Signage for an AT&T store is seen in New York October 29, 2014. REUTERS/Shannon Stapleton/File Photo

WASHINGTON (Reuters) – A federal appeals court in California on Monday dismissed a U.S. government lawsuit that accused AT&T Inc  of deception for reducing internet speeds for customers with unlimited mobile data plans once their use exceeded certain levels.

The company, however, could still face a fine from the Federal Communications Commission regarding the slowdowns, also called “data throttling.”

The U.S. Court of Appeals for the Ninth Circuit said it ordered a lower court to dismiss the data-throttling lawsuit, which was filed in 2014 by the Federal Trade Commission.

The FTC sued AT&T on the grounds that the No. 2 U.S. wireless carrier failed to inform consumers it would slow the speeds of heavy data users on unlimited plans. In some cases, data speeds were slowed by nearly 90 percent, the lawsuit said.

The FTC said the practice was deceptive and, as a result, barred under the Federal Trade Commission Act. AT&T argued that there was an exception for common carriers, and the appeals court agreed:

The panel reversed the district court’s denial of AT&T Mobility LLC’s motion to dismiss, and remanded for an entry of an order of dismissal in an action brought by the Federal Trade Commission under section 5 of the FTC Act that took issue with the adequacy of AT&T’s disclosures regarding its data throttling plan, under which AT&T intentionally reduced the data speed of its customers with unlimited mobile data plans.

Section 5 of the FTC Act contains an exemption for “common carriers subject to the Acts to regulate commerce.” 15 U.S.C. § 45(a)(2). The panel held that AT&T was excluded from the coverage of section 5 of the FTC Act, and FTC’s claims could not be maintained. Specifically, the panel held that, based on the language and structure of the FTC Act, the common carrier exception was a status-based exemption and that AT&T, as a common carrier, was not covered by section 5.

Asked about the appeals court ruling, a spokesman for AT&T said: “We’re pleased with the decision.”

An FTC spokesman said the agency has not yet decided whether to appeal. “We are disappointed with the ruling and are considering our options for moving forward,” FTC spokesman Jay Mayfield wrote in an emailed comment.

The company, however, could face action from the FCC. In June 2015, the agency proposed a fine of $100 million for AT&T’s alleged failure to inform customers with unlimited data plans about the speed reductions. AT&T has contested that proposed fine.

(By Diane Bartz; Editing by Paul Simao and Matthew Lewis; Additional reporting by Stop the Cap!)

Critics question the wireless industry’s claim LTE-U and Wi-Fi can co-exist peacefully. (Image: EVOLVE)

Consumer groups and cable operators are warning the Federal Communications Commission a plan by the nation’s largest wireless carriers to introduce premium Wi-Fi services for their mobile customers may create serious interference problems for existing Wi-Fi users.

AT&T, Verizon, and T-Mobile are all members of EVOLVE, a group advocating for LTE-U and LAA, technologies that will depend largely on the unlicensed Wi-Fi bands to deliver wireless data to their mobile customers.

Cable operators fear the proposal will give mobile providers an unfair advantage, introducing more traffic into the already crowded Wi-Fi bands while mobile operators reserve the right to use a licensed control channel to shift their customers’ traffic back and forth between unlicensed and licensed spectrum at will. Cable industry critics of the plan claim allowing mobile operators to dump customer traffic into the Wi-Fi bands is likely to worsen interference, harming the cable operators’ investment in a growing network of Wi-Fi hotspots and in-home Wi-Fi.

Consumer groups agree with the cable industry.

The Open Technology Institute at New America, Public Knowledge, Free Press, and Common Cause have filed a joint statement with the FCC warning the agency “mobile carriers will have both the ability and strong incentives to use LTE-U and LAA to engage in anti-competitive behavior harmful to consumers,” all while making a tidy profit charging customers for the use of a service comparable to Wi-Fi, now a free alternative to the carriers’ 3G and 4G data networks.

The groups argue Wi-Fi standards were developed with unlicensed users in mind, able to co-exist peacefully with other similar Wi-Fi signals. The proposed LTE-U technology from wireless carriers is far less sensitive to neighboring signals.

