Should iPad Owners Have the Right to Unlimited Data?

For at least one iPad owner, the option to switch between different data service plans is a right worth suing for. After all, there are days when downloading buckets of data makes an unlimited service plan a carefree experience on the wallet, while other days an unlimited service is overkill and brings unnecessary costs to the household budget.

AT&T had previously offered customers the attractive option of switching back and forth between an unlimited 3G service plan or a service plan that capped their data usage on AT&T's 3G network but carried a lower monthly fee. That option, however, ended last week when AT&T canceled its unlimited data service.

The move spurred a lawsuit from a New York iPad owner, Adam Weisblatt, who alleges that Apple (AAPL) and AT&T (T) engaged in a range of misdeeds, from fraud to false advertising, related to the cancellation. The lawsuit, which is seeking class-action status, comes less than two weeks after AT&T announced plans to curtail data hogs on its 3G network. The iPad, along with the iPhone and iPod, allows users to download movies and other large files, a process which consumes a large chunk of bandwidth. With Apple selling 2 million iPads within two months, it's clear that the problem could grow exponentially.

While AT&T will still honor the unlimited plan for Apple subscribers that have already signed up for it, new subscribers will no longer be able to get the plan and -- more pertinent to the lawsuit -- the company eliminated the ability for customers to toggle back and forth between unlimited and capped data service plans. Eliminating that feature means that current subscribers are stuck with whatever plan they were on when the unlimited plan disappeared.

Plaintiff: Don't Take Away Toggling

Weisblatt contends Apple and AT&T should honor their initial offer to allow users to toggle between an unlimited service and a capped plan, depending on their needs at any given month. In his suit, Weisblatt says he upgraded from the cheaper WiFi-only iPad to the more expensive WiFi-3G-enabled version specifically because of that flexible service plan. He also notes that no one at the Apple store where he purchased his device told him that the unlimited service plan and service-toggling option would soon be eliminated, even though AT&T had made the announcement three days before his purchase.

According to a copy of the lawsuit, reported by Courthouse News Service, the complaint says:

Weisblatt, who paid an additional $140 for his 3G iPad, claims in the lawsuit that he would have remained content with his cheaper iPad, using only WiFi -- and not 3G -- for his Internet access, if he had known he would not be able to jump between both service plans. He only needs to use 3G several months out of the year, according to the claim.

Reading the Fine Print

Rebecca Tushnet, a Georgetown University Law Center professor who specializes in advertising and intellectual property, says she would be "astonished" if Weisblatt's service agreement didn't include language allowing AT&T to make any changes whenever it desired.

But that may not be enough. Tushnet also noted that consumer protection laws also limit the broad strokes a company may brush into agreements to allow them to change ongoing services. "[Weisblatt's] allegations are not that unreasonable, since some people would reasonably find it attractive to switch between service plans," Tushnet says. "If you make a claim and then take it back in fine print, the law doesn't look too kindly on that."

Heather Hippsley, assistant director with the Federal Trade Commission's advertising and practices division, declined to comment on this specific case, but notes: "Generally, any advertising of products and services should be truthful and not misleading." The challenge of adhering to that core advertising policy can be more difficult for service companies like AT&T than those that sell products.

Manufacturers and retailers often deal with the issue of offering sales products at a certain price by noting they will only be available "while supplies last," for example. But when it comes to offering services at a certain price or with certain features, Tushnet says, "You have to look at the reasonable expectations of consumers. What do they expect and for how long?"

Unintended Consequences

One way service companies have dealt with this challenge is to grandfather in existing customers at the same service level, while bringing in new folks under the revised terms. That strategy is similar to AT&T's decision to keep the unlimited service for existing customers while doing away with the option for new ones. The difference is that AT&T also eliminated the toggling option between services for both new and old customers.

Apple didn't immediately respond to a request for comment, and an AT&T spokesperson declined to comment, saying the company hadn't yet seen the lawsuit.

For Apple and AT&T, the lawsuit may only be one unintended effect of removing the unlimited service plan. It has yet to be seen whether the change will curtail purchases of the iPad or Apple's recently unveiled videoconferencing enabled iPhone 4.