Appeals court backs AT&T in data-usage case

On Monday, a federal appeals court ordered dismissal of the Federal Trade Commission’s suit against AT&T for reducing the data speed of iPhone customers with unlimited-data plans after they exceeded a certain amount of usage each month.

Reversing a federal judge’s ruling, the Ninth U.S. Circuit Court of Appeals in San Francisco said the commission lacked authority over AT&T because the telecommunication giant is a “common carrier” exempt from FTC regulations

of unfair business practices.

As a common carrier, AT&T remains subject to regulation by the Federal Communications Commission, which has filed its own case against the company.

AT&T spokesman Marty Richter said the company was pleased with the decision. Federal Trade Commission spokesman Jay Mayfield said agency officials were disappointed “and are considering our options,” which could include further appeals.

The FTC accused AT&T of unfairly misleading iPhone customers who had signed up for for mobile data plans that were advertised as “unlimited” when they were sold between 2007 and 2010.

The company stopped selling unlimited mobile data contracts in June 2010 but, to avoid losing customers, allowed those who already had unlimited plans to keep them. Starting in July 2011, however, AT&T began throttling those customers, or substantially reducing their transmission speed, once they reach a certain threshold of usage in their billing cycle. That was initially 5 gigabytes of data; AT&T announced last fall that it was raising the limit to 22 gigabytes.

The FTC’s regulations do not apply to activities of telecommunications common carriers. But U.S. District Judge Edward Chen of San Francisco agreed last year with the commissions argument that it could still regulate mobile phone data service, which was not classified as a common carrier activity. The FCC later reclassified mobile data service as a common carrier service, but the FTC sought to penalize AT&T for its past conduct.

The appeals court, however, said the 102year-old law that established the FTC exempted common carriers from the commission’s regulations for all their activities.

The law “carves out a group of entities based on their status as common carriers ... even as to non-common carrier activities,” Judge Richard Clifton said in the 3-0 ruling.

FTC spokesman Jay Mayfield said officials were disappointed “and are considering our options.”