AT&T has won the lawsuit filed by the Federal Trade Commission (FTC) regarding its data throttling plans. In the now dismissed case, the FTC said the American telecommunications conglomerate intentionally reduced data speed of customers subscribed to its unlimited data plans.
The United States Court of Appeals for the Ninth Circuit sided with AT&T and reached a decision to dismiss the lawsuit that was filed by the FTC in October 2014.
The FTC filed the complaint under section 5 of the FTC Act, taking issue with AT&T's inadequate disclosure about how the plans will substantially get reduced in speeds during a given billing cycle once an unlimited data customer's consumption has exceeded the network carrier's set threshold, without regard to real-time network congestion. Section 5 of the FTC Act prevents persons, partnerships or corporations from using unfair or deceptive acts or practices in or affecting commerce.
"The central issue before us is whether AT&T is covered by section 5, which exempts, among others, 'common carriers subject to the Acts to regulate commerce,'" says Circuit Judge Richard Clifton.
Of course, there are exceptions to Section 5's coverage. Corporations such as banks, saving and loan institutions, federal credit unions and the mentioned common carriers are some of the specified ones. FTC's problem arose when the Federal Communications Commission (FCC) reclassified mobile data as a common carrier service from non-common carrier service and thus, making AT&T a common carrier.
While the FTC argued that AT&T's activities in question predates its reclassification, the federal appeals court deemed that AT&T's exemption from Section 5's coverage as status-based, which exempts it from regulation for as long as it has the status of a common carrier.
"We conclude, based on the language and structure of the FTC Act, that the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by section 5," states the federal appeals court's ruling that was filed on Aug. 29.
"Because AT&T was a common carrier, it cannot be liable for the violations alleged by the FTC. The district court's denial of AT&T's motion to dismiss is reversed, and the case is remanded for entry of an order of dismissal."
Even though AT&T has survived this battle against the FTC, it is still in locked horns with the FCC, which proposed a $100 million fine for the same internet connection throttling activities that the FTC cited.
Note that when AT&T became the Apple iPhone's exclusive provider within the United States in 2007, it also started offering unlimited mobile data plans to its customers. However, in 2010, AT&T shifted to tiered data plans and stopped offering unlimited mobile data plans to new customers. In 2011, AT&T began throttling the speed of its unlimited data plan users, according to the FTC.
"Although AT&T attempts to justify this program as necessary to prevent harm to the network, AT&T's throttling program is not actually tethered to real-time network congestion," says Clifton. "Instead, customers are subject to throttling even if AT&T's network is capable of carrying the customers' data. AT&T does not regularly throttle its tiered plan customers, no matter how much data those customers use."