Lawsuit Accuses AT&T of iPhone and iPad Overcharges

iphone overcharge at&t ipad overchargeAT&T Mobility is being sued for systematically overcharging its iPhone and iPad customers for data transactions, small charges the suit alleges amounts to millions of dollars in revenue for the wireless carrier.

"AT&T's billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car's tank," the suit alleged. "AT&T's bills systematically overstate the amount of data used on each data transaction involving an iPhone or iPad account."

According to the federal class-action suit, an independent consulting firm hired by plaintiff Patrick Hendricks' counsel conducted a two-month study of AT&T's data usage billing practices, and discovered the carrier systematically overstated web server traffic by 7% to 14% -- and in some cases by more than 300%As a result, an iPhone user who downloads a 50 KB website will typically be billed for 53.5 KB (a 7% price hike) to as much as 150 KB (a 300% overcharge). The suit also accuses AT&T of billing customers for non-use.

"It gets worse," the suit charges. "Not only does AT&T systematically overbill for every data transaction, it also bills for phantom data traffic when there is no actual data usage initiated by the customer."

This claim was based on findings from the consulting firm, which purchased an iPhone from an AT&T store, closed all applications, disabled all notifications and services, deactivated the email and left it alone for 10 days.

"During this 10-day period, AT&T billed the test account for 35 data transactions totaling 2,292 KB of usage," the suit claims. "This is like the rigged gas pump charging you when you never even pulled your car into the station."

AT&T spokesman Marty Richter told Consumer Ally the company intends to defend itself "vigorously."

"Transparent and accurate billing is a top priority for AT&T," Richter told Consumer Ally. "In fact, we've created tools that let our customers check their voice and data usage at any time during their billing cycle to help eliminate bill surprises. We have only recently learned of the complaint, but I can tell you that we intend to defend ourselves vigorously."

Other tests by the consulting firm also purportedly showed that AT&T's billing system fails to accurately record the time and date of data usage, making it difficult for customers to track their usage and take advantage of their full allotment.

Although AT&T's alleged overcharges per customer are "modest," the suit says, the effect on AT&T's bottom line is "huge." AT&T has 92.8 million customers, and for the fourth quarter of 2010, reported a wireless data revenue increase of $1.1 billion, or 27.4%, from a year earlier. A "significant portion" of those revenues, the suit says, resulted from AT&T's "rigged billing system" for iPhone and iPad data usage.

"A customer cheated by a rigged gas pump may not notice the small fractions of a gallon missing from the tank, but the station owner can boost his revenues enormously by repeating this trick again and again to overcharge a large number of customers by a little bit apiece," the suit charges. "The same is true with respect to AT&T's rigged data billings."

Another AT&T Mobility class-action lawsuit is currently before the U.S. Supreme Court.

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