By now, you've probably heard that the Federal Trade Commission is suing AT&T for how it treats its unlimited data customers. Despite paying for an unlimited plan, these subscribers had their mobile Internet slowed to dial-up speeds, or "throttled," once AT&T decided they had surfed the Web too much. If that sounds nonsensical to you, you're not alone: Tens of thousands of consumers have complained about the practice, saying "unlimited" should mean just that — without limits.
Just how big a deal is this? At the very least, we're talking about hundreds of millions of dollars in potential losses to consumers. Although federal regulators haven't disclosed how much they're seeking in damages from AT&T, we can do some math to put a rough dollar value on AT&T's throttling practices. I asked a number of economists, antitrust lawyers and former FTC officials familiar with the process of calculating damages to help give a rough idea of the money that may be at stake here.
First, here's the quick summary. AT&T may have lost consumers anywhere from $300 million to over $1 billion or more.
That $300 million figure may not sound like much, considering the company allegedly misled 3.5 million customers a total of 25 million times over the course of three years. Indeed, $300 million is just a fraction of AT&T's annual revenue — two-tenths of a percent, to be exact. But what's pocket change to a wireless company is big money to consumers and for the FTC: $300 million is 13 times greater than the biggest fine the FTC has ever levied and (for a more apples-to-apples comparison) nearly four times greater than the agency's biggest restitution award against a wireless carrier.
And remember that $300 million is just a conservative baseline figure. Economists and lawyers from both sides are going to argue that damages should be calculated in all kinds of other ways, which we'll go into below.
How do regulators come up with damage figures in these kinds of cases? There are two ways to approach the problem, according to Kenneth Davidson, a former FTC attorney who spent 27 years working on agency investigations and enforcement actions from 1978 to 2005. The simpler, more limited way involves repaying customers who were effectively overcharged by AT&T. These customers paid for unlimited data for a month, but only got unlimited data for part of a month, so whatever fraction of the month that they paid for but didn't get unlimited data, they get back as cash -- refunds for services not rendered.