California AT&T customer Matt Spaccarelli can’t understand why his wireless phone company is selling him an “unlimited data plan” for his iPhone that is subject to being throttled to dial-up speeds after as little as 13 minutes of Netflix viewing per day over the course of a month.

Spaccarelli argued his case with several AT&T representatives, who recommended he “upgrade” his account to a tiered plan that would guarantee him at least 3GB of an unthrottled experience for the same price he was paying for an ostensibly “unlimited use” plan.

“That to me says ‘if you pay more, then you get what we promised you in the first place,’ and that is not cool,” Spaccarelli told the Associated Press.

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The Associated Press talks with Matt Spaccarelli, who successfully sued AT&T over his throttled Internet connection.  (3 minutes)

The Simi Valley man did what few AT&T customers have dared — he took the company to small claims court, and won a judgment of $850.

A Ventura County judge took a dim view of AT&T’s claim that customers can enjoy an “unlimited usage” experience, as long as they understand AT&T never promised what speeds customers would receive along the way.

AT&T lost, according to the judge, because of the legal concept of “justifiable reliance,” which means because AT&T advertises itself as the “fastest wireless network,” a normal consumer with an average understanding of mobile broadband should not expect to have their speeds on an advertised “unlimited use” plan reduced to something akin to an AOL dial-up account.

After AT&T’s representative read the company’s carefully-constructed legalese in its contract and terms of usage in court, even the judge was confused, relates Spaccarelli.

“What does this mean?” Spaccarelli remembers the judge asking.

AT&T's Control Measure for "Heavy Users"

Spaccarelli said he tried it AT&T’s way — switching to a 3GB tiered usage plan to stop the throttling on his “unlimited” plan.

“For one month they switched me to a tiered plan and that month I used the smallest amount of data ever and got the highest bill,” he told KTTV in Los Angeles. “AT&T has not and cannot show that my usage has ever caused damage to their network or caused other people to slow down.”

The AT&T Usage Limbo Dance — Lowering the Bar on Customers With Continuously-Decreasing Usage Allowances

Spaccarelli explained in court his throttling experiences with AT&T have gotten worse over the last several months as part of what he calls AT&T’s “Upside Down Pyramid Scheme.”

“The problem with using the top 5% of data users [as a basis for throttling] is because [customers] are not able to use the services that we would normally use, data usage becomes less and less,” he says. That in turn makes AT&T’s “top 5% usage throttle” engage at perpetually lower and lower usage rates.  Heavy users that used to make the top 5% of data users last fall were consuming a dozen or more gigabytes per month.  Today, AT&T’s “top 5%” consume only 2GB of data.

“When this all started I was getting slowed down after around 10GB of usage, then 8GB and then 5GB,” he says. “[Now] AT&T will admit that 2GB is the average when most people get slowed down.”

“They don’t want my usage to affect other users, which I totally understand,” Spaccarelli says. “But it seems like as long as I pay more they don’t care that my usage might affect other people.”

Spaccarelli pays AT&T around $140 a month for a plan he says AT&T sold him as “unlimited everything.”

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KTTV talked with Spaccarelli about why he decided to sue AT&T, what the experience was like, and why consumers should be concerned about usage-limiting Internet plans.  (5 minutes)

A judge was persuaded by Spaccarelli’s argument and awarded him $850 for the value of his effectively-lost “unlimited use” plan.  But Spaccarelli isn’t waiting by his mailbox — AT&T has indicated it intends to appeal the judge’s ruling and has not sent a check.  (Perhaps he could follow in the footsteps of George Kontos, an AT&T customer in Winston-Salem, N.C. who walked into a local AT&T retail store with a Forsyth County Sheriff’s deputy, to seize the store’s merchandise to satisfy Kontos’ $2,000 judgment.)

Lowering the bar on "unlimited use" customers.