“LTE-U/LAA is designed to be centrally controlled by a network anchored in a separate, exclusively licensed frequency band,” the consumer groups wrote. “3GPP, the mobile industry standards body, may ultimately design LAA in a manner that shares fairly with Wi-Fi and other unlicensed technologies; yet several studies filed by commenters demonstrate that the version of LTE-U that U.S. carriers plan to deploy by next year coexists poorly with Wi-Fi, degrading both throughput and latency (delay).”

Critics contend the wireless industry’s proposed service is not as likely to use “Listen Before Talk” effectively, a standard that checks for existing traffic before powering up on an unlicensed frequency. Consumer groups fear mobile carriers will have both the ability and a strong incentive to use LTE-U and LAA to charge consumers for the use of unlicensed spectrum and give themselves an unfair advantage by escaping the interference its own technology can cause other users.

“Carriers also have powerful incentives to use LTE-U to deter mobile market entry by ‘Wi-Fi First’ providers, such as wireline ISPs,” argue the consumer groups, also referring to independent providers like Republic Wireless that depend primarily on Wi-Fi for smartphone connectivity. “Carriers deploying LTE-U will have the apparent option to adjust their access points to introduce just enough latency to frustrate consumer use of real-time applications, such as video calling.”

Another incentive is money. For several years, wireless carriers have encouraged customers to offload their mobile data traffic to Wi-Fi. But since Wi-Fi traffic does not count against the customer’s usage allowance, it also reduces revenue opportunities. LTE-U is a variant of LTE, and carriers traditionally do count that traffic against a customer’s usage allowance. For the first time, mobile customers will accrue usage charges based on their use of unlicensed frequencies. For some, they may have no other choice.

Ellen Satterwhite, a spokesperson for WifiForward, a coalition of companies advocating for more unlicensed spectrum for Wi-Fi, said LTE signals never play well with traditional Wi-Fi.

“When LTE and Wi-Fi signals collide, LTE wins,” Satterwhite said.

“The wireless carriers have completely changed their tune about Wi-Fi—because they have to,” said David Callisch, vice president of corporate marketing for Ruckus Wireless, a Sunnyvale, Calif.-based maker of Wi-Fi hardware, whose customers include Verizon and AT&T. “Wi-Fi for them is like a train going down the track,” Callisch told Bloomberg BNA in an interview. “You could get hit by it or you could jump on the train. They’re jumping on the train.”

“Carriers have historically hated Wi-Fi, because they can’t control it,” Callisch added. “They’ve always liked the licensed band, because they can buy it and they can control it and they can deliver a quality of service to customers over it. With Wi-Fi, you can’t do that.”

But with LTE-U they have the control they crave, able to use network management technology that prioritizes their customers over other conventional Wi-Fi users. Even better, they can charge customers for using it.

Both cable operators and consumer groups want engineers, not business executives, to carefully develop standards and rules that guarantee Wi-Fi users can co-exist with other users of unlicensed frequencies before the technology is switched on.

If you are among the dwindling number of customers still using Sprint’s Clearwire 4G WiMAX service, the wireless provider would like you to leave.

After about a year of successive warnings it was preparing to decommission its aging WiMAX network in favor of LTE service, nobody can accuse Sprint of not giving its customers fair warning. The top banner on the Clear.com website is now festooned with red text giving customers one last chance to move on.

In brief, the last Sprint WiMAX cell tower will cease functioning Nov. 6 2015 at 12:01am EST. Sprint is repurposing many of its former WiMAX cell sites to support expanded 4G LTE service in the carrier’s perennial network makeover.

Despite this, there still remains a loyal user base for WiMAX service — many in semi-rural areas using the service until the last days for wireless home broadband. The alternative is usually very expensive mobile data service from Verizon, AT&T, Sprint or T-Mobile, or one of several resellers. But usage caps can be stingy and overlimit fees high.

We also found several businesses, including a small auto servicing chain in western New York, still occasionally relying on Clear WiMAX-powered guest Wi-Fi, apparently unaware the service is soon to disappear. Time Warner Cable is often the chosen replacement for Clear’s business customers in the northeast as the cable company aggressively markets business broadband service coupled with free customer/public Wi-Fi access for around $90 a month.

