AT&T, the largest U.S. mobile phone company, agreed to pay $60 million to settle Federal Trade Commission claims that it misled millions of smartphone customers with offers of "unlimited data" plans that carried poorly disclosed risks.
The company failed to adequately warn subscribers that it would "throttle" their data speeds, rendering many commonly used apps such as internet browsing and video streaming unusable, if their data usage in a particular billing cycle topped threshold levels, the agency said in its 2014 complaint.
"AT&T promised unlimited data — without qualification — and failed to deliver on that promise," said Andrew Smith, director of the consumer protection division. "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 didn't immediately respond to a message seeking comment.
The Dallas-based company began curbing data speeds on unlimited plans in 2011 after customers used as little as 2 gigabytes in a billing period, the commission said. The slow down affected more than 3.5 million subscribers as of October 2014. The telecom giant, which has since expanded into television, movies and video-streaming with CEO Randall Stephenson's purchase of Time Warner, originally argued that the FTC lacked jurisdiction but was overruled by the 9th Circuit U.S. Court of Appeals last year.
Under the settlement, AT&T is barred from making any claims that its data service is unlimited without prominently disclosing significant restrictions on speeds or amounts. The money it's paying will be deposited into a fund providing partial refunds to current and former customers who signed up for unlimited plans before 2011 and had their data-transmission speeds reduced, the FTC said.
"The company could have upheld its obligations to its customers by making the right infrastructure investments; it certainly had the money to do so," Commissioner Rohit Chopra, a Democrat appointed by President Trump, said in a statement on Tuesday. "In 2012, as the company boasted to investors that customers were fleeing its unlimited plan for tiered plans, it spent more on share buybacks than it invested in its wireless network."