FCC To Fine AT&T $100M For Throttling Unlimited Data Customers

New submitter Wargames writes: According to the article in the New York Times, AT&T is getting fined $100,000,000 for its doublespeak redefinition of the word "Unlimited". The FCC says AT&T failed to adequately notify its customers that they could receive speeds slower than the normal network speeds AT&T advertised and that these actions violated the FCC's 2010 Open Internet Order. “Unlimited means unlimited,” Travis LeBlanc, the F.C.C.’s chief of the enforcement bureau, said in a statement on Wednesday. “As today’s action demonstrates, the commission is committed to holding accountable those broadband providers who fail to be fully transparent about data limits.”

Comments

$100,000,000

[fustakrakich]

What does that amount to? A month? A week's worth of revenue? Show some teeth dammit! Revoke their charter...

Re:$100,000,000

[viperidaenz]

2014 revenue, 134 billion
EBITDA 32.14 billion

So if this fine happened last year, their EBITDA would have only been 32.04 billion, a drop of 0.3%

Re:$100,000,000

[Anonymous Brave Guy]

Serious question: Is that actually a proportionate penalty for the infraction?

For example, how does it compare to the revenues and/or profits that AT&T derived from customers who were on the supposedly unlimited plan over the period when the misleading advertising was going on?

If the effect of this is to cost the service provider at least the amount of extra profit they made, relative to what they would have received if those customers had been on the closest available limited plan that provided the relevant data volumes, then it's an effective deterrent.

If the cost to the service provider is significantly more than that, then it's a meaningful penalty, particularly if they are subject to further fines of the same magnitude or greater for any subsequent repetition of this kind of behaviour.

Re:$100,000,000

[AK Marc]

So, about 6 hours revenue (assuming an even revenue distribution, in reality, about 2 business hours revenue)? This is the same as fining a person on minimum wage $15.

Woo hoo, a $15 (effective) fine on AT&T. That'll show them.

Re:$100,000,000

[fahrbot-bot]

What does that amount to? A month? A week's worth of revenue? Show some teeth dammit! Revoke their charter...

I'm more interested in how much $100 M could have upgraded their infrastructure to *actually* provide said services...

Re:$100,000,000

[amicusNYCL]

I like how you think that a telecommunications company might use excess cash to upgrade their service. That's funny right there.

Re:$100,000,000

[MightyMartian]

Exactly. That's why fines should never be in fixed dollar amounts. They should be in percentages; either of revenue or assets (no considering net anything, to easy to hide true value that way). I suspect if AT&T were faced with, say, a 13 billion, it probably would very quickly alter its behavior.

Re:$100,000,000

[oneiron]

AT&T assumed that their advertising was fine until told otherwise.

https://en.wikipedia.org/wiki/...

It doesn't matter how long they evaded law enforcement with double-speak. They were violating the law and should be held accountable for the full magnitude of the crime they've committed. That's how justice works in this country.

Re:$100,000,000

[rmdingler]

AT&T assumed that their advertising was fine until told otherwise.

https://en.wikipedia.org/wiki/... It doesn't matter how long they evaded law enforcement with double-speak. They were violating the law and should be held accountable for the full magnitude of the crime they've committed. That's how justice works in this country.

"If X is less than the cost of a recall, we don't do one." Fight Club narrator

Fines like this are a calculated cost of doing business, to be sure, but they are also an important part of punishment theatre. Companies of this size negotiate fine amounts and punishments as forms of appeasement when caught with their hands in the cookie jar.

Exxon, Goldman Sachs, Bear Stearns, every Wall Street banker ever, etc.

Re:$100,000,000

[pavon]

From Arstechica's article:

"Although the company no longer offers unlimited plans to new customers, it allows current unlimited customers to renew their plans and has sold millions of existing unlimited customers new... contracts for data plans that continue to be labeled as 'unlimited,'" the FCC said. "In 2011, AT&T implemented a 'Maximum Bit Rate' policy and capped the maximum data speeds for unlimited customers after they used a set amount of data within a billing cycle. The capped speeds were much slower than the normal network speeds AT&T advertised and significantly impaired the ability of AT&T customers to access the Internet or use data applications for the remainder of the billing cycle."