That a customer successfully sued AT&T in small claims court is a potential nightmare for the company, which has worked for years to eliminate consumer protection clauses from its contracts.  AT&T already prohibits customers from pursuing class action lawsuits and typically mandates corporate-friendly arbitration in customer-company disputes.  But AT&T has not yet prohibited customers from suing them in small claims court, where damages are limited.

“I’m not a lawyer and I’ve never done something like this before,” Spaccarelli writes on his website. “I did my own research and took my own time to put together this case against AT&T.”

A case that he has begun documenting in an effort to help consumers pursue their own actions against AT&T.  He says filing a small claims case is simple.

“You give the clerk $85 and the court will give you a court date, that’s it,” Spaccarelli told AP.

Now AT&T has backpedaled on its original plan to throttle unlimited customers who use more than 2GB per month.  Instead, they have announced the throttle will kick in after 3GB of usage, the same amount offered by AT&T’s most popular $30 tiered plan.  That gives customers two choices: a speed throttle or overlimit fees for customers who exceed AT&T’s allowance.

AT&T has at least 17 million customers grandfathered on its now-discontinued “unlimited use” plan.  Any of them face the potential of throttling by AT&T, which could lead others to small claims court, with Spaccarelli’s help.  He told the New York Times he’s willing to travel anywhere in the country to appear as an “expert witness” in future court cases, as long as someone covers his travel expenses.

Spaccarelli says he’s not really interested in the $850, he just wants his unlimited use plan to really mean “unlimited use” again.

“I’d give back the money if they stopped slowing my speed down,” he says.

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Spaccarelli calls AT&T customer service looking for his $850.  (2 minutes)

Verizon Communications has agreed to full restitution, as part of a class action settlement, for unauthorized third party charges on their customers’ phone bills.

Known in the industry as “cramming,” extra unauthorized fees pop up on phone bills for voicemail, dating lines, ringtones, or 800 numbers many customers have no idea they even had.  Almost all of the charges come from independent companies unaffiliated with Verizon.  But critics charge phone companies have been ignoring abusive cramming practices, in part because they share a percentage of money billed and collected from customers.

Deceptive cramming charges are often hard to spot on phone bills replete with cleverly-named-to-be-obscure surcharges, taxes and fees.  Many crammers deliberately keep descriptions about the services they are billing as vague as possible, sometimes appearing as “special services charge,” “voicemail access,” or even “monthly charge.”  Many ratepayers assume it is all just a part of the cost of having phone service.

A class action lawsuit against Verizon accused the company of doing little to stop unauthorized third party fees, and many customers afflicted by them report getting them off their bills is not as easy at it should be.

“When I had a mysterious $14.95 monthly fee for ‘voicemail,’ a service I knew I didn’t have, Verizon required me to fight with some Bermuda-based company to get the charges reversed, and they just kept repeating I must have authorized the service because it was on my bill,” reports Stop the Cap! reader Kevin Sessly. “They wear you down until you just pay the bill.”

Sessly eventually won refunds after contacting his state’s public utility regulator.

As part of the settlement, Verizon customers will be entitled to full refunds of all unauthorized third party charges from April 27, 2005 through Feb. 28, 2012.

“Some settlement class members may have a claim for hundreds or thousands of dollars in refunds under the settlement,” class counsel Bryan Kolton said.

Verizon has also agreed to adopt an “opt in” system where customers must first allow third party charges on their phone bills before a company can bill your account.  Currently, customers are subject to third party billing unless they specifically block it with their telephone company.

“It is difficult to overstate the credit that is due Verizon for its commitment to fixing the third-party billing system as it relates to Verizon customers,” said John Jacobs, one of the lead attorneys for the class. “By this settlement, Verizon has committed to extensive and unprecedented changes that we believe will go a long way toward eliminating cramming and will change the industry.”

Crammers have used a variety of tricks to bill phone customers for services they never ordered.  Completing sweepstakes or contest forms with a phone number is one common method, asking for a cell phone number as part of a “free ringtone offer” is another.  Many services also trick customers into signing up with free offers or discounts on other products or services.  Many customers forget to cancel before the trial ends, resulting in recurring charges.

