FTC Sues AT&T Over Alleged 'Data Throttling' on Phone Plans

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Andrew Harrer/Bloomberg via Getty Images
By Diane Bartz

WASHINGTON -- The U.S. government has sued AT&T, alleging the No. 2 U.S. wireless carrier sold consumers unlimited data plans but would reduce their Internet speeds once they exceeded a certain amount of data.

The Federal Trade Commission said Tuesday that this throttling of Internet feeds was deceptive and that in some cases data speeds were slowed by nearly 90 percent.

FTC Chairwoman Edith Ramirez said that AT&T (T) wanted to retain longtime customers and so allowed them to buy unlimited data plans, in some cases after new customers were no longer offered unlimited plans. Then they unilaterally changed the terms, she said.

"They stopped providing the service that customers understood they had purchased when they entered into their contract," she said. "Customers would be subject to an early termination fee if they wanted to get out of their existing contract."

AT&T called the allegations "baseless" and said the practice was needed to manage network resources.

"We have been completely transparent with customers since the very beginning," said Wayne Watts, AT&T's general counsel. "This program has affected only about 3 percent of our customers, and before any customer is affected, they are also notified by text message."

More than 3.5 million customers with legacy unlimited data plans had their Internet speeds slowed more than 25 million times by AT&T's practice, which began in October 2011, the FTC said.

AT&T says on its support website that people with certain plans can experience data slowdowns once they exceed certain limits. Customers with a 3G smartphone will experience slowdowns after using 3 gigabytes of data in a month, while those with 4G LTE smartphones can use 5 gigabytes before potential slowdowns.

Those who dislike the throttling can use Wi-Fi or switch to a different plan, AT&T says on its website.

AT&T closed up 0.6 percent at $34.33 a share.

Federal Communications Commission Chairman Tom Wheeler has said that his agency was troubled that some carriers singled out specific customers for throttling.

The FCC is reviewing wireless carriers' data management practices after Verizon (VZ) in July announced that the top 5 percent of high-speed data users on its older unlimited data plans might experience slower speeds.

Verizon, the largest U.S. wireless provider, ultimately scrapped the plan for the higher-speed 4G network, though the policy is in effect for unlimited subscribers on the 3G network.

Sprint (S) and T-Mobile US (TMUS) continue to offer unlimited data plans.

Earlier this month AT&T said it would pay $105 million to settle FTC allegations that it put unauthorized changes on customers' mobile phone bills.

Separately, the Justice Department is currently reviewing AT&T's proposed purchase of DirecTV (DTV).

The case in the U.S. District Court for the Northern District of California is FTC v. AT&T Mobility LLC.

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FTC Sues AT&T Over Alleged 'Data Throttling' on Phone Plans

Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

​Instead, whenever your financial situation gets a boost, consider the best ways to put that money to work for you. The truly wealthy are those whose money continues to grow and earn them more, even when they're not actively doing anything with it.

The average American household that carries credit card debt holds a balance of around $15,000. If you're among those who have a credit card balance, you've probably seen the little chart on your monthly statement telling you how much you'll pay in interest over the next several years if you make only the minimum payment. (If you haven't, look at it.) The same chart will also compare that to a "suggested" payment that's slightly higher. 

​Our recommendation? Throw everything you can at paying your balances off as fast as possible. And make sure not to take on any additional debt in the future; if you can't pay for a consumer good out of pocket, don't finance it.
We don't demonize student loan debt the way we do credit card debt because we see an education as an investment -- and higher education often is the difference between one income bracket and another. Similarly, many people justify taking out a car loan by stating that they need a car to get to work.

​That said, debt is still debt, and the longer you take to pay it off, the more interest you'll pay. Once you've freed yourself of credit card debt, paying down your car and student loan balances should be next on your list.

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​Putting aside a little each month could prevent you from getting socked with a hefty bill you can't afford and then need to finance.

No matter your age, you should be adding to your retirement funds -- such as your 401(k) or individual retirement account -- each month. Just setting aside money sporadically won't cut it; you need to identify how much you'll need to live on once you stop working and monitor whether you're on track to reach that amount.

​Here's a quick-and-dirty rule of thumb: multiply your annual spending by 25. This is the amount you'll need in your retirement portfolio, if you assume that you'll withdraw 4 percent per year to live on during your retirement. In other words, you'd need $1 million in your portfolio to live on $40,000 annually. Creating a plan will help you make sure you're able to retire the way you envision.
A home is a big investment, and sometimes that investment doesn't wind up netting you the return you thought it would.

The biggest culprit is having too large a balance on your mortgage, which detracts from your own personal stake in the current market value for your home. The sooner you pay this amount down, the better your home equity will be.

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Paying high investment fees eats away at your gains. And since your gains compound over time, this creates a domino effect that can really chip away at your wealth. Take a close look at your investment companies' fees and shop around to make sure they're not taking more of your money than they need to be.

If you don't have a long-term investment vision and are simply playing the market, you could seriously undermine your wealth-building potential. Stop paying attention to market fluctuations, media pundits and the stories of your friends and family. Instead, create your own long-term investment strategy that will maximize your overall returns. Resist the urge it play it ultra-conservative (or fall for get-rich-quick schemes) and educate yourself on the best way to make your dollars work for you.

​If you're having trouble making sense of your options or want a second opinion, seek the help of a trusted financial adviser.
Based on your experience and seniority level, education and industry, you should have a fairly good idea how much you ought to be making at your job. If you don't, check out a site like PayScale to get a ballpark figure.

If you're not making what you're worth, you're doing more than leaving money on the table; you're also losing all the compound growth and investment returns that money could be generating for you. Invest in yourself with professional development and continuing education, make the case for that raise or promotion, or seek out a company who will value you higher.

If you don't have proper insurance coverage, you're taking a very big risk that could come back to bite you. Too many people think the worst can't happen to them, but the hard truth is you can't predict the future, and scrimping on sufficient insurance is never a good idea.

Of all the things we're hesitate to part with our money for, adequate insurance coverage should not be one of them. No matter your age, everyone should be properly covered with:

  • Health insurance.
  • Disability insurance.
  • Homeowner's or renter's insurance.
  • Flood insurance (if you live in a flood-prone area).
  • Umbrella liability insurance (especially if you own a small business).

If a spouse or children relies on you for support, make sure you have a decent term life insurance policy, as well.

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