AT&T Has to Pay $105 Million for Overcharging Customers

A settlement, not a fine

Federal Communications Commission chairman Tom Wheeler held a press conference alongside colleagues from the Federal Trade Commission and the states attorneys general today to publicly reprimand AT&T for "cramming"—adding fees that customers didn't authorize to phone bills—over the last eight years. It's a $105 million spanking, $80 million of which will go into a restitution fund for consumers. If "cramming" doesn't sound familiar to you, just think of the ringtones you could buy with a text message and have charged to your phone bill a few years ago; those are among the chief culprits. (And yes, the FTC and FCC have dealt with some of the third-party companies exploiting the loophole in SMS purchasing that caused the trouble.)

FTC chairwoman Edith Ramirez spoke first. But Wheeler was harsher than his colleagues, dinging AT&T for "deceptively and unfairly billing for unauthorized third-party charges" and saying that he looked forward to working more closely with the FTC. "This is not the last time that we will act jointly," he said. "There is no daylight between us."

Oddly, the payout is characterized as a "settlement," not a fine, presumably meaning AT&T admits no wrongdoing in exchange for the $105 million. The panel assured reporters the outcome was good for consumers. "AT&T has agreed to change their business practices," Wheeler said.

What will they do next? Well, probably more of the same. "There are a lot of other carriers involved in this as well," Wheeler said. "It's $20 million [a year] across all of the wireless providers in America, not just AT&T, and stay tuned about those other wireless providers."

In an emailed statement, AT&T spokesman Marty Richter said that the company had discontinued the premium SMS service that allowed customers to make the disputed purchases. AT&T is stressing the all-the-other-kids-did-it line, which, in fairness, appears to be true. "In the past, our wireless customers could purchase services like ringtones from other companies using Premium Short Messaging Services (PSMS) and we would put those charges on their bills," Richter wrote. "Other wireless carriers did the same."

The FCC has been taking a harder line with telecommunications companies in the recent past. Rather than rubber-stamp the DirecTV/AT&T or Comcast/Time Warner mergers, the agency is demanding copies of the carriage agreements the two cable operators have with content producers like 21st Century Fox, Viacom and Discovery. 

Wheeler has been subject to some serious criticism in the recent past about his own perceived conflicts of interest. He's addressed those concerns in Q&A sessions, but today's session gives us a clearer idea of how and whether he's willing to prove to the public that he's worthy of their trust.