Thursday, June 18, 2015

AT&T Wireless Risks Having to Pay $100 Million in Tuition on Contract Law

          The FCC has issued a Notice of Apparent Liability to AT&T Wireless with a $100 million “forfeiture” for throttling service to subscribers still having “unlimited” service plans.  See http://www.wsj.com/articles/fcc-to-fine-at-t-100-million-for-capping-unlimited-data-plans-1434557988; https://www.fcc.gov/document/att-mobility-faces-100m-fine-misleading-consumers-0.

           The FCC applies the transparency requirements contained in its 2010 and 2015 Open Internet Orders that passed muster with appellate court review. 

            Ironically, AT&T could have avoided the fine if it strategically blended service contracts with FCC filed tariffs.  Historically, tariff filing requirements have been vilified as harmful to competition, innovation and carrier flexibility.  The FCC has mandated detariffing of many services including wireline and wireless long distance services on the assumption that carriers will self-regulate in a competitive market.

           Apparently even in competitive markets, carriers can risk a bait and switch gambit.

           If only AT&T had a tariff filing option.  It could have inserted language deep in the boilerplate of a tariff to accord it near total flexibility to throttle whenever it wanted.

           The campaign of AT&T and other incumbent carriers to eliminate tariffing has an impact AT&T apparently has failed to evaluate fully. By seeking to replace tariffs with contracts, AT&T now has to comply with issues such as fair notice, proper definition of words like unlimited and congestion, consumer protection and unfair trade practices.  A very old legal precedent, known as the Filed Rate Doctrine, allows common carriers to insert language in tariffs that subvert, conflict with and change the terms and conditions of a negotiated contract.  In effect AT&T could have baited and switched if it could still file a tariff. 

            The tariff would have trumped anything offered orally, or by written agreement. Even today, under certain circumstances, incumbent carriers still like what tariffs offer.  For example, Verizon still has a web page that seems to like tariffing.  The company states that: “Tariffs have historically served as the basis for creating binding rights and obligations between carriers and their customers for telecom services.” See http://www.verizonenterprise.com/us/publications/service_guide/detariffing_f_a_q/.

           But of course who wants a fair balance of rights and obligations between carriers and consumers?  With binding arbitration clauses and major limits of the certification of class action law suits, carriers increasingly can behave poorly, dare I say cheat customers, without penalty.  Occasionally the FCC and FTC step in, and the offending carrier pays a minor fine.

           Possibly a $100 million dollar fine will motivate AT&T to appeal the FCC’s order.  If so AT&T, as the author of a “take it or leave it” contract of adhesion, will bear the burden of proving that unlimited does not mean what people commonly assume the word to mean.

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