What does AT&T's $100 million fine mean to me?
CNET's Marguerite Reardon explains to an AT&T unlimited-data customer what the FCC's historic fine against the company for misleading customers really means.
Subscribers to AT&T's unlimited-data plan know all too well the pain of slow broadband service. Federal regulators have stepped in to take action.
Earlier this month, the Federal Communications Commission said it intends to fine AT&T $100 million for violating a provision of the agency's Net neutrality regulations.
At a high level, Net neutrality is the idea that all traffic on the Internet should be treated equally. That means your broadband provider, which controls your access to the Internet, can't block or slow down your ability to use services or applications or view websites.
But it's one of the lesser-known parts of the rules where AT&T comes in -- one that requires broadband providers to clearly inform their customers of the details of their service.
The FCC's fine is the largest the agency has ever proposed. It sounds like a great victory for the average consumer, who's likely seen his service slowed down to the same speed as dial-up Internet access. But what does it really mean for AT&T customers? In this edition of Ask Maggie, I answer that question.
Dear Maggie,
I've been following your coverage of the FCC's Net neutrality rules. And I saw that the FCC fined AT&T a lot of money for violating those rules. I'm an AT&T customer who still has an unlimited-data plan. How will this affect me?
Thank you for your time,
Ricardo
Ricardo
Dear Ricardo,
The FCC's actions raise a lot of questions about what this means for consumers. To help you and others understand what it means, I've put together this FAQ.
Why is the FCC fining AT&T?
The FCC alleges that AT&T intentionally slowed service for 4G LTE subscribers to its unlimited-data service to the point where customers couldn't even use the service. The agency claims that when AT&T's unlimited-data customers used more than 5 gigabytes of data in a month, the company dropped the speeds of their service to as low as 512 kilobits per second, which is about 5 percent of what it advertised for its 4G LTE service. It's a practice known in the industry as throttling.
If you remember the painfully slow days of dial-up Internet access, that's what the connection felt like for customers whose service was slowed by AT&T.
The FCC also alleges that AT&T failed to adequately notify its customers that they could receive slower-than-advertised speeds. By "falsely labeling" these plans as allowing unlimited data usage and by not giving customers information that explained how and when their services would be slowed, AT&T violated the 2010 Open Internet Transparency Rule, the FCC said.
Did AT&T violate the new Net neutrality rules that prohibit broadband providers from slowing down Internet traffic?
No. While it may seem like AT&T broke the "no throttling rule," the truth is it didn't. The rules the FCC adopted ban network operators from slowing down or blocking specific applications, content or services. If a service provider is slowing down all traffic on the network, it's not being discriminatory. Therefore, it's not violating the rule.
Then what rule is AT&T violating?
The FCC is not accusing AT&T of violating the new Net neutrality rules voted on in February. Instead, it says AT&T violated the only piece of the 2010 Net neutrality order that survived the court challenge in 2014.
According to the FCC's information guide, the "Transparency Rule empowers consumers to make informed choices about broadband services." The FCC says this means broadband providers need to offer customers enough information about the speed and price of their service for a customer to know what they're paying for. It also requires broadband providers to offer accurate service descriptions, including expected and actual broadband speeds. It requires operators to provide accurate pricing, including monthly prices, usage-based fees and any other additional fees consumers may be charged. And it requires broadband operators to disclose network management practices, such as congestion management practices and the types of traffic subject to those practices.
Does this mean that AT&T will stop throttling my unlimited service?
Maybe. The FCC's action isn't final yet. AT&T says it hasn't violated any FCC rules. It claims it has informed customers of its its policies and therefore has complied with the Transparency Rule. The company has 30 days to appeal the FCC's enforcement action. It can can ask the commission to reduce or eliminate the fine.
But if the enforcement action goes into effect, then AT&T must notify customers of unlimited-data plans that its "disclosures were in violation of the Transparency Rule, and that AT&T is correcting, or has corrected, its violation of the rule with a revised disclosure statement."
In other words, the FCC isn't ordering AT&T to stop throttling customers. It's only telling the company to make its policy clear.
AT&T changed its policy in May. Previously, it slowed down service if a customer exceeded 5GB of data in a month, regardless of whether the network was congested. Now AT&T says heavy users on the unlimited LTE plans are throttled only when the network is congested.
A $100 million fine is a big one. Does that mean I will get a refund?
No. The FCC's enforcement bureau only has the authority to impose fines. The money will go to the US Treasury. But this doesn't mean customers won't get some relief from the government. The Federal Trade Commission is suing AT&T over the same practice. If it wins its case, it could require AT&T to pay back customers. Another possibility is that AT&T may settle with the FCC and the FTC, as the company has done in other cases. Some sort of settlement may include reimbursement for customers.
