AT&T to fork out less than two days' profit in bogus bill charge flap
That's $105 million to you and me – or 41.1 hours of operating income for telco giant
AT&T has been ordered to cough up $105m by US trade watchdog the FTC after allowing miscreants to whack bogus charges on Americans' cellphone bills.
The commission said the telco giant would be on the hook for $80m in refunds to customers, and an additional $25m in fines and penalties to settle claims that it allowed third parties to unfairly "cram" fees on subscribers' accounts.
AT&T recorded a $5.6bn operating income in its most recent financial quarter: that boils down to about $42,500 a minute, which means the $105m (£65m) bill will be paid off using just over 41 hours of operating income. (The telco also raked in $32.6bn in revenues in that three-month period.)
According to the FTC, AT&T allowed bills to be inflated by bogus charges from third parties through subscriptions people ended up signed up for with little or no notification.
The FTC says the practice, known as "cramming", is lucrative to both the advertisers and the telco: AT&T pocketed between 35 and 40 per cent of revenues on charges that users would often overlook on their monthly statements. The FTC said the company earned $108m in 2012, and $161m in 2013, from said charges, many of which were unauthorized [PDF].
The subscriptions are often disguised as one-time offers for services such as daily horoscope updates and ringtone downloads that hide the monthly fees they carry.
"I am very pleased that this settlement will put tens of millions of dollars back in the pockets of consumers harmed by AT&T’s cramming of its mobile customers,” FTC chairwoman Edith Ramirez said in a statement.
"This case underscores the important fact that basic consumer protections – including that consumers should not be billed for charges they did not authorize - are fully applicable in the mobile environment."
AT&T is not the first carrier to be hit by regulators for facilitating cramming operations. Earlier this year the commission filed a complaint against T-Mobile US for the same practice.
For its part, AT&T said that it has since cut ties with the shady operators responsible for the cramming schemes.
"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. Other wireless carriers did the same," a company spokesperson told The Register.
"While we had rigorous protections in place to guard consumers against unauthorized billing from these companies, last year we discontinued third-party billing for PSMS services." ®