So as a rough order of magnitude estimate "millions of customers" equates to $100's of millions of revenue a month, over nearly 5 years, so they made roughly billions to 10's of billions of dollars on these accounts over the time period. And that is excluding customers that moved to a different plan as a result of the throttling.

The FCC said it believes millions of customers have been affected by AT&T's throttling, with speed reductions that "imped[ed] their ability to use common data applications such as GPS mapping or streaming video." On average, customers' speeds were slowed for 12 days per monthly billing cycle, the FCC said.

These customers were impacted for about a 1/3 of the time, and if you value the throttled service at half the value of the promised service, that comes to 100s of millions to billions of dollars that they were overcharging. So the fine is on the low end of reasonable.

Note, that the FTC is also investigating this and may require AT&T to refund money to their customers in addition to paying the FCC fine.

Re:$100,000,000

[AK Marc]

Given that most "fines" aren't under $100, they'd think $15 was low for a fine, not that it's a trivial expense for someone on minimum wage.

Re:$100,000,000

[AK Marc]

Why would you fine a person based on revenue, and a corporation based on profit? Either revenue for both, or profit for both would be the "fair" solution.

Re:$100,000,000

[Yebyen]

Why would you tax an individual's gross income but tax a business only on its profit? Oh, wait. That's exactly how it works, isn't it.

Re:$100,000,000

[linuxrocks123]

LOL.

You just cited one of the stupidest legal fictions ever created. Yes, everyone knows it. Yes, it's been around since forever. And yes, it's ridiculous.

How many federal statutes are there? Trick question: no one even knows. You could spend your whole life reading the Federal Register and you still wouldn't know the whole law. And even if you did, there are statutes that incorporate the entirety of "foreign law" by reference ("No animal may be transported in violation of any state, federal, or foreign law."). So you'd need to memorize every law in the world.

There needs to be some sense to this imputation of knowledge. "I didn't know it was illegal to kill someone" is retarded; of course you did. "I didn't know it was illegal to break into that guy's house"; again, ridiculous.

"I didn't know that Honduras prohibited transporting lobsters in clear containers, rather than opaque ones." That's not at all ridiculous. And someone was convicted for that and sentenced to jail.

"Ignorance of the law is no excuse" comes from a time when mob justice was close to the only justice. "We all think you did something bad, so you must have known it was bad, too!" There are still many crimes that have the quality that "you must have known you were doing something wrong, even if you couldn't cite the statute".

But there are others that, while valid criminal laws, really should only be enforced against people in some profession or other. If you own a company that catches, kills, and sells for food various types of wildlife, you should know if the state you're hunting in adds a turtle to the protected species list.

If you're some restaurant owner halfway across the country, and you just bought a shipment of turtles for your turtle soup from some company you'd been doing business with for years ... you probably shouldn't be held liable. You would think, quite rightly, you didn't really have to worry about endangered species law since you're buying from a legit corporation, and you know that the species isn't endangered because it's one of the most common turtles in the country so you didn't think to check if Rhode Island had changed its law recently.

This happened, too: some kids lobbied the state government to make this common turtle the "state reptile", and the state did, and the state's laws said "all state animals are protected species", and federal law prohibits trafficking protected species across state lines, and some company was negligent, and some restaurant owner was unaware the company was negligent, and some federal prosecutor was a douchebag, and now this poor guy is a federal criminal for making turtle soup using a turtle species which isn't at all endangered and which isn't protected in his state, at the federal level, or in any state except one random state that thinks it's cute to let 4th graders write state laws . He went to jail because of a Rube Goldberg-esque legal dominoes game.

There are too many laws, and society is too complicated, for us to keep saying "ignorance of the law is no excuse". You're right, but you shouldn't be.

Re:$100,000,000

[NatasRevol]

Are building and materials part of COGS?

