FTC Says Unlimited Data With Throttling Doesn't Count as Unlimited

In a case that could have broad implications, the Federal Trade Commission on Wednesday ordered prepaid mobile provider TracFone to pay $40 million for slowing down the speeds of customers who had paid for unlimited data service.

While the case was specific to TracFone, a number of carriers still offering unlimited service have been slowing down, or throttling, the speeds of customers who use more than a certain amount of data. Both the FTC and Federal Communications Commission have taken a dim view of the practice.

“The issue here is simple: When you promise consumers ‘unlimited,’ that means unlimited,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a statement Wednesday.

The two largest carriers, AT&T and Verizon, have stopped offering unlimited data plans to new customers, though they still have some customers grandfathered in to the plans. Sprint and T-Mobile do offer unlimited data plans.

All the carriers are on notice, though, that slowing down customers on unlimited plans could land them in hot water. In the TracFone case, customers who purchased such plans and saw their speeds slowed are now eligible for refunds.

The FTC said that TracFone not only slowed the data service of some unlimited customers, but in some cases cut off service, too. According to the FTC, TracFone “generally slowed data service when a customer used one to three gigabytes, and suspended data service at four to five gigabytes.”

Those levels had to do with the costs TracFone was incurring rather than a need to manage network traffic, it added. Verizon and the other major carriers have said that, in their case, slowing has been done to manage congestion.

Update: In a conference call with reporters, Rich said that the FTC’s concerns relate specifically to how carriers are advertising their services.

“This case is about false advertising,” Rich said in response to a question from Re/code. “It’s not about throttling. We’re not challenging throttling in and of itself.”

Rich said that so long as it is made clear to customers, carriers can employ the practice: “If it’s clearly disclosed, if a company advertises unlimited, but very clearly discloses their practices with regard to throttling we would not challenge that action.”