Last year, AT&T agreed to pay a fine of $105 million to the FTC and to state governments to settle charges over a practice known as "cramming," or allowing third parties to put unauthorized charges on customers' bills for unwanted text messages. On top of that, the company agreed to pay $5 million to the FCC.
What does this mean for the future of unlimited-data plans?
The days of the unlimited-data plan could be numbered. AT&T stopped offering unlimited data to new customers in 2010. It has allowed customers who had that plan before 2010 to keep it indefinitely. But that could change. AT&T isn't required to allow customers to keep their old plans once their contracts expire. It could require customers to move to one of its usage-based plans.
Verizon, which also eliminated its unlimited-data plan for new customers, allows customers to keep the plan, but only if they meet strict requirements. Under Verizon's plans, customers must pay full price for their phones if they want to keep the unlimited data. This has discouraged a lot of customers from keeping the plans. Verizon said there are few unlimited-data users left on its network.
AT&T and other wireless providers may find it too costly or simply too much trouble to keep these plans. Sprint CEO Marcelo Claure said at the Recode conference last month that the company would likely stop offering unlimited-data plans in the future. In another, more recent interview, he said the company will increase the price of unlimited-data plans near the end of the year.
Even T-Mobile, which professes to be different from all its competitors, may eventually do away with unlimited data. As the company adds new customers to its network, it may hit a limit in terms of the number of customers it can handle. The company already raised the price of its unlimited-data offer from $70 to $80 a month. There's a chance it might get rid of it entirely. Still, T-Mobile doesn't charge customers an overage penalty if they exceed their allotted data even on plans that are capped. Instead, it slows customers down for the remainder of the billing period once they reach their max.
Ask Maggie is an advice column that answers readers' wireless and broadband questions. If you have a question, I'd love to hear from you. Please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.
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LGBT rights are good for the tech industry, SF Pride Parade chief says
San Francisco is both the home of the tech industry and the epicenter of the gay rights movement. Now the city is throwing its biggest party of the year, just after the Supreme Court legalized same-sex marriage.
San Francisco -- and the tech industry -- are beaming with Pride this weekend.
The United States Supreme Court on Friday ruled same-sex marriage a constitutional right, one day before San Francisco begins its famous Pride festivities, one of the largest celebrations of lesbian, gay, bisexual and transgender -- aka LGBT -- culture in the country.
The tech industry is practically euphoric, especially after high-profile executives this year, from Apple CEO Tim Cook to Salesforce.com CEO Marc Benioff, publicly advocated advancing gay rights.
But that advancement works both ways, said Gary Virginia, board president of SF Pride, which organizes the celebration. Speaking out is not just a personal decision for tech execs; it makes good business sense too, he said.
"They attract a younger population for their workforce, and it's been proven that social attitudes are changing," said Virginia. "So it behooves them to have progressive policies to attract LGBT employees. I think they see the benefit of it."
The celebration caps off a landmark year for the gay rights movement. In September, Apple 's Cook wrote an essay saying he's gay, making him the first openly gay CEO of a Fortune 500 company. A month later, he allowed for his name to be attached to an LGBT antidiscrimination bill in his home state of Alabama.
In March, Benioff said he had canceled all Salesforce events in Indiana after its governor signed a law that would allow businesses to refuse service to anyone in the LGBT community on religious grounds. Less than a week later, dozens of executives from Airbnb, Ebay, Jawbone, Lyft, PayPal, Twitter and other companies signed a joint statement in The Washington Post against the religious freedom laws either passed or being considered in several states.
The tech industry is a relatively recent ally. LGBT leaders point out it's taken decades to achieve Friday's Supreme Court decision. New York City, for example, is commemorating the anniversary of the 1969 riots at the Stonewall Inn, which many consider the jump start of the movement. The 1978 assassination of Harvey Milk, an openly gay San Francisco board supervisor, galvanized the national LGBT community.
Pride Parade
Tech giants including Apple, Facebook and Google have been mainstays of San Francisco's giant Pride Parade for years. But the year of activism from the tech industry leading up to this year's parade has been a standout, particularly fueled by Cook's public support of the issues, said Kellie McElhaney, director of the University of California, Berkeley's Center for Corporate Responsibility.
"When you have him stepping up, that's huge," she said, referring to his role as the leader of the most valuable company in the world. "It's different from anything we've seen in the past."
But that doesn't mean the relationship between the tech industry and the LGBT community hasn't had its share of friction. Members of the drag and transgender community last year protested against Facebook's policy requiring all members to use their real names. Some people petitioned the parade to ban Facebook from marching in it this year. The SF Pride board, however, voted to let the company march.