The answer is yes to both....

Re:$100,000,000

[linuxrocks123]

Re the Honduras thing:

The woman convicted was in the US, did no business with Honduras, did nothing other than RECEIVE a shipment of lobsters from a company that had ultimately gotten them from Honduras. She didn't know this: do you know what country the stuff you buy from Walmart ultimately comes from?

And the shipment was in clear containers. And the Honduran government filed a brief saying that that law had been invalidated by the Honduran courts. And she still went to jail.

Re:$100,000,000

[drinkypoo]

AT&T assumed that their advertising was fine until told otherwise.

AT&T knew full well what they were doing when they advertised something as "unlimited" and then put limitations on it, and if they didn't, then they're not competent to make public statements and should be prohibited from doing so since they have demonstrated their inability to handle the awesome responsibility of the first amendment, and used their corporate right to freedom of expression for fraud. When someone misuses a firearm we take away their constitutional right to keep and bear arms; why shouldn't we take away AT&T's constitutional right to free expression?

Or, we can just fine them into a smoking hole in the ground. Fuck them either way, they're evil, and they know it, and they like it that way.

Re:$100,000,000

[Dynedain]

AT&T knew full well what they were doing was illegal. They couldn't just cut off the plans mid-contract (though they could and did stop offering new contracts) without giving customers the ability to break contract without penalty. Which is why they kept calling them "Unlimited" plans as they started implementing limits.

Re:$100,000,000

[Jhon]

"Fines like this are a calculated cost of doing business, to be sure, but they are also an important part of punishment theatre. Companies of this size negotiate fine amounts and punishments as forms of appeasement when caught with their hands in the cookie jar. "

We need to stop blaming the evil corporations. Let there be shame. When stuff like this becomes public people should jump carriers. Let THAT get factored in to the cost of doing business.

If we're too lazy to jump to another carrier then it's our own damn fault we need to deal with this.

Re:$100,000,000

[hawguy]

over the period when the misleading advertising was going on

It's not clear what the correct period should be. AT&T assumed that their advertising was fine until told otherwise. If the FCC had fined them after 1 day of misleading advertising, then AT&T would have paid a small fine and stopped. It turns out that the FCC reacted more slowly. AT&T shouldn't be punished proportionally with the slowness of law enforcement.

You should try that excuse after you get a speeding ticket: Sure officer, I knew that going 100mph was against the law, but if you would have stopped me at 56 mph instead of taking your time and waiting until I reached 100mph, the fine would be much smaller. I shouldn't be punished proportionally with the slowness of law enforcement

Re:$100,000,000

[AK Marc]

A business deducts their house, food, and operational expenses that a person doesn't get to, before they claim a "net profit". A person is measured on income (AGI), not wealth creation/extraction.

Re:$100,000,000

[Solandri]

Individuals are effectively taxed on profit via deductions and graduated income tax. A certain amount of income is assumed to be dedicated to necessary expenses like food, shelter, and clothing (at least in some states). Since the requirements for each person to live are pretty much the same, the same standard deduction works for every person. Further reductions in income taxes are made based on how many dependents (children) you're supporting.

The same method doesn't work for businesses because they vary so much in expenses they incur to operate. But why should you even tax a business? Businesses don't consume or produce anything - the people working at them do. A business is just a paper shell representing a group of people. If you tax the business, the money just comes from the employees (lower wages) and customers (higher prices).

Taxing businesses creates a contradiction if you believe in "no taxation without representation." Either you can tax businesses and therefore businesses deserve representation in government. Or you recognize that a business is just a group of people working together, and those people are already taxed and can vote, so it doesn't make sense to tax them more just because they've decided to work together, and therefore a businesses does not deserve representation in government.

(Some business taxes make sense. But these are generally taxes to recoup regulatory costs like excise taxes on vehicles, or to encourage/discourage certain behaviors like pollution taxes.)