Customers will be able to recover the full amount of the unauthorized charges, if they have copies of their past phone bills, or obtain a quick $40 flat-rate refund by submitting claims at www.verizonthirdpartybillingsettlement.com or calling toll-free 1-877-772-6219.  Both services should be up and running by March 9.

Non-Verizon customers can still take steps to protect themselves from unauthorized charges by calling their provider and requesting a block on all third-party charges.  This service is provided at no charge.

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ABC News reports on the Verizon settlement and steps consumers can take to identify cramming and obtain refunds for unauthorized charges.  (2 minutes)

Inmates at the Liberty County Jail in Texas managed to outwit Comcast’s set top boxes to watch “hours on end” of soft-core pornography for free, courtesy of the cable company.

Jail Warden Tim New claimed he spent weeks trying to get Comcast technicians out to the county facility to fix the problem — one that Comcast denied could be happening.

“4 Dorm watching porno channel again,” read one February security log obtained by ABC News. Just three days later, a guard wrote, “One of the TV’s had porn on it. Told them to change the channel.”

“I believe that Comcast just couldn’t believe that their system had been manipulated,” Capt. Rex Evans with the Liberty Count sheriff’s office told ABC.

It turns out bypassing the cable boxes effectively opened every channel up for viewing.

It finally took a threat from County Judge Craig McNair to cancel Comcast service in the jail to get the cable company to dispatch a technician.

“Once Liberty County made us aware the inmates had access to Cinemax, we took the necessary steps to block access to the channel,” a representative for the cable company said.

Inmates told KPRC that there would be “a lot of fights” because of the porn sessions and that showers had become “hell” because of Cinemax.

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KPRC-TV in Houston covers a porn scandal inside Liberty County jails.  Public safety officials blame Comcast for not pulling the plug on the adult programming.  (3 minutes)

Last week’s shocking development that Cablevision, a major cable operator in greater New York City, New Jersey and Connecticut is not going to raise rates in 2012 is bad news for other cable operators itching to raise rates once again this year.

Cablevision’s decision was made as the company continues to battle Verizon FiOS, the phone company’s fiber-to-home-service across its service area.  Verizon has been playing hardball with Time Warner Cable, Comcast, and Cablevision in its metro New York service area, offering up to $500 in rebates to sign new customers.  That level of vicious competition has been great for consumers, but lousy for Wall Street.

Investors were not pleased with Cablevision’s pass on rate hikes and its intention to invest a lot more in system upgrades than originally planned.  Wall Street loves increased revenue and hates it when companies spend it on their customers.

With all of this competition breaking out, Comcast and Time Warner Cable may be more than a little uncomfortable sitting down at an antitrust hearing later this month to discuss their new agreement with Verizon to cross-market cable and mobile service.  In return for the cable industry signaling they will never compete with Verizon’s mobile phone offering, Verizon has generously purchased the cable industry’s leftover spectrum and agreed to pitch cable TV subscriptions to Verizon Wireless customers.  With this new “non-aggression treaty,” will there still be a need to offer $500 gift cards and cut-rate prices to attract new customers?  Consumer groups think not.

A greater percentage of Cablevision’s service area is served by Verizon’s fiber network than either Time Warner Cable or Comcast.  Competition is forcing Cablevision to rethink the usual cable industry plan for financial success — force channels customers don’t want and raise rates up to 5% a year to pay for the “increased costs of doing business.”  Consumers are fed up with $150 monthly cable bills and will take Verizon up on an offer than cuts rates $50 a month and hands over up to $500 just for saying “yes” to FiOS.

While incumbent phone and cable operators often try to directly block community broadband projects, sometimes politics and special insider interests also get in the way.  One of our loyal readers shared a piece with us published in Fierce Telecom that outlines the trouble spots:

Gov. Bobby Jindal Blows It for Louisiana; Wife’s Foundation Heavily Supported By AT&T

Jindal's wife's charity is a recipient of AT&T money.

