Friday, May 20, 2011

iPhone Customer Sues AT&T Over 'Rigged' Data Charges

AT&T last year discontinued unlimited data plans for iPhones and transitioned to a tiered pricing structure. Photo: Jon Snyder/

An iPhone customer has filed a lawsuit against AT&T, claiming that the telecom company is overcharging him for data services.

Filed by Patrick Hendricks in the Northern District of California, the lawsuit seeks class-action status, alleging that AT&T is committing unlawful and fraudulent business practices by regularly overbilling customers for data transactions.

?AT&T?s billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car?s tank,? the complaint says (pdf).

This lawsuit emerges as the broadband industry gradually shifts toward limited data plans, putting a price on a fixed amount of internet usage. In recent years, AT&T, Comcast and multiple small internet service providers abandoned unlimited data plans in favor of tiered pricing structures. Ryan Singel, who has extensively reported on the broadband industry, says the reasoning behind the shift to capped data is not to reduce costs ? bandwidth costs are extremely low and keep decreasing ? but rather to mitigate network congestion due to limited infrastructure.

AT&T in June 2010 transitioned to tiered data pricing for the iPhone, and Hendricks? lawsuit suggests that AT&T exploits limited data plans by charging for invisible data transmissions that aren?t visible to the customer.

Hendricks? lawyers claim that they consulted an independent firm that conducted a two-month study with iPads and iPhones and found that AT&T was overstating web server traffic by 7 to 14 percent, and in some instances by more than 300 percent, to inflate charges.

The lawyers also claim that the firm conducted another test, in which it purchased a brand-new AT&T iPhone and immediately shut down all apps and disabled push notifications and location services. The firm left the phone untouched for 10 days and found that AT&T billed the test account for 35 data transactions, totaling 2.3 megabytes of usage.

An AT&T representative told that Hendricks? complaint made incorrect claims. The company provided the following statement to

Accurate billing is clearly important and, unfortunately, there have been some incorrect claims about our data usage billing practices. We properly charge for all data that our customers send and receive, including data activity that runs in the background on smartphones and other powerful data devices. Data usage for emailing, downloading applications, browsing the web, downloading a video or streaming music is all applied to a customers? data plan. So are real-time updates to applications, such as weather updates, sports scores, or stock tickers. Particularly for smartphones, tablets and other advanced mobile devices, applications are often constantly running in the background and engaged with our network. And, AT&T captures your data activity nightly to create a bill record in our systems. This will appear on your bill to be a late night ?charge,? but in fact, the time stamp reflects the time that your device established a connection to the network, not the time that you sent or received data. checked an iPhone billing statement and did not discover any erratic charges that would support Hendricks? claims. However, this account was tied to an unlimited data plan.

It?s worth noting, however, that in the tests cited in Hendricks? complaint, the phone?s cellular signal was not shut off, which would still allow for some data transmissions to occur in the background, such as network diagnostics, as well as transmitting information about data activity for billing to AT&T. Therefore, that part of the test seems questionable.

iPad and iPhone customers: Do you think AT&T has overbilled you for data? Respond in the poll below, or post your observations in thesection.


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