The Federal Communications Commission said it plans to fine AT&T $100 million for capping the speed on data plans it advertised as "unlimited."
I have no insight into how AT&T is managed these days, But when I ran public relations for the company, we had constant battles with line management about the announcement of price increases and other customer-affecting moves.
We in public relations wanted to issue a news release explaining any increase; line management thought it was sufficient to mention it in mice-type legal ads.
Luckily, for most of my tenure at AT&T, there was another player in this mix -- the company's CEO, who could see further than the next quarter's earnings report. Unfortunately, times -- and CEOs -- change. One incident late in my career points this up.
AT&T's most profitable business -- consumer long distance service -- was in steep decline, thanks to increases in wireless usage, the dot.com bust, and a major competitor cooking its books to price below cost. The guys running the business were under incredible pressure.
So I was surprised when they reported a profit spike in one of their monthly reports halfway through the year, especially since it seemed to stem from a significant increase in operator-assisted calls. I asked what accounted for it and was told they had started charging an extra $10 if customers asked an operator to complete a call.
I said I was amazed that, in this day and age, so many people needed an operator to help to make a long distance call. Well, sometimes people's calls don't go through because they misdial to a non-existent number, I was told. If they call the operator for help, she connects the call but adds $9.99 to whatever the final bill is. (In those days, nearly all operators were women.)
“But surely she tells the customer there’s an extra fee involved,” I said. The guy at the overhead projector grew Little Orphan Annie eyes. “Well, yes,” he said. “But she doesn’t say how much unless asked.”
Our new CEO -- brought in from outside the industry -- sat quietly through the ensuing argument until someone mentioned that the revenue from the extra charge was baked into the unit’s profit forecast. “In that case,” he said, “change the policy on January 1. Next subject.”
Fifteen years and three CEOs later, the subject is data throttling, and the object under discussion is a $100 million fine. That's a lot of money, even for AT&T. But even if the company successfully challenges the fine, it will pale in comparison to the billions it saved by slowing down data usage on its "unlimited" plans. So in dollars and cents terms, this is probably a no-brainer for today's modern manager.
But in the long-run, it could be a disaster for the company's reputation.