T-Mobile USA failed to adequately disclose speed and data restrictions on its "unlimited data" plans and has agreed to pay a fine and provide some benefits to customers, the Federal Communications Commission said today.

Like other carriers, T-Mobile slows the speeds of its unlimited data customers after they've used a certain amount of data each month; when these customers connect to congested cell towers, they receive lower speeds than customers without unlimited data plans. The throttling is applied after customers use 26GB in a month.

"Under its 'Top 3 Percent Policy,' T-Mobile 'de-prioritizes' its 'heavy' data users during times of network contention or congestion," the FCC said in an announcement today. "This potentially deprived these users of the advertised speeds of their data plan. According to consumers, this policy rendered data services 'unusable' for many hours each day and substantially limited their access to data."

T-Mobile signed a consent decree in which it agreed to pay a $7.5 million fine to the US Treasury and provide some discounts and extra data for T-Mobile and MetroPCS customers. (MetroPCS is a T-Mobile subsidiary.)

From now on, T-Mobile will also have to provide clear and conspicuous disclosures about the speed and data limits of its unlimited data plans in all sale, advertising, and marketing materials. Alternatively, T-Mobile can comply by removing the word "unlimited" from the plans, or by no longer throttling unlimited data users. It seems likely that T-Mobile will take the first option of improving its disclosures—the FCC noted that T-Mobile already improved the disclosures a bit in June 2015.

The FCC alleged violations of the commission's Open Internet transparency rules, saying that "T-Mobile’s public disclosures about the de-prioritization policy prior to June 2015 were not sufficient to fully inform consumers about limitations imposed on the UDPs [unlimited data plans], because they did not identify the data usage threshold that would trigger application of the policy, did not explain how the policy could impact a de-prioritized customer’s ability to use their service, or discuss the data throughput speed reduction a de-prioritized customer could experience."

“Throttling”

For a couple of years, T-Mobile spokespeople have repeatedly asked Ars to stop using the word "throttling" to describe the company's practice of slowing certain customers' speeds, even though throttling is a commonly used term for speed reductions imposed by Internet service providers. In one e-mail earlier this month, a T-Mobile spokesperson insisted that our latest article's "use of the term 'throttling' in incorrect... This is prioritization, which every network operator does." T-Mobile also asked us to delete the "Dead Slow" image at the beginning of that previous article.

But as the FCC's order says, T-Mobile itself has abandoned its insistence that this is only "prioritization" in disclosures to consumers. Before June 2015, T-Mobile merely told consumers that their data speeds might be de-prioritized below those of other customers. The updated disclosures in June 2015 "state that affected customers 'will likely see significant reductions in data speeds, especially if they are engaged in data-intensive activities,'" the FCC said.

The new disclosures also tell unlimited data customers the actual amount of data they can use before being throttled, whereas previously T-Mobile merely said that the slowdowns "would be triggered when the customer used 'more data than what 97% of other customers use' based on historical use," the FCC said.

The FCC received hundreds of complaints from T-Mobile and MetroPCS customers. "These customers complained that they were not receiving 'unlimited' data as had been sold to them, that their data throughput speeds after de-prioritization caused their data service to be 'unusable' for many hours each day, that the de-prioritization policy led to them consuming 'half' of the data they wanted to use, or that they had gone to too much trouble changing plans from another carrier to switch again, even though they felt misled by T-Mobile," the FCC said. "In April 2015, a T-Mobile UDP customer complained of feeling 'stuck' with T-Mobile because they were still on a payment plan for their T-Mobile phone, despite 'paying $300 a month' for 4 lines of 'unlimited data,' yet feeling that T-Mobile wasn’t providing the service it advertised. One de-prioritized customer stated that the applications he likes to use to watch movies 'are now unusable' due to the slow speeds he experiences after being de-prioritized."

The consumer benefit program that T-Mobile agreed to will provide discounts of 20 percent (up to $20) off any in-stock accessory, and an additional 4GB of data. That isn't 4GB every month, however—it's just a one-time addition of 4GB, and it is only for unlimited data subscribers who also purchase data for another device such as a tablet. (The 4GB can be rolled over for customers in the T-Mobile "Data Stash" program, so it wouldn't have to be used the first month.) T-Mobile will notify eligible customers by December 15, and consumers can get more information at the T-Mobile and MetroPCS websites.

The benefits in this program are expected to total up to $35.5 million.

T-Mobile will also spend at least $5 million in low-income school districts to give students free devices such as tablets and free mobile broadband. If the consumer benefit program we previously mentioned ends up providing less than $35.5 million worth of benefits, T-Mobile will take the difference and add it to the low-income school program. The school program is expected to start in October 2017 and help up to 80,000 students over four years.

The FCC has also been trying to punish AT&T for misleading customers about unlimited data plans. The FCC proposed a $100 million fine in June 2015, but AT&T challenged the decision. AT&T and the FCC could come to some agreement similar to the one announced today with T-Mobile, or the FCC could issue a final ruling requiring AT&T to pay a fine. But if it comes to that, AT&T could try to reverse the penalty by taking it to the US Court of Appeals.