Re:$100,000,000

[redwraith94]

That was since 2010 though, so what that is 20 Million a year? This was probably an AT&T marketing idea:

Clown #1:Everyone is so pissed about these bills, their speed is terrible, and there is no coverage indoors, plus that whole NS...whatever thing.
Clown #2: What do we do about these perceptions of problems? if they don't go away, I won't be able to buy that new electric motorcycle, to go with my Tesla!
Clown #3: Oooh, Oooh! I know, we'll have the FC, uh what were they called again? Fine us...something like chump change, right,, like a billion? and then everyone will think we've been punished!
Director #1:A billion? Those plebs, would think 100 Million is a massive amount of money, that's what we'll do, we'll have the FCC fine us a cool 100 Million. Hell we've already earned that back since this meeting started! That's a great idea, I'm glad I thought of it!
Clown #3: ...

Re:$100,000,000

[dryeo]

So what you are saying is that the owners of the business should be taxed on the companies income. Lets see, if I suddenly put a million dollars in the bank, the taxman will come calling and take a good bit. So if Apple puts 40 billion into the bank, the shareholders should have to pay their share of it. Sound like a good idea, Apple can bank billions in some island somewhere and the share holders can pay the taxes. Should really help companies get investment and do wonders for the stock market.
We can take it a step further. The average worker can only write so much off, the standard deduction basically. Businesses should be the same, a basic write off and that's it. Then their owners pay tax on the gross revenue of the business just like I pay on my gross income and can't claim a Rolls to drive to work or a Mansion to sleep in between work. At that I can't even write off bus fair, lunch.or a ticket to the capital to speak to my government.

Re:$100,000,000

[Uberbah]

A certain amount of income is assumed to be dedicated to necessary expenses like food, shelter, and clothing (at least in some states).

But it's not close to what you can deduct as a company, where you can write of just about any item as a cost of doing business. Corporate retreat in Hawaii? Business expense! Private gym and sauna next to the private parking garage for upper management? Business expense!

You can't do the same thing as an individual, writing off your every purchase as your cost of living.

But why should you even tax a business?

My Spidey sense is detecting an ascent into the wingnutosphere....

If you tax the business, the money just comes from the employees (lower wages) and customers (higher prices).

Trite nonsense, if it's a tax on profit. Such a tax could be 95% or .005%, and it would result in neither of the above options. Because prices are always set to maximize profits, and wages are always set to minimize payroll. If companies could jack up prices without losing too many customers, or cut wages without losing too many employees, they would go ahead and do it, not wait for a tax.

Re:$100,000,000

[Maxo-Texas]

I understand where you are coming from but...

Revenues are not profits.

AT&T's profits in 2014 were about 6 billion. Their annual average profits over the last 6 years were about 10 billion a year.

Fines are usually not a tax deductible expense so they lower profits not revenue.

So the fine was over 1% of last years net profits and about 1% of their average net profits.

That would be like getting a $1,000 fine if you made $100,000 a year. You'd notice.

Re:$100,000,000

[AK Marc]

"profit" is everything left over after every expense. When you make $100,000 and spend $55k a year on housing, and another $30k on basic necessities, you have about $15k in disposable income. You can buy some toys, part of a car, or save for a kids school. 1% of that $15k is $150. The AT&T fine is about the same as $150 on someone who makes $100,000 a year.

The problem is that you think corporate profits are the same as personal gross income. Either compare profits of both, or gross income of both.

Re:$100,000,000

[tburkhol]

But why should you even tax a business? Businesses don't consume or produce anything - the people working at them do. A business is just a paper shell representing a group of people. If you tax the business, the money just comes from the employees (lower wages) and customers (higher prices).

You tax businesses to discourage people from hiding assets and economic activity within a shell corporation to avoid taxation. (ie, I don't own anything or draw a salary, but my consulting company lets me live in this nice house and provides a generous entertainment budget) The US has decided to minimize the taxation of the individuals comprising the business (ie, highly favorable treatment of capital gains and dividends), and you can't simultaneously argue against taxing the business because its participants are taxed and against taxing the distributions because the business is taxed.

