FTC Levies $40M Fine Against TracFone for Throttling Unlimited Data Customers

MacRumors · Jan 28, 2015

In recent months, the Federal Trade Commission has taken a significant interest in carrier throttling practices and today handed down a ruling that could have future ramifications for carriers who throttle their unlimited customers.

As reported by Re/code, the FTC has ordered prepaid wireless carrier TracFone to pay $40 million to consumers who paid for unlimited service and were then throttled after reaching certain data limits.

TracFone advertised "unlimited text, talk, and data" for $45 a month under the brands Straight Talk, Net10, Simple Mobile, and Telcel America, and until September 2013, did not clearly disclose its throttling policies that saw customers experiencing data speeds that were cut by up to 90 percent, thereby violating the FTC Act.

While this ruling only affects TracFone at the current time, there are several other carriers that have similar practices for their unlimited customers. AT&T and Verizon no longer offer unlimited data plans, but continue to provide unlimited data for many people who remain on grandfathered plans. AT&T has engaged in throttling practices for years, often cutting off customers who exceed 5GB of LTE data usage.

"The issue here is simple: when you promise consumers 'unlimited,' that means unlimited," said Jessica Rich, director of the FTC's Bureau of Consumer Protection. "This settlement means that Straight Talk, Net10, Simple Mobile, and Telcel America customers will be able to get money back from the company for services the company promised but didn't deliver."

Last year, Verizon planned to throttle its high-usage unlimited data LTE customers, sparking interest from FCC chairman Tom Wheeler, who said he was "deeply troubled" by the decision. Verizon ultimately reversed course and opted not to throttle its unlimited customers, but the FCC's attention was already roused, and the agency began questioning all carriers on their unlimited throttling practices.

The government's interest in carrier throttling practices led the FTC to file a federal complaint against AT&T in October of 2014, accusing the carrier of misleading its smartphone customers by charging them for unlimited data and then going on to reduce data speeds. Based on today's TracFone decision, AT&T may also be facing hefty fines in the future, and the FTC's ongoing involvement in carrier throttling of unlimited customers could finally put an end to the practice.

Article Link: FTC Levies $40M Fine Against TracFone for Throttling Unlimited Data Customers

k1121j · Jan 28, 2015

its about time they make them honor "Unlimited" its not if its limited. I'm surprised its gone on this long

maflynn · Jan 28, 2015

40 Million, that's lot for a tiny carrier, though aren't they owned by walmart

lozanoj83 · Jan 28, 2015

Start little, go big. Just get something done FTC, "you're our only hope."

blevins321 · Jan 28, 2015

I'd say that's it folks. No more unlimited plans for the grandfathered customers on VZ/ATT. Once the contract is up they're free to change plan terms.

ArtOfWarfare · Jan 28, 2015

Can we do something about the regional broadband monopolies (IE, Comcast, Verizon, Time Warner?) They concern me more than the cellular providers, which at least compete with each other so have some interest in screwing over their customers less so that people will switch.

HobeSoundDarryl · Jan 28, 2015

OK FTC, but dole out the fines to more than just the cheap(est) players. It will be wrong to fine a player like this while allowing AT&T, Verizon etc to carry on without fines. Of course, AT&T & Verizon make big campaign contributions so lets see if the Gov punishes wrongdoing or if this "wrongdoing" is defined as not contributing enough to campaigns.

Seems odd that a relatively small player would get a headline fine for throttling while the much bigger, much deeper pocketed players are left out.

k1121j · Jan 28, 2015

blevins321 said:
I'd say that's it folks. No more unlimited plans for the grandfathered customers on VZ/ATT. Once the contract is up they're free to change plan terms.

i agree it will end the contracts but either way they will be forced to state what they are stilling in actual terms not be allowed to false advertise IE Unlimited thats limited.

as an original AT&T unlimited customer they may want to think twice before ending the unlimited plan i may just find another carrier...and its not one of the big two I'm eyeballing these days

jtrenthacker · Jan 28, 2015

GOOD! I hope they fine the hell out of all of them. I'm an unlimited customer with AT&T and I've now been bitten by their throttling practices. We just recently moved across the country. Before the move, I worked at a university that had campus wide wifi and of course I had wifi at home. Between the two, I hardly ever used LTE. After we moved, we were without internet for three weeks. I would use the LTE for everything on my phone including Netflix. Soon I was getting texts that I will be throttled if I go over 5gb. Sure enough, eventually LTE became almost unusable. Then last week, I start getting texts, emails, and an actual letter telling my to stop tethering! Mind you, we've had internet at the house for a couple weeks now. I have never used tethering. They say if I continue they will change my plan without my consent. I called the customer service line and bitched about it. They didn't really apologize. They just tell me my plan will stay the same and that there may be apps on my phone that act like tethering (total BS). We have never had a bad experience with AT&T until now. All because I went over 5gb in data on my UNLIMITED plan? Kiss my att.

LawJolla · Jan 28, 2015

I'm an ATT "Unlimited" customer. One thing to keep in mind is, unlike Verizon, they still subsidize phones on this plan.

I'd take truly unlimited data (or even reasonably throttled, like 25gb) over a subsidized phone, but it does offset things a little.

