TracFone Wireless, the largest prepaid mobile provider in the U.S., has agreed to refund US$40 million to customers to settle charges that it throttled bandwidth or cut off consumer data connections, despite promising "unlimited" data service as a marketing tool.
The U.S. Federal Trade Commission said Wednesday that from 2009 TracFone, which sold unlimited prepaid monthly plans for about $45 per month, under the Straight Talk, Net10, Simple Mobile, and Telcel America brands, slowed or cut off mobile data after customers used more than certain fixed limits in a 30-day period.
The data service was generally slowed down after a customer used 1GB to 3GB, and was suspended at 4 to 5GB, according to the FTC.
Until September 2013, most of the operator's ads did not explain the data throttling policy. It started disclosing information subsequently but these were in fine print or not conspicuous.
FTC has warned previously that it would go after operators that allegedly use deceptive ads. The agency had last year filed a federal court complaint that charged AT&T Mobility mislead smartphone customers about its unlimited data plans. The commission's case against AT&T is still in litigation, FTC said.
TracFone even terminated all the talk, text, and data services of some consumers. Throttled users experienced slow-downs of between 60 to 90 percent, which affected their online activities like video streaming, according to the FTC.
Under the settlement with the FTC, besides paying the refunds to customers, TracFone has been blocked from making further deceptive advertising claims about its mobile data plans, and must disclose clearly any limits on the speed or quantity of its data service.
Consumers who had an unlimited plan but are not sure if their data service was slowed or cut off should still file a claim to find out if they are eligible for a refund, FTC said.
TracFone could not be immediately reached for comment.
The operator runs a virtual network by reselling mobile services purchased from network-based providers, according to a FTC filing on Wednesday in the U.S. District Court for the Northern District of California, San Francisco division.
The TracFone refund will be done in coordination with a pending class-action law suit against the operator.