The Federal Communications Commission on Wednesday said it planned to fine AT&T Mobility $100 million, accusing the company of misleading millions of wireless customers with unlimited data plans by slowing down their service without adequately informing them.
The agency said that once customers had used a certain amount of data, AT&T delivered service that was significantly slower than advertised, affecting subscribers’ ability to do things like stream video or use GPS mapping services.
By slowing the speed of service without disclosing it to consumers, the agency said, AT&T violated a 2010 rule that required greater openness to customers. It is the first time the F.C.C. has accused a company of violating that rule, and the fine is the largest ever proposed by the agency.
Wednesday’s announcement also raises new questions about whether the agency will take a more aggressive stance toward wireless and landline Internet service providers after even stricter disclosure requirements took effect last Friday. The new requirements are part of the F.C.C. rules approved in February that regulate broadband Internet service more like a utility.
“Consumers deserve to get what they pay for,” said Tom Wheeler, the Democratic chairman of the F.C.C., on Wednesday. “Broadband providers must be upfront and transparent about the services they provide.”
AT&T began offering unlimited data plans in 2007, according to the F.C.C., and in 2011 it began capping data speeds for consumers enrolled in unlimited plans who had already exceeded a certain amount of data in a single billing cycle, a practice known as throttling. That capped data speed, the agency said, “significantly impaired” users’ access to the Internet, delivering service that could be 5 percent of the expected speed. The agency’s investigation found that the average customer experienced slower service for 12 days each billing cycle.
“Unlimited means unlimited,” Travis LeBlanc, the F.C.C.’s chief of the enforcement bureau, said in a statement on Wednesday. “The commission is committed to holding accountable those broadband providers who fail to be fully transparent about data limits.”
AT&T on Wednesday defended slowing service speeds for some of its unlimited data subscribers and said the company had more than satisfied disclosure requirements. Michael Balmoris, a spokesman for AT&T, said the company planned to “vigorously dispute” the regulatory agency’s accusations.
“The F.C.C. has specifically identified this practice as a legitimate and reasonable way to manage network resources for the benefit of all customers, and has known for years that all of the major carriers use it,” Mr. Balmoris wrote in an email. “We have been fully transparent with our customers, providing notice in multiple ways,” he wrote, pointing to a notice posted to the wireless carrier’s website.
AT&T is not battling with just the F.C.C. on this matter. Last fall, the Federal Trade Commission sued AT&T for the same practice, saying that the company had engaged in deceptive advertising. That case is pending.
The F.C.C. said on Wednesday that since 2011 it had received thousands of complaints from AT&T customers enrolled in unlimited data plans and that the service of millions of customers had been impaired. While AT&T no longer offers unlimited plans to new customers, it has allowed already-enrolled customers to renew their contracts.
“I entered into a contract believing I was paying for unlimited data at 4G speeds,” one complaint filed with the F.C.C. last October read. “Providing me less than that seems disingenuous at the least.”
The 2010 rule that the F.C.C. says AT&T violated is part of the agency’s 2010 Open Internet order, an earlier attempt by the agency to protect the principles of net neutrality, or the concept that no service provider should be allowed to manipulate a web user’s access to content. While most of that order was invalidated by a federal court after Verizon sued the F.C.C., the transparency rule applied in this case was upheld by the court and has been in effect since 2011.
Critics of the enforcement action said it highlighted that the F.C.C. had too broad and too subjective a say over what kind of behavior was acceptable from service providers, a criticism of the regulations approved this year. The agency’s Republican minority on Wednesday called the proposed $100 million penalty too severe.
“Here we are imposing a rigid standard that is based on a subjective opinion of what notification, in hindsight, should have been provided,” said Michael O’Rielly, a Republican commissioner.
According to senior F.C.C. officials, the fine could be reduced during the administrative process ahead and the agency will take into account what kind of flexibility AT&T might offer current subscribers to opt out of unlimited data contracts they have been locked into.
Daniel Lyons, an associate professor at Boston College law school who specializes in telecommunications and Internet regulations, called the size of the fine unexpected.
Mr. Lyons said AT&T had simply done what was necessary to manage its network in the face of “exploding” demand for mobile data. “When the company first offered those unlimited data contracts, no one could have predicted how big mobile data would be,” Mr. Lyons said. “Given there was a reasonable network management explanation for the company’s actions, I’m a bit surprised that the fine is as large as it is.”
But for Mr. Wheeler, the potential necessity of AT&T’s practice did not justify what he saw as insufficient disclosures that harmed the wireless carrier’s subscribers. “The F.C.C. will not stand idly by,” Mr. Wheeler said on Wednesday, “while consumers are deceived by misleading marketing.”
The announcement was hailed by consumer groups, which said it was a strong signal to the industry that marketing materials would come under careful review.
“The F.C.C. is trying to send a message that transparency rules are not a joke or an opportunity to be clever,” said Harold Feld, a senior vice president at Public Knowledge, a consumer advocacy group in Washington. “You have to be upfront rather than try to engage in a game of bait and switch.”