Is AT&T Systematically Overcharging iPhone and iPad Users?

Retained by plaintiff Patrick Hendricks, a representative from an independent consulting firm visited an AT&T store, purchased a brand new iPhone, and then disabled all location services and push notifications. All of the applications on the new iPhone were closed, no email account was configured with the device, and it sat untouched -- the plaintiff claims -- for ten days. "During this 10-day period, AT&T billed the test account for 35 data transactions totaling 2,292 KB of usage," Courthouse News Service reported. "This is like the rigged gas pump charging you when you never even pulled your car into the station."

The so-called phantom data traffic charges are just one component of a new federal class action lawsuit that AT&T Mobility is faced with concerning the company's iPhone and iPad services. The other: systematically overbilling for data usage. The independent consulting firm spent two months studying AT&T's billing practices and concluded that the company regularly overstates web server traffic by somewhere between seven and 14 percent, and sometimes overstates data usage by as much as 300 percent. "If an iPhone user downloaded a 50KB website for example, an AT&T bill might overstate the traffic as 53.5KB," Electronista explained. "The billed usage would potentially go as high as 150KB, the suit says."

"Transparent and accurate billing is a top priority for AT&T," an AT&T representative told MacNN in response to the lawsuit. "In fact, we've created tools that let our customers check their voice and data usage at any time during their billing cycle to help eliminate bill surprises. We have only recently learned of the complaint, but I can tell you that we intend to defend ourselves vigorously."

Whether accurate billing is a top priority, as AT&T claims, or not, this wouldn't be the first time that the company has overcharged its users. In mid-2005, AT&T acknowledged that it had overcharged tens of thousands of customers in Texas by more than $800,000 since January of the previous year, according to a story in the Austin Business Journal.

If AT&T is overcharging customers at the margins that the new lawsuit suggests, it wouldn't mean much for individual users unless they typically use an amount of data that puts them near their monthly allowance. Many early iPhone and iPad users are still allowed an unlimited amount of data usage per month, an option that was offered when both devices were first introduced. The company has since switched to capped plans; iPhone users on the new system are charged overage fees once they exceed either 200MB or 2GB of data transmission for the month.

Pat is one customer that is affected by unfair data charges address by the class action lawsuit, which accuses AT&T of unjust enrichment, breach of contract, unfair and fraudulent business practices, unfair competition, and breaking the federal Communications Act. A reader of Stop the Cap!, Pat sent the website a note this past September detailing how she had been overcharged $45 on her August bill after her family exceeded their 200MB usage allowance. "At around 2AM most mornings, our phones regularly show usage of around 5-10MB each even though they are being charged and are not used by anyone in the family," Pat wrote. "At first my husband thought an application on the phone was automatically exchanging data so we tried switching off 3G access and relied exclusively on Wi-Fi access, to no avail."

Forums going back to the introduction of AT&Ts capped system are filled with similar complaints. Many, including Pat, have been told by company representatives that the easiest way to avoid these frustrating charges it to upgrade from the 200MB/month plan to one that allows for 2GB of data usage. Are the mysterious charges just a way to get a fatter bill out to more customers every month?

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Nicholas Jackson is a former associate editor at The Atlantic.

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