Although WiMAX is nearing extinction in the United States, it remains in service in places like Ukraine and Azerbaijan. In Calgary, Platinum Communications continues to offer WiMAX wireless broadband in rural parts of Alberta between Edmonton and Calgary and large sections of the flat, open prairie of southeastern Alberta, including the communities of Lethbridge, Brooks, and Medicine Hat.

AT&T is obviously a supporter of bringing its wireless customers closer together… in family plans, that is.

The wireless carrier has adjusted its wireless data plans once again, this time in response to recent changes at Verizon and to better compete against T-Mobile — the carriers AT&T’s plans now most closely resemble.

Pricing wireless data has become a marketing art. Push people into too-small data plans and they will get stung with bill shock. Give them ample data at a high price and customers feel justified trying to use every last bit of it to get their money’s worth. So what is AT&T up to?

Light User/Budget Customers Squeezed

If you keep your phone turned off except during special occasions, road trips, and landline service outages, AT&T has a plan for you. Actually, Verizon thought up most of these plans first — AT&T is now matching them as a consequence of the “competitive” market.

AT&T’s $20 a month entry-level data plan offers a paltry 300MB of data, an amount so low it is likely to be consumed quickly just updating apps, reading web pages, and checking email. Although intended for light users, it is likely to expose customers to a nasty overlimit fee identical to the cost of the 300MB plan itself ($20 per 300MB). With embedded video advertising, bloated web pages, and growing-size apps that require regular upgrades, this kind of allowance is no longer tenable.

AT&T’s old 1GB and 3GB plans are also gone. Heads you may lose, tails AT&T usually wins. Customers on 1GB plans will now be herded into a 2GB plan that delivers twice the amount of data, for $5 more per month ($60 a year). That is a good value as far as wireless pricing is concerned, but only if you need twice the data. Customers with 3GB plans lose one-third of their allowance but get a $10 price break… unless they go over their limit and expose themselves to AT&T’s dastardly $15/GB overlimit fee. Then the savings evaporate.

The 2GB usage plan seems designed to keep you worried. Will you come perilously close to the overlimit fee again this month after watching those videos on the train? What about the 15 app updates that chewed through 300MB last week? With the average 4G iPhone customer in the United States using 1.8GB of mobile data each month during the summer of 2014, 2GB+ average usage is likely this year. Avoiding the overlimit fee will involve a costly leap into a more generous 5GB plan at a higher cost.

The New Normal: The 5GB Individual Plan/15GB Family Plan

It won’t be hard for AT&T to sell most customers on either a 5GB data plan if they have an individual account or a 15GB shared data plan for families.

The 5GB plan is $20 less than the 6GB plan it replaces. It’s presumably AT&T’s idea of a “sweet spot” for customers with a single line choosing between a $30 2GB plan that might not include enough data or a much more expensive 15GB plan — the next step up AT&T’s data plan range.

A close look at AT&T’s price chart shows the plan options and prices are designed to encourage individual line customers to migrate into a family plan. Here’s how AT&T does it:

Two AT&T customers with individual plans now pay $75 each for unlimited talk and text and 5GB of data. That adds up to $150 a month. But watch what happens when those customers take their vows as AT&T family plan customers. First, they each get a $10 break on the Plan Access charge ($15/mo each instead of $25). Second, there is more justification to spend $100 on a data plan that offers a more generous 15GB of data. Let’s look at the math:

Individual Plan (2 Lines)

2 x $25 Plan Access charge
2 x $50 5GB data plan

$150/month

Family Plan with 2 Lines

2 x $15 Plan Access charge
1 x $100 15GB data plan

$130/month — a $20 savings

Family plan customers pay $20 less and get an extra 5GB of mobile data. Customers choosing a data plan of 15GB or more also receive free unlimited calling and texting in Canada and Mexico.

Customers can be forgiven if they fall into the value trap – saving yourself into poverty. While AT&T’s recent price changes offer significant savings for certain customers, it is instructive to remember not so long ago AT&T charged $30 a month for unlimited mobile data, making the prospect of spending $100 for 15GB sanity-questionable. But that was then and this is now.

AT&T expects it will increase the amount of money it collects from each customer with the advent of these new plans, with the hope customers won’t remember back to the days where data usage was not monetized like a commodity.