AT&T agreed to a $60 million settlement over allegations it misled more than 3.5 million customers by charging them for "unlimited" data plans while reducing their data speeds when their usage exceeded a certain amount.
The settlement, announced Tuesday, resolves a 2014 lawsuit with the Federal Trade Commission.
AT&T, which is CNN's parent company, allegedly started throttling, or slowing speeds, for customers with unlimited data plans in 2011, according to the FTC. The practice made it difficult to browse the web or perform other functions, and in some cases, slowed data speeds by nearly 90 percent, according to the FTC. Throttling was allegedly initiated after customers used as little as 2 gigabytes of data in a billing period, the FTC said in a press release today.
In a statement to CNN Business, an AT&T spokesperson said: "Even though it has been years since we applied this network management tool in the way described by the FTC, we believe this is in the best interests of consumers."
The settlement money will be used to issue partial refunds to affected customers who signed up for unlimited plans prior to 2011, according to the complaint. Customers won't have to submit a claim to receive the money. Current customers will receive a credit on their bills and former customers will get checks.
In 2015, the Federal Communications Commission fined AT&T $100 million for similar allegations about misleading "unlimited" plans. The FCC found AT&T subjected unlimited data plan customers to slower speeds after they used more than a certain amount of data per billing cycle.
Under this new settlement, AT&T will no longer be able to make claims about the speed or amount of mobile data, including that it is "unlimited," without revealing relevant restrictions. Any such disclosures will need to be prominently placed, not hidden in fine print or behind hyperlinks, according to the settlement.
"AT&T promised unlimited data — without qualification — and failed to deliver on that promise," FTC's Bureau of Consumer Protection Director Andrew Smith said in a press release. "While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised."
AT&T tried to challenge the FTC's authority over the case for years but in 2018, an appeals court ruled in favor of the FTC.
Throttling has been an issue within the telecom industry as smartphones have become ubiquitous and data usage has surged. In July 2014, Verizon faced criticism from the FCC over plans to throttle the connections of unlimited data plan customers. The company abandoned the plan in October 2014.
However, in 2018 Verizon allegedly throttled a Northern California
fire department's data
as its firefighters battled the largest wildfire in state history. The issue was mentioned in a net neutrality lawsuit brought by several states in 2018. At the time, Verizon acknowledged it had made a mistake and said it would "fix any issues going forward."