumers from abusive business practices, has filed the suit against the telecom giant, asking a judge to give consumers their money back and end the practice.

AT&T calls the charges “baseless” and “baffling.” The company says the new policy was a disclosed part of its network management practices—including in a press release that led to almost 2,000 news stories—but the FTC says its disclosures were not sufficient.  ”We’re going to prove these allegations in court,” FTC Chairwoman Edith Ramirez told reporters today.

Ramirez says that the agency’s investigation revealed that AT&T determined its unlimited data plan was too costly to maintain, but didn’t want to lose the marketing clout that came with offering “unlimited” data. The FTC’s complaint notes that AT&T was well aware of how consumers would interpret its unlimited offer but didn’t change its marketing practices:

The marketing aspect will be key to its case: While the FTC was created to be an aggressive anti-trust agency, its powers are now limited to bringing lawsuits like these about unfair and deceptive practices. Of late, the agency has been taking a lead in fighting for consumer issues on the internet, calling out companies for holding personal data insecurely.  In challenging AT&T’s data management service, the FTC is getting into some of the most controversial questions of the modern telecom: How do you tell the difference between the necessity for the company to manage the limited resource of its network and a company acting abusively?

These are the questions are also at the heart of the debate over wired internet service, where customers may not receive the access they believe they have paid for because of opaque fights between internet service providers, content companies, and network companies over how to manage internet traffic. Right now, consumers bear the brunt of those conflicts, but if regulators will hold ISPs responsible for delivering the speeds they promise regardless of network management issues, internet users can at least hope for truth in advertising. The Federal Communications Commission, the FTC’s sister agency with a speciality in telecom regulation, warned ISPs about accurate disclosure in July.

“What we’re challenging is not the practice of throttling in and of itself, but that AT&T marketed and sold unlimited data plans that were not,” Ramirez said.

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