Industry Lawyers See FTC Suit Against AT&T a Move Toward Mobile Regulation

The suit comes amid a debate over the roles of the FCC and FTC in net neutrality. At an NTCA event on Monday, FTC Commissioner Maureen Ohlhausen pushed for her agency’s continued role enforcing Internet consumer protection laws, saying if the FCC adopts a Title II approach, it would at the least raise “serious legal questions” about the FTC’s ability to enforce Internet privacy and other laws, because the agency doesn't have jurisdiction over common carriers (see 1410270035).

Some Communications Act Section 706 proponents have said that’s a concern. "I'm much more comfortable with an FTC enforcement action based on a claim of failing to comply with disclosure requirements than I am with the FCC embarking on an inquiry that in the end would amount to an old fashioned rate case,” said Free State Foundation President Randolph May. Asked about a turf war between the agencies, May noted that the FTC news release said the agency worked with FCC staff.

“There may be some turfiness” between the FTC and FCC, said Free Press Policy Director Matt Wood. The FTC has a role in the enforcement, he said. “Whatever the FCC did over the summer, the FTC is perhaps understandably looking to fill a vacuum here by looking at conduct for data services that the FCC has refused to classify properly,” said Wood. “But if the FCC treated broadband like the telecom service it is, there'd be no question that the FCC has as much ability or more than the FTC does to oversee such practices.”

“Wireless customers across the country are complaining that their supposedly ‘unlimited’ data plans are not truly unlimited, because they are being throttled and they have not received appropriate notice,” said an FCC spokesman in a statement. “The FCC has been actively investigating throttling practices since this summer, when Chairman [Tom] Wheeler sent letters to major nationwide wireless carriers about these practices,” he said. “We continue to work on this important issue, including with our partners at the FTC, and we encourage customers to contact the FCC if they are being throttled by AT&T or other cellular providers,” he said.

'Baseless,' Says AT&T

“The FTC’s allegations are baseless and have nothing to do with the substance of our network management program,” said Wayne Watts, AT&T general counsel, in a statement. “It’s baffling as to why the FTC would choose to take this action against a company that, like all major wireless providers, manages its network resources to provide the best possible service to all customers, and does it in a way that is fully transparent and consistent with the law and our contracts."

This is the first data throttling suit brought by the FTC and should leave “no doubt that our commitment to consumers fully extends” to mobile, said Ramirez . The FTC is alleging that AT&T “sold unlimited data plans and failed to provide unlimited service,” she said. “That’s the thrust of our complaint.” AT&T didn’t “adequately disclose” information about its data throttling program to consumers, Ramirez said when asked about the company’s varied attempts to inform customers of changes to the program. “We stand by our allegations and aim to prove those in court,” she said.

AT&T had “numerous” alternatives to “reduce data usage” that didn’t involve “violating its promise to customers,” said the FTC complaint. AT&T could have required “existing unlimited data customers to switch to a tiered data plan at renewal,” it said. But AT&T “rejected” that approach “in part because of concern that renewing customers would switch providers” rather than remain with AT&T’s tiered plan, it said. AT&T could also have introduced its throttling program when its customers renewed their plans, disclosing its plan changes at the “point of sale,” said the FTC. That was rejected because such a strategy would’ve included all AT&T customers and not its largest users, it said. Other alternatives could have included a “limited, narrowly tailored throttling programs” that would have been “consistent” with AT&T’s “contracts, advertising, and other public disclosures,” it said.

“We have been completely transparent with customers since the very beginning,” said AT&T’s Watts. “We informed all unlimited data-plan customers via bill notices and a national press release that resulted in nearly 2,000 news stories, well before the program was implemented,” he said. “In addition, this program has affected only about 3% of our customers, and before any customer is affected, they are also notified by text message.”

Years of Complaining

“Consumers have been complaining about throttling for years,” said Delara Derakhshani, Consumers Union policy counsel, in a statement. “We’re glad the feds are going after companies that are ripping people off,” she said. “As the FTC said, unlimited means unlimited,” said Derakhshani. “If you charge someone for an unlimited data plan and then slow down their speeds, that sounds deceptive to us,” she said. “It looks like AT&T was trying to push people into more expensive plans,” Derakhshani said: “To add insult to injury, if you cancelled your contract after you were throttled, you could get hit with early termination fees.” The company “may argue it was transparent about these practices, but clearly the government disagrees, and so do we,” she said.

“This enforcement action should remind everyone that the FTC already polices the kinds of issues that are regularly cited as examples of the need for FCC to expand its own regulation of broadband,” said TechFreedom President Berin Szoka. “It also highlights one important downside of Title II: declaring broadband to be a common carrier would bar the FTC from exercising its authority,” he said. “The FTC has been making both points for years, dating back at least to the FTC’s 2007 broadband report, but this is the clearest assertion yet of the FTC’s authority."

“Anytime the FTC goes after a communications company, there’s always a question of whether the FCC is the more appropriate regulator,” said a communications attorney. But there’s “certainly a basis” for the FTC to act under its Section 5 authority, she said. Section 5 covers “unfair or deceptive acts or practices in or affecting commerce,” according to the FTC website.

“What a bold move by the FTC,” said a former FCC aide. “They’re obviously trying to assert their authority over mobile broadband. It also gives the FCC another reason to impose net neutrality rules on mobile broadband.” Ramirez said the FTC worked "closely" with the FCC on the AT&T suit.

The FTC as a consumer protection agency “clearly sees a growing problem in the mobile space,” said a second former FCC wireless adviser. “If the FCC is hesitant to act, for whatever reason, it appears that the FTC is eager to step up and fill the void.” A lawyer who works on FTC issues said the FTC “kind of chaffed” for years under its common carrier exemption. But as witnessed by recent FTC/FCC coordination on cramming (see 1410090091), the relationship between the two seems reasonably good at this point, the lawyer said.