"That's just really not how Pride operates," said Virginia, responding to criticism for not banning the company.
"Facebook flat out said, 'We know it's an imperfect system,'" he said, adding the social network will hold four meetings with the LGBT community in the coming year to devise a solution.
"Facebook has been a staunch supporter of the LGBT movement for numerous years," Virginia said. Virgina points to Facebook joining Google, Amazon, Microsoft and Twitter in a 2013 friend of the court brief filed with the Supreme Court protesting the Defense of Marriage Act, which attacked same-sex marriage.
The social network is proud of marching in the parade, as well as its commitment to LGBT rights "as a company and employer," Facebook said in a statement.
And Virginia said he's happy to have those companies on board.
"The tech industry was on the right side of history for equality."
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Regulators push for more broadband competition, but is it enough?
FCC chief Tom Wheeler says the agency is doing all it can to promote broadband competition, but smaller wireless providers disagree.
FCC chairman Tom Wheeler says that the upcoming wireless spectrum auction is one of many opportunities for the agency to promote broadband competition, which he says is crucial for getting high-speed Internet service to every American. But smaller wireless providers worry he isn't doing enough.
Speaking at the Brookings Institution in Washington, DC, on Friday, Wheeler said protecting and encouraging competition is a "foundational requirement of the modern FCC." He pointed to the upcoming wireless auction early next year, in which TV broadcasters will sell unused spectrum, as an opportunity for the agency to ensure that all Americans have access to broadband.
"It's pedal to the metal on broadband policy," Wheeler said. "We're not going to let up on protecting and promoting broadband competition...As I have made plain on innumerable occasions, competition is paramount."
Wheeler highlighted his agency's efforts in designing this complicated auction, which for the first time will offer existing spectrum license holders an incentive to sell their spectrum rights back to the government so it can be repurposed for a new use. The auction is seen as a make-or-break event for wireless carriers, who need access to the airwaves to deliver streaming video and other Web-based services to mobile devices. The spectrum in this auction is particularly important because it is low-band or low-frequency spectrum that travels longer distances and can penetrate through obstacles like walls.
But T-Mobile and other smaller players say Wheeler's focus on competition doesn't square with his actions. On Thursday the chairman indicated he is recommending the FCC vote against a proposal from T-Mobile that would expand the amount of spectrum the government will set aside for smaller players to bid on during the auction. T-Mobile and other smaller players say they can't compete in an auction against well-capitalized AT&T and Verizon.
In a letter to the FCC sent Friday, T-Mobile CEO John Legere, who has tried to drum up grassroots support through two videos the company has posted, expressed his disappointment in Wheeler's position regarding T-Mobile's proposal. He asked the chairman to reconsider his position before the full FCC votes on the matter at its meeting July 16.
"From the day you took office you have repeated a mantra of competition, competition, competition," Legere said. "However, your recent blog proposes a low-band spectrum reserve that is too small to support a robustly competitive market and is really frustrating."
The FCC agreed last year to set aside some spectrum to allow operators of all sizes a fair shot at getting these valuable licenses. Companies such as T-Mobile and Sprint have pushed for the FCC to carve out even more spectrum for them to bid on without having to bid against AT&T or Verizon, which could easily outspend everyone else. T-Mobile argues the extra spectrum is crucial if the FCC hopes to promote true competition in the wireless market.
The proposal supported by T-Mobile and other small carriers to increase the amount of spectrum for smaller carriers to bid on has the support of antitrust officials at the Department of Justice. Earlier this week the agency sent a letter to the FCC stating it recognized the FCC "must balance competing policy priorities" in setting the reserve. But it asked the agency to "give considerable weight" to ensure that larger competitors like AT&T and Verizon don't walk away with the bulk of spectrum in the auction.
The Competitive Carrier Association, which represents T-Mobile as well as hundreds of smaller rural and regional service providers, says ensuring smaller operators have access to spectrum in this auction is critical. Following Wheeler's speech, the group's head, Steven Berry, called on "the FCC to follow the Department of Justice's guidance."
"We must do more to promote mobile competition," Berry said in a statement.
Wheeler did not address the issue of increasing the amount of spectrum the agency will set aside in the auction. Instead, he talked more broadly about how the policies the FCC has adopted will help promote competition within the wireless industry. Wheeler said as the agency works to free up additional spectrum for future auctions and encourages stakeholders to share their wireless licenses to make more efficient use of airwaves, there will be more room for additional competitors in the market.
"The economics are changing," Wheeler said. "That's why spectrum is so important. And we need to make sure there are multiple providers."
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