Yesterday, the Federal Trade Commission (FTC) filed a complaint against AT&T alleging that the company misled consumers by limiting its “unlimited” data plan for mobile customers.

The FTC’s two-count complaint, which was filed in the U.S. District Court for the Northern District of California, alleges that AT&T violated Section 5 of the FTC Act, which prohibits “unfair or deceptive” trade practices, by imposing significant data speed restrictions on unlimited data plan customers and failing to disclose this practice to customers.

According to the complaint, AT&T sold unlimited data plans for $30 to customers who initially purchased their mobile data plans between 2007 and 2010.  The complaint alleges that beginning in July 2011, AT&T began substantially reducing — or “throttling” — the data speeds for its unlimited data plan customers if they exceeded a certain level of data usage.  The complaint states that, initially, this threshold was as low as 2 GB per billing cycle in densely populated markets like New York City and the San Francisco Bay Area.  The complaint goes on to state that, in March 2012, the threshold was increased nationwide to 3 GB for devices using AT&T’s 3G network and HSPA+ network and 5 GB for devices using AT&T’s LTE network.  According to the complaint, customers who were throttled experienced up to a 95% decrease in broadband connection speeds.  As a result, the complaint alleges, many everyday applications, such as web browsing, GPS navigation, and streaming video, ran significantly slower and some were rendered practically inoperable.  According to the complaint, AT&T throttled its customers more than 25 million times, affecting more than 3.5 million different customers since October 2011.

The complaint alleges that at the same time AT&T was throttling unlimited data plan customers when they exceed certain thresholds, the company continued to advertise its data plan to those customers as “unlimited.”  According to the complaint, AT&T later provided disclosures to certain customers about the effect of certain levels of usage on broadband connection speeds, but it did not do so for all customers.  The complaint further alleges that these disclosures were inadequate because they “failed to disclose the degree to which the customers’ data speed would be reduced” and the resulting impact on the device’s use and “failed to adequately disclose that the speed reduction was due to a limit intentionally imposed by [AT&T], as opposed to general network congestion.”

According to the complaint, AT&T was aware that its throttling practices were inconsistent with consumer understandings of its “unlimited” data plan, but the company did nothing to change its behavior or provide clearer explanations.

The FTC press release announcing the action stated that the FTC worked closely with the Federal Communications Commission (FCC) on this matter.  Although the FTC’s jurisdiction does not extend to common carriers, mobile broadband Internet access is not classified as a common carrier service, which helps explain why the FTC believed it had the authority to take this action.  Notably, throttling is a focus of the FCC’s current net neutrality proceeding.