U.S. Appeals Court Rules in Favor of AT&T in Throttling Suit

A federal appeals court in California has ordered a lower court to dismiss the data-throttling lawsuit filed against AT&T in 2014 by the Federal Trade Commission (FTC). The case accused the carrier of deceiving customers by reducing internet speeds for those with unlimited mobile data plans after certain usage levels were exceeded. The FTC asserted that the carrier failed to inform consumers of this. In some cases, according to the suit, data speeds were slowed by almost 90 percent. The FTC called the practice deceptive and, as a result, barred under the Federal Trade Commission Act. AT&T argued that there was an exception for so-called common carriers, and the appeals court agreed. The company said it was pleased with the decision. The FTC has not yet decided whether to appeal. AT&T could still face action from the Federal Communications Commission (FCC). In June 2015, the agency proposed a fine of US $100 million for the operator’s alleged failure to inform customers with unlimited data plans about the speed reductions. AT&T has contested that proposed fine.   The ruling by the Ninth Circuit Court of Appeals is certainly a victory, and perhaps an indication that the practice of data throttling—whose demise has been predicted due to vigorous action from the FTC and FCC—may still have some life left in it. For AT&T, without a doubt, the ruling is good news, insofar as it spares the operator fines and customer refunds. However, we should note that data throttling is no longer as important a strategy for the major operators as it formerly was, since the trend away from “unlimited” data got underway. At this point, it applies only to legacy customers still on plans that are no longer available to new customers. What the AT&T’s court victory does not change is the fact that public awareness of throttling and the seemingly un-straightforward approach the operator took toward disclosing and explaining it hurt the company’s image with consumers. Even if legal, reducing speeds to the point at which in-demand data services are impossible to use is, we believe, bad advertising for AT&T.   Interestingly, the issue has arisen again due to the policies of a U.S. operator that is bucking the trend—T-Mobile. The “Uncarrier,” as we reported last week, is defiantly declaring that plans with data allowances are “over” and offering so-called unlimited data. However, in a seeming flashback to earlier practices, T-Mobile throttles data in two ways, for video and hotspot use. We will be watching to see whether the public becomes as outraged at this as it did at AT&T’s throttling.

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