As you say, though, it is all the same money, so the only question is where to impose a tax. The US used to get the lion's share of tax revenue from businesses, where clear accounting rules make it clear what a business can "afford." Taxing individuals is much more complicated for everyone - I have to discount my salary by some 35%, between Federal, Social security, and State taxes to figure out my budget, nevermind the various discounts and incentives.

Taxing businesses creates a contradiction if you believe in "no taxation without representation."

Surely you're joking. Just who do you think is paying all those lobbyists? Who do you imagine supports the campaigns of the elected officials? BP may not get to cast a ballot in any particular district, but their interests are far better represented than your own. And again, corporate suffrage would enable the creation of armies of shell companies with no purpose other than to sway elections. Patently ridiculous.

Just wait

[lsllll]

To be overturned in an appeal.

Re:Just wait

[viperidaenz]

The advice of their lawyers will be it's better to spend $200,000,000 on lawyer fees than submit to a $100,000,000 fine.
I don't think fines are tax deductible. Lawyers fees are though.

Return to unlimited

[serano]

I used to have one of those "unlimited" accounts but because the throttling was interfering with my work so much, I was forced to "upgrade" to a much more expensive plan. Does anyone know if there will be a path back to the unlimited plans we were pushed out of?

This takes me back.

[thegarbz]

It feels like 2001 all over again when the ACCC s heavily slapping Telstra around in Australia for the same practices. Then subsequently for not providing usage data once the limits were openly defined... And then again once it was found out that they were limiting based on real-time stats but providing users day of stats.

USA you have a way to go yet.

I Predict...

[Irate Engineer]

I predict next year, AT&T's rates will magically go up by $100,000,000 divided by the number of their customers.

AT&T now knows the cost of cheating; next to nothing. And they can now budget for it.

The winner here is AT&T.

Re:I Predict...

[bobbied]

I predict next year, AT&T's rates will magically go up by $100,000,000 divided by the number of their customers.

Not even close... AT&T is just going to slow down a bit on their equipment purchases (say a couple of cell towers won't get upgraded or something) but their operating costs are going DOWN per subscriber, even with such a fine. They won't pass this on in the form of rate hikes...

They may just jack up the price of a cell phone by a few bucks or something, but their monthly rates will stay competitive, meaning they will be dropping like everybody else's are. What AT&T cannot do is lose market share. They cannot loose subscribers (I mean sheep) to fleece, because the point here is that you make just a little bit of money on a LOT of subscribers that way and the guy with the most subscribers is the winner.

So customers will pay by increased non-recurring costs, and possibly less signal coverage, but you can bet the advertised monthly rates won't do anything but go down.

Re:I Predict...

[diamondmagic]

Economics doesn't work like that. Prices are set by the market, as a function of what people are willing to pay and how much it takes to produce the product.

If costs go up, that creates a change in supply and raises prices, and both marginal profit and quantity supplied will drop.

If AT&T chooses not to charge that equilibrium price, that means they're taking a loss, in the economist's usage of the term (as opposed to an accounting profit, i.e. they might still turn a profit, but it's less than what it could be).

Re:Could you imagine?

[ArcadeMan]

If AT&T had a wireless monopoly we'd be paying $10 per megabyte of 2g data right now.

That's the regular rates in Canada.

Re:Works for "unlimited" but not for "infringe"

[bobbied]

Even with the FCC's ruling, "unlimited " data really isn't "unlimited" if there is a time and speed limit anywhere in the system. They haven't yet invented an unlimited speed data pipe for a cell phone and AT&T is fond of monthly billing....

But let's not get technical...

So, cost of doing business, not jail time?

[WillAffleckUW]

Look, when you get to keep all the money you stole and pay a fine of 0.01 pct of the amount you stole, it's like a checking fee for being one day late.

Until we see real jail time for senior execs who signed off on these illegal actions, it's meaningless.

Re:Ooops.. Somebody forgot something....

