AT&T fined $100 million for internet speed cap on 'unlimited' data plans

Millions of AT&T customers were affected by the practice

A woman uses her phone outside the AT&T store in New York's Times Square, June 17, 2015. The U.S. Federal Communications Commission on Wednesday proposed a $100 million fine for AT&T Inc, accusing the No. 2 wireless carrier of misleading customers who pai

(REUTERS)

The Federal Communications Commission slapped AT&T with a $100 million fine Wednesday, accusing the country's second-largest cellular carrier of improperly slowing down Internet speeds for customers who had signed up for "unlimited" data plans.

The FCC found that when customers used up a certain amount of data watching movies or browsing the Web, AT&T "throttled" their Internet speeds so that they were much slower than normal. Millions of AT&T customers were affected by the practice, according to the FCC.

The fine, which AT&T says it will fight, is the largest ever levied by the agency.

AT&T implemented the practice in 2011, prompting thousands of customers to complain to the FCC, according to an agency statement.

By not properly disclosing the policy to consumers who thought they were getting “unlimited” data, the company violated the FCC's rules on corporate transparency, FCC Chairman Tom Wheeler said in a statement.

"Consumers deserve to get what they pay for," Wheeler said. “Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.”

Many of AT&T’s unlimited customers have 4G LTE service, which typically provides mobile Internet speeds of more than 30 megabits per second. That's roughly 60 times faster than the speeds experienced when AT&T throttled subscribers, who were slowed to speeds equivalent to dial-up, according to a senior FCC official.

But consumers are unlikely to receive any money from the fine, which will go instead to the U.S. Treasury, said the agency official.

AT&T disputed the charges. “The FCC has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it,” the company said in a statement.

“We have been fully transparent with our customers, providing notice in multiple ways and going well beyond the FCC’s disclosure requirements.”

This isn't the first time AT&T's unlimited data policy has landed the company in hot water. The Federal Trade Commission sued the telecom company in October, alleging that 3.5 million users had their Internet service slowed to dial-up speeds an average of 12 days every month.

This comes at a tricky time for AT&T, which is trying to convince regulators to approve its $49 billion acquisition of the nation’s largest satellite TV provider, DirecTV.