The U.S. Dept. of Commerce awarded $80.5 million to help drain Louisiana’s broadband swamp with a new statewide fiber network linking the most rural and poor areas of the state, including schools, libraries, hospitals, and universities.  Users could have obtained service from 10Mbps-1Gbps, but not if Jindal had his way.  He preferred AT&T (and the state’s cable operators) handle everything the same way they have traditionally handled telecommunications in the state — service in big cities and next to nothing everywhere else.  In addition to directly supporting the governor, AT&T contributes substantially to a charitable foundation founded by Jindal’s wife.

Jindal never openly blocked the project.  Instead, his administration “dithered and bickered” over the fiber network and ran the clock out.  Last October, the Commerce Department revoked the grant, leaving Louisiana’s Broadband Alliance with little more than a plan they’ll never be able to implement as long as Jindal occupies the governor’s office.  Stop the Cap! covered the mess back in November.

Public Service Commissioner Foster Campbell:

“We want to know what the heck happened; we’re the only ones in the country that dropped the ball,” Campbell said. “I meet with people in every parish, and the number one priority by far is high-speed Internet, and how do you lose $80 million coming from the federal government to do that. How do you drop the ball, and if they did drop the ball was it because someone whispered in their ears, ‘it’s going interfere with big companies?’”

AT&T-Backed Astroturf Operation Scandalizes the Mayor’s Office and Ruins A High Tech Training Program

Marks

As Stop the Cap! wrote last fall, a scandal involving AT&T and the mayor of the state capital of Florida ultimately cost the city of Tallahassee a $1.6 million dollar federal broadband grant to expand Internet access to the urban poor and train disadvantaged citizens to navigate the online world.

Mayor John Marks never bothered to inform the city he had a direct conflict of interest with the group he strongly advocated as a participant in the grant project. The Alliance for Digital Equality (ADE) is little more than an AT&T astroturf effort — a front group that did almost nothing to bring Internet access to anyone. Mayor Marks was a paid adviser.

After the media got involved, the mayor’s office hoped the whole project would just go away. And it did, along with the $1.6 million.

Wisconsin Republicans <Heart> AT&T, Even When It Means Forfeiting $23 Million for Better Broadband

Wisconsin Gov. Scott Walker is a close friend of AT&T.  So close, when the phone company was threatened with the loss of revenue earned from the institutional broadband network it leases to the state, Walker and his Republican colleagues intervened, literally turning away $23 million in government stimulus funding.  Walker alone has accepted more than $20,000 in campaign contributions from AT&T.  Stop the Cap! covered this story in detail in February 2011.

Governor Walker (R-AT&T)

The decision to return the money had a direct impact on 380 Wisconsin communities, 385 libraries, 82 schools, and countless public safety offices across the state.  Namely, being stuck with AT&T’s outdated and expensive network the state leases in successive five year contracts.  Since broadband stimulus funding requires the construction of networks designed to last 20 years, not five, Walker’s insistence on sticking with AT&T made the stimulus funding off-limits.  But what are friends for?

AT&T has historically had no trouble getting its phone calls returned by Republican state lawmakers, who have cheered most of AT&T’s proposed legislation through the state legislature.  Today, Wisconsin takes a “hands off” approach with the state’s cable and phone companies, passed a statewide franchising bill that stripped oversight away from local communities, and AT&T’s landline network faces little scrutiny in the state, especially in rural communities.

The state university is now attempting to bypass Walker with its own $37 million project, but it will never serve Wisconsin consumers.  The institutional network will target schools, hospitals and first responders.

As Fierce Telecom notes, other communities could face the loss of their stimulus funding if they do not get busy building the projects they promised.  The Rural Utilities Service, part of the U.S. Dept. of Agriculture, has put several projects on notice they could forfeit broadband stimulus funding if they fail to meet project deadlines.