Koodauw · Jan 28, 2015

Dear FCC,

Please bring the pain that is trying to use a throttled phone to AT&T. They need to know the pain they have inflicted.

Z400Racer37 · Jan 28, 2015

Everyone to whom throttling would be relevant knows about throttling, and nows the carriers do it. And its in the contract that they can do it. It's not like this stuff is a secret. So they did it on some people, and those people are now pissed because they don't like the terms of the contract that they signed anymore. But worry not, bureaucrats to the rescue. Let's just steal their money back because they're not happy with their decision anymore.

Losers.

GrecoISU · Jan 28, 2015

Z400Racer37 said:
Everyone to whom throttling would be relevant knows about throttling, and nows the carriers do it. And its in the contract that they can do it. It's not like this stuff is a secret. So they did it on some people, and those people are now pissed because they don't like the terms of the contract that they signed anymore. But worry not, bureaucrats to the rescue. Let's just steal their money back because they're not happy with their decision anymore.

Losers.

You're so cute!

jtrenthacker · Jan 28, 2015

Z400Racer37 said:
Everyone to whom throttling would be relevant knows about throttling, and nows the carriers do it. And its in the contract that they can do it. It's not like this stuff is a secret. So they did it on some people, and those people are now pissed because they don't like the terms of the contract that they signed anymore. But worry not, bureaucrats to the rescue. Let's just steal their money back because they're not happy with their decision anymore.

Losers.

Are you the AT&T customer service rep I talked to the other day? Huh, small world.

eoblaed · Jan 28, 2015

Now if only we can get AT&T to stop throttling our 'unlimited' accounts at such low thresholds .... and let us tether.

idiiamots · Jan 28, 2015

Is T-Mobile going to run afoul of this when they advertise Unlimited internet, which really means "unlimited 2G and limited 4G LTE" or are they fine because they spell it out?

NokX · Jan 28, 2015

As much as I hate the throttling of data (I'm with AT&T), if you agreed to their terms you agreed to the throttling. You still get unlimited data, you just agreed to a little line that says they can throttle that unlimited data after a certain limit.

It sucks but every single one of us who signed a contract agreed to those terms.

Bryan Bowler · Jan 28, 2015

This is good. Let's hope this puts an end to the unfair practice that AT&T has been doing. Unlimited should mean unlimited. I've been paying for it for 6 years and when I need to use a little extra data, it should be there for me.

Bryan

----------

NokX said:
As much as I hate the throttling of data (I'm with AT&T), if you agreed to their terms you agreed to the throttling. You still get unlimited data, you just agreed to a little line that says they can throttle that unlimited data after a certain limit.

It sucks but every single one of us who signed a contract agreed to those terms.

Yes, it's vaguely written into the terms, but it's still deceptive advertising from an overall point of view.

Bryan

jtrenthacker · Jan 28, 2015

NokX said:
As much as I hate the throttling of data (I'm with AT&T), if you agreed to their terms you agreed to the throttling. You still get unlimited data, you just agreed to a little line that says they can throttle that unlimited data after a certain limit.

It sucks but every single one of us who signed a contract agreed to those terms.

But I did not agree to the harassment and accusations that I tether because I'm using the unlimited data that I agreed to pay for.

ron7624 · Jan 28, 2015

And this after giving up my unlimited plans after getting throttled at 5 gb. IMO, it was a pretty useless plan with only 450 min of talk. ATT unlimited phone plans were not that great for me.
I'm spending less money and have 40 gb of data that I don't come close to.

psingh01 · Jan 28, 2015

it doesn't matter if some carriers respond by ending their "unlimited" plans if those are just unlimited in name only anyway.

at&t's unlimited plan is worse than tmobile's 5gb plan. still have to pay more for unlimited mins and text.

nutmac · Jan 28, 2015

I can see how this is bait and switch.

But I would instead like carriers be more transparent about bandwidth.

My ideal carrier would offer the following.

1. Todays widget that reports current data usage like Verizon.

2. When certain amount of bandwidth is used, offer customers a choice between (1) automatically charging $10 to get additional bandwidth (e.g., AT&T and Verizon) or (2) automatically throttling to lower speed, such as 128 Kbps (e.g., T-Mobile). Customers should be able to switch to different option at any time.

3. Data rollover from 2 or more billing cycles.

4. No distinction between hotspot/tethering and regular mobile data consumption.

5. Get rid of unlimited tier. As much as I like the idea of Sprint's "we will only throttle you if the tower gets congested", in reality, such things are subject to abuse. I prefer more transparent, consistent policy with as few rules and exceptions as possible.

Col4bin · Jan 28, 2015

Funny how the FTC targets a much smaller entity like Straight Talk. Almost a warning shot at Verizon, AT&T and Sprint who have all been accused of throttling at one time or another. But I guess the FTC, being a government organization, are giving these guys a pass considering they're all in bed with the Telecom lobbyists on Capital Hill, funneling huge amounts of $$$ into our politician's campaign coffers.

hansonjohn590 · Jan 28, 2015

the little company gets a massive fine, AT&T still gets away with throttling....

Icy1007 · Jan 28, 2015

The data is unlimited. They didn't say you'd get it all at the same speed.

FTC Levies $40M Fine Against TracFone for Throttling Unlimited Data Customers

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