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AT&T Fined $100 Million For Throttling Data Plans

The Federal Communications Commission announced Wednesday it plans to impose a $100 million fine on AT&T for capping data speeds on its unlimited wireless data plans.

The FCC claims in a press release that AT&T severely slowed down the data speeds for customers with unlimited data plans, and failed to adequately notify them that they could receive speeds slower than the speeds AT&T advertised, though the firm’s defenders contend its actions were allowed under the rules in effect at the time.

“Consumers deserve to get what they pay for,” said FCC Chairman Tom Wheeler. “The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.” (RELATED: FCC Fines AT&T $25 Million for Disclosing Data on Hundreds of Thousands of Americans)

AT&T began offering unlimited data plans in 2007, and in 2011, the company implemented a “Maximum Bit Rate” policy that caps speeds for customers once they exceed a predetermined amount of data usage within a billing cycle. AT&T has since discontinued unlimited data plans for new customers, but continues to allow renewal for existing customers, thousands of whom have sent formal complaints to the FCC since 2011.

According to the FCC, the threshold kicked in after 5 gigabytes of data usage in one month 4G LTE customers, and for 3G and other 4G customers after just 3 gigabytes. Customers who exceeded those limits, the Commission says, experienced data speeds that were “orders of magnitude slower than the normal network speeds AT&T advertises.”

On the 4G LTE network, for instance, speeds typically range from about 5 megabits per second to 12 Mbps in most markets, but were limited to 512 kilobits per second once the data limit was reached. For non-LTE customers, the caps reduced data speeds from between 1.7 Mbps and 6 Mbps to a mere 256 kbps.

One megabit is equal to 1,000 kilobits, so the caps limited users to approximately 10 percent of normal connection speeds. On average, customers who were subjected to the caps endured the restriction for 12 days per billing cycle, or nearly half the time.

“These reduced speeds … significantly impaired the ability of AT&T’s customers to use their data service,” the FCC asserted, pointing out that a 700 kbps connection is necessary for most mobile applications, while standard definition television requires at least 3.5 Mbps.

AT&T now has 30 days to respond to the notice, after which the FCC will reconsider the issue and issue a binding final judgment, according to USA Today.

“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.”

Moreover, the company also claims that it was “fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”

The FCC’s two Republican Commissioners both sided with AT&T, arguing that the fine is being imposed based on retroactive revisions to the agency’s rules. (RELATED: Anti-Net Neutrality AT&T Used Rules as a Defense Against ANOTHER Federal Agency)

Commissioner Ajit Pai called the FCC’s actions “Kafkaesque,” accusing the agency of “imposing specific requirements found nowhere in the 2010 Net Neutrality Order,” and saying that the decision to fine AT&T “disregards specific language in that order and related precedents that condone AT&T’s conduct.”

“Here we are imposing a rigid standard that is based on a subjective opinion of what notification, in hindsight, should have been provided,” Commissioner Michael O’Rielly agreed, saying, “This is not consistent with the word or spirit of the 2010 Open Internet Order,” which promised to allow broadband providers significant flexibility in network management.

Berin Szoka, president of the tech policy think tank TechFreedom, said in a press release that the FCC’s decision “makes clear that it doesn’t give two figs about basic Anglo-Saxon legal principles,” but is problematic for reasons beyond just the retroactive rules change.

The real story, according to Szoka, is that “the FCC is going to use massive fines as a sledgehammer to coerce companies into settling ‘Open Internet’ cases even as Title II regulations languish in court.” (RELATED: This is What a Republican FCC Commissioner Had to Say About Wheeler’s Net Neutrality Plan)

“If settling means $50 million instead of $100 million, or $100 million instead of $200 million,” he explained, “companies will settle routinely—and the courts will play no role in checking the FCC’s discretion.”

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