FTC TracFone settlement sets data throttling precedent

Prepaid mobile provider TracFone has agreed to settle a charge of deceiving millions of customers by paying the US Federal Trade Commission (FTC) $40 million, which will go to refunds to its throttled customers. The settlement likely sets a precedent on data service throttling.

According to the FTC’s complaint, TracFone, the mobile company behind brands Straight Talk, Net10, Simple Mobile and TelCel America cut off and slowed down data service for customers whose data packages were sold as unlimited. FTC claimed the practice went as far back as 2009, and involved plans costing around $45 a month with ‘unlimited’ data.

The trade body said the plans were advertised on various media, where the unlimited data feature was clearly stated, but claimed services were reduced when subscribers reached a certain amount of data within a 30-day period.

“The issue here is simple: when you promise consumers ‘unlimited,’ that means unlimited,” Jessica Rich, Director of the FTC’s Bureau of Consumer Protection said. “This settlement means that Straight Talk, Net10, Simple Mobile, and Telcel America customers will be able to get money back from the company for services the company promised but didn’t deliver.”

The FTC’s complaint claimed slow-downs experienced by throttled customers were at least 60% slower than normal speeds, sometimes up to 90% slower. The complaint also stated TracFone had no technical grounds, such as network congestion for throttling, and claimed it was purely down to the costs associated with providing the services. The FTC claimed this came apparent from TracFone’s internal documents.

Following the settlement, customers who had a contract with the any of the aforementioned mobile brand and were throttleds, are able to claim a refund. Customers who are not sure whether or not their service was limited or cut off can still file a complaint.

Further to the refunds, TraFone was ordered to make any limits on its packages transparent to consumers. Apparently the provider began disclosing some details on its throttling practices in September 2013 but according to the FTC, those disclosures were unclear.

This is the first case of its kind brought on by the FTC but it currently has another one ongoing with AT&T. It is likely the outcome of this complaint against TracFone will set a precedent for any future cases on throttling, including AT&T. Of course, it comes down to finding clear proof the practice went on, but if the evidence is there it is likely similar settlements will follow.