Throttling Scandal How Big of a Black Eye for AT&T?

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The Federal Trade Commission’s new lawsuit against AT&T over slowing Internet speeds for “unlimited” customers is certainly significant in the short term, but industry insiders wonder how much impact it will have on the wireless giant in the long run.

The FTC charged the carrier this week with “throttling,” or slowing down, data speeds for its unlimited customers when they reached a certain threshold of data use.

The federal agency says some of AT&T’s customers saw their speeds reduced by nearly 90 percent after reaching their data cap. The FTC’s issue here is that AT&T failed to disclose the throttling and instead marketed the plans as unlimited. Then, the carrier supposedly charged its customers early-termination fees when its customers became angry and dropped the plans. The Commission wants AT&T to repay millions of dollars in charges related to the caps.

AT&T, meantime, has denied the accusations, saying it throttled just 3 percent of its users and notified those affected via text messages and billing messages, which the FTC says was inadequate.

“It’s no secret AT&T has continually worked to move its grandfathered unlimited users onto tiered plans. This specific FTC charge will come down to transparency,” noted 451 Research analyst Rich Karpinski, commenting specifically on an InfoWorld article. “ … The market question will be just how big of a black eye this will cause for AT&T, and how aggressively competitors will use it to go on attack. The operator most likely to go on the offensive, as always, is T-Mobile. The problem is that it throttles – openly so, to eliminate bill shock overages – as a fundamental part of many of its data plans. Managing customer network usage remains a tricky but necessary business. But in such a competitive market, trust is a crucial brand attribute. AT&T, regardless of intent, would do well to redress the charges aggressively and definitively.”

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