AT&T pays $12M for unlimited-data throttling, and it’s a good deal—for AT&T

AT&T has agreed to a $12 million settlement in a class-action lawsuit over its throttling of “unlimited” mobile data plans. As usual, refunds to individual customers amount to a fraction of what the customers paid for the hobbled service.

The paltry nature of expected per-person payments was explained last week by plaintiffs in a filing that asked the US District Court for the Northern District of California to approve the settlement. After administrative costs and attorneys’ fees, typical victims are expected to get $10 or $11 from the new settlement. Many of these same people previously received $12 each from a $60 million settlement between AT&T and the Federal Trade Commission, bringing the typical person’s total payout to $22 or $23. (The FTC/AT&T settlement applied to customers in any state, but the newly announced settlement is only for California residents.)

Customers paid AT&T $30 a month for unlimited data at a time when AT&T automatically throttled “unlimited” plans for the rest of the month once subscribers hit thresholds of either 3GB or 5GB. This throttling was particularly severe because it was enforced 24 hours a day regardless of whether there was any network congestion, and downloads were throttled to speeds as low as 128kbps. AT&T eased up on the throttling in 2014 and 2015 and now throttles only when consumers are connected to congested cell sites.

The FTC, which sued AT&T over the practice in 2014, said after the $60 million settlement that “AT&T promised unlimited data—without qualification—and failed to deliver on that promise.” The FTC had accused AT&T of violating US law against unfair or deceptive acts in commerce with its “unfair mobile data throttling program” and “deceptive failure to disclose [the] mobile data throttling program.”

The new class-action settlement says that, on average, settlement-class members exceeded the throttling thresholds during 7.5 monthly billing periods. This means customers paid AT&T an average of $225 for unlimited data in months they were throttled. Despite that, plaintiffs concluded that the $10 or $11 settlement payments are a good deal compared to what they would likely get at trial. “It is unlikely… that plaintiffs and the class could recover [$225 for each person], even assuming plaintiffs were to overcome the numerous remaining pre-trial obstacles, prevail at trial, and survive an inevitable further appeal,” plaintiffs wrote in their filing asking for court approval of the settlement.

The filing continued:

AT&T would have arguments for significantly reducing that amount. Some of the throttling occurred after the (generally two-year) contract period in which the accounts were throttled for the first time. AT&T will argue that any possible damages would, at the least, be cut off after the first contract period during which the customer was throttled, because the customer was then “on notice” and could have discontinued their service plan. Even assuming as much as one-half of the throttling (i.e., 3.75 monthly billing periods) occurred during the first contract period in which the customers were first throttled, this argument if successful would reduce the estimated average damages to about $112.50 per Group A account. AT&T will also argue that, even in the monthly billing periods that customers were throttled, they got some of what they paid for—i.e., data service for the part of the period before they were throttled. Plaintiffs understand that throttling typically occurred towards the latter part of the monthly billing period (i.e., after the account exceeded the data threshold for the period).

Payment details

Here’s how the numbers in the new settlement shake out. Of the $12 million, $462,000 is set aside for administrative costs and up to $3 million for attorneys’ fees and expenses. The remainder would be distributed to the class, which is defined as California residents who bought unlimited mobile data from AT&T and exceeded the data usage threshold “for one or more monthly billing cycles such that the user would have been eligible for data usage slowing or deprioritization by AT&T in those billing cycles under AT&T’s network management policies.” (Plaintiffs originally sought certification of a nationwide class but ended up agreeing to a California-only class.)

The class is divided into two groups. Group A consists of about 750,000 California residents who exceeded the data-usage threshold before AT&T deployed “congestion-aware throttling,” the system that throttles only when the network is congested. All 750,000 “will automatically be issued a ‘Group A payment’ without the need to submit a claim,” with payments expected to be “approximately” $10 or $11.

Group B consists of California residents who were throttled after the congestion-aware throttling system went into place. There won’t be automatic payments to this group because AT&T’s records “reflect which accounts exceeded the threshold, but not which were actually throttled.” After the settlement is approved and administered, Group B members will be able to submit claim forms “attesting (by checking a box) that they believe their data was slowed at least once in 2014 or later” in order to receive a payment.

Group B payments are expected to be about $13 to $14 each, and there is overlap between Group A and B. That means some people will get $23 to $25 from the California settlement. But there won’t be much money left over for Group B after the Group A payments, which could be $7.5 million or more. The $13-$14 estimate is based on an assumption that only 3 percent of the 1.35 million people in Group B will submit claims, which amounts to about 40,500 people.

These payments are in addition to what customers got in the FTC settlement. “Under the FTC judgment, most payment recipients received approximately $12, with a smaller portion receiving approximately $31,” the new settlement notes. Since Group B claims are expected to be low, we figure the typical consumer included in this settlement will get $10 or $11 in new money plus the $12 they got before from the FTC case.

Class members who are still AT&T customers will get their payments via credits to their accounts. Former customers will get checks in the mail. There’s nothing for settlement-class members to do right now. Class members will be notified via mail, email, or text message after the settlement gets preliminary approval, and a settlement website will be set up. The notice date is defined as 45 days after the settlement gets preliminary approval from a judge; after the notice date, Group B members will have 90 days to submit claims.

Paying the $12 million won’t be much of a problem for AT&T, which reported $45.7 billion in revenue in Q4 2020. “While we continue to dispute the allegations, we elected to settle rather than continuing to engage in drawn-out litigation,” AT&T said in a statement to Ars.

Long road between lawsuit and settlement

It’s not unusual for many years to pass between the filing of lawsuits and payments to consumers, and AT&T’s strategies in the FTC and class-action suits help illustrate why.

After the FTC sued in October 2014, AT&T claimed that the FTC had no jurisdiction over the company because the FTC is barred from regulating common carriers. A panel of federal appeals court judges ruled in AT&T’s favor in August 2016, but the FTC finally got the court victory it needed in February 2018. Settlement talks followed, and the $60 million deal was announced in November 2019.

AT&T seemed to have defeated the separate but similar class-action lawsuit in March 2016, when a federal judge ruled that the dispute had to be heard in arbitration instead of court. The lawsuit was revived by an April 2017 California Supreme Court decision in another case, which essentially changed the state law on mandatory arbitration agreements.

Multiple years of legal wrangling still lay ahead. In February 2020, a panel of US appeals court judges ruled that AT&T’s mandatory-arbitration clause was unenforceable. After another 11 months, the sides announced their settlement last week.