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AT&T today won a major victory over the Federal Trade Commission, which was trying to punish AT&T for throttling the Internet connections of customers with unlimited data plans.
The FTC sued AT&T in October 2014, seeking refunds for customers who paid for unlimited data.
The FTC said AT&T deceived customers by offering unlimited data plans and then throttling speeds once customers hit certain usage thresholds, such as 3GB or 5GB in a month.
In response, AT&T claimed that the FTC had no jurisdiction over AT&T because of the company’s status as a common carrier.
This argument was complicated.
At the time, AT&T was a common carrier for landline phone and mobile voice service, but not for mobile Internet access.
The Federal Communications Commission later reclassified mobile Internet as a common carrier service, which put it under a stricter FCC regime but exempted AT&T from FTC oversight.
The FTC argued that it could punish AT&T for transgressions related to non-common carrier services, including actions related to mobile Internet access before AT&T was reclassified. Last year, a US District Court judge in California sided with the FTC, saying that “the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity.”
AT&T appealed that decision to the US Court of Appeals for the Ninth Circuit, which today issued a decision in AT&T’s favor (full text).
Appeals court judges had to decide whether the common carrier exception applies to all activity by AT&T or whether it applies only to activities related to one of AT&T’s common carrier services.
“AT&T advocates a status-based interpretation of the exemption, arguing that its status as a common carrier under the Communications Act shields it from liability under Section 5 [of the FTC Act] even as to non-common carrier activity,” a court panel said in a decision written by Judge Richard Clifton. “We conclude, based on the language and structure of the FTC Act, that the common carrier exception is a status-based exemption…
Because AT&T was a common carrier, it cannot be liable for the violations alleged by the FTC.”
We contacted the FTC and asked if the commission intends to appeal, but haven’t heard back yet.
This doesn’t mean that AT&T is completely off the hook for throttling unlimited data plans.
The FCC last year proposed a $100 million fine against AT&T, saying it falsely labeled plans as “unlimited” and failed to sufficiently inform customers of the throttling.
AT&T contested that decision, and the FCC hasn’t issued a final ruling yet. If the FCC does issue a fine, AT&T could appeal to the US Court of Appeals.
Despite not yet facing any punishment, AT&T has eased up on its throttling of unlimited data plans. While the company used to throttle customers for the rest of the month once they hit a certain limit, AT&T now only throttles when customers connect to congested cell towers.
AT&T bitterly opposes common carrier regulation for Internet service, and sued the FCC to overturn that classification and related net neutrality rules.
AT&T lost that case, though an appeal is pending.
But after today, maybe AT&T won’t mind being a common carrier after all.