[l0n3s0m3phr34k]

I think it all stems from Wheeler's past work at start-ups that got royally screwed by telecos. I don't know the particulars, but he's mentioned it in a few interviews. He's got a personal stake in this, "this time it's personal" lol. Whatever it takes, IMHO.

Re:Works for "unlimited" but not for "infringe"

[drinkypoo]

Even with the FCC's ruling, "unlimited " data really isn't "unlimited" if there is a time and speed limit anywhere in the system.

You are confusing unlimited (without limit) with infinite (without end). If you don't apply an artificial limit to the pipe, then the pipe is unlimited. If the pipe can transfer more than you can possibly stuff into it, then the pipe is infinite (in bandwidth.)

Sure, unlimited can mean infinite in English sometimes... but not here

Re:Works for "unlimited" but not for "infringe"

[Dynedain]

AT&T is/was intentional bottlenecking the traffic of "unlimited" customers if you hit 3GB in a month. On average AT&T LTE speed, you can hit that monthly chokehold in just over 10 minutes.

10 minutes of full network usage a month, and they call it "unlimited".

While simultaneously they spam you to switch to their convenient 4GB/mo plan with 1GB billing increments beyond that to avoid any speed limits.

There is no possible way that a defined cap can be construed as "unlimited". Whereas "full usage up to network availability" is a pretty reasonable definition that the average layperson would agree with.

No matter how you slice it, it's clearly false advertising and a shady way to try to force customers onto more expensive offerings without discontinuing the existing service contract.

Um... that's not how we fine people

[rsilvergun]

If a person on minimum wage gets fined it's almost always a speeding ticket, which is usually $300 minimum ( and $500 if it's excessive, like what AT&T was fined for).

I think the grandparents numbers are a bit off. Min wage is $7.25 hr. About 15% of that goes to taxes that no poor person can get out of (even accounting for earned income credits which is really meant to offset other taxes the poor pay). It's about $6.16/hr take home (profit) or about $37 bucks.

So if we were to fine AT&T the way we fine the poor it would be about $1.3 billion, give or take.

But OTOH the poor person didn't make any profit from speeding (unless you want to count getting to their shitty job as "profit", but that's just being a vindictive jerk if you're gonna do that). The reason us libtardos want to find Corps way, way more than the pleabs is so that it _hurts_. You have to fine them more money than they made doing the illegal activity or they're going to do it again. They have to, since it's profitable and corporations have a legal requirement to do whatever's most profitable for the shareholders (they really do, look it up).

See, that $500 bucks _hurts_ the guy at McDonalds. It might even be what turns him into a hobo when he can't pay his rent. At the very least he's not going to do _anything_ except work and eat (and not much of that) for the next 6 months to a year. He'll remember the pain of losing that money and think twice about speeding. Let's give AT&T that feeling. Then maybe we'll stop seeing crap like this happen.

The Traffic Fine Issue

[JimSadler]

Corporate money is very much like the traffic fine problem. A poor man gets a $200 fine for driving ten miles over the limit. That $200 may exceed his weekly take home pay. A multi millionaire gets the same fine and it is so trivial as to mean absolutely nothing. Now if both men had to spend a week in jail we would have equality in the system. So just why do we not do that? it is simple. First the system would lose money by putting them in jail. Secondly the rich demand being exempt from the law and one way or another make pay offs to keep that immunity. So we have two factors and a very unpleasant reality. The reality is that our justice system is all about money and not about justice at all. If the public becomes aware at the same time we face rebellion and riot. It also proves what many black leaders have fought against in that the poor are often a target of police. Police placate the public by arresting unpopular racial or ethnic groups. In many cases police are shown to knowingly arrest innocent people and allow them to go all the way to death row. Chicago is notorious for police sweeping up some poor soul and telling the media that the bad guy has been caught. And it throws the entire system into jeopardy. Since we know that sometimes lies and false evidence are created by police departments how can we have faith that in any trial a person is not being railroaded? In essence reasonable doubt is in effect in almost every case before the courts and if we do what we are supposed to do we find almost all defendants not guilty without regard to the supposed evidence against them. Society crumbles as a consequence.