Yahoo Finance AT&T (T) Wins Legal Battle Over Data Throttling With FTC
U.S. telecom giant AT&T Inc. T recently won a major legal battle as the Ninth Circuit Court of Appeals in California has dismissed a data throttling charge issued by the Federal Trade Commission (FTC). Data throttling basically means data traffic blocking and slowing any data traffic once customers hit a certain usage threshold in a month. In Oct 2014, the FTC disputed that using data throttling technique, the telecom carrier has deceived its unlimited plan customers.
On Aug 29, the Ninth Circuit Court of Appeals in California reversed a lower court's denial of AT&T's motion to dismiss the throttling lawsuit. The appeals court identified AT&T as a common carrier. Due to this, the service provider cannot be held liable for the violations of rules that the FTC brought in its case.
Notably, the Federal Communications Commission (FCC) slapped a fine of $100 million for similar reason in Jun 2015. AT&T has filed a response, which is still under review by the FCC. It is worth mentioning here that the FCC had adopted the Net Neutrality rules in Feb 2015. The new laws has classified high-speed broadband (Internet) as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act.
Net neutrality implies an open-Internet atmosphere which will prohibit ISPs (Internet service Providers), especially the telecom and cable TV operators, from discriminating against applications. The enforcement of the new law has banned common ISP practices such as data traffic blocking, slowing any data traffic and paid prioritization. The FCC will closely monitor and put a check on all such deals in the future.
For the FTC case, AT&T didn’t deny that it had throttled some users. However, the company defended itself citing that an exception is in place for common carriers. In Oct 2014, AT&T was a common carrier for landline phone and mobile voice service, but not for mobile Internet access. The FCC reclassified mobile Internet as a common carrier service only after adopting the Net Neutrality Rules. These arguments by AT&T likely compelled the federal court to dismiss the FTC case. The FTC is yet to take a decision whether it will appeal in a higher court.
The U.S. telecom industry is becoming immensely competitive with cut-throat pricing. Recently, T-Mobile US Inc. TMUS and Sprint Corp. S escalated the pricing war with new unlimited data plans. Yesterday, Verizon Communications Inc. VZ announced that it completed a major upgrade of its 4G LTE networks to LTE-Advanced technology covering 461 cities in the U.S. The LTE-Advanced network will raise the data packet transmission speed by more than 50%.
At this juncture, a favorable court ruling related to the FTC case is a major respite for AT&T. AT&T currently carries a Zacks Rank #3 (Hold).
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