AT&T Lawsuit Over Data Charges Shows Need for Customer Awareness

May 24, 2011— -- If you're an iPhone owner on a limited data plan, keeping track of your monthly usage can be a tricky task -- one extra email here, an impulsive app purchase there, and you could find yourself facing an unwanted overage fee.

Now, a lawsuit filed by an iPhone owner alleges that AT&T makes monitoring data usage more difficult by not only overbilling its customers for data transactions, but also charging for so-called "phantom" traffic -- actions the customer did not initiate.

The lawsuit, filed by AT&T customer Patrick Hendricks in the Northern District of California and seeking class action status, accuses AT&T of breach of contract and fraud for systematically overcharging for data usage.

"AT&T's billing system for iPhone and iPad data transactions is like a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car's tank," the complaint says, attempting to represent all U.S. AT&T customers with a limited data plan for Apple's iPhone or iPad.

Barry Davis, an attorney with Thornton, Davis & Fein, P.A. in Miami, the firm representing Hendricks, said the suit was filed after an independent computer engineer verified the overcharge claims made by AT&T customers.

The engineer spent two months testing about a dozen different smartphones and found that AT&T iPhones and iPads consistently overstated data usage and billed for "phantom data traffic," Davis said.

Data Charges Can Be Incurred When Applications Update in the Background, AT&T Says

On average, the devices overstated usage by 7 to 14 percent but, in some cases, he said the overage was as high as 300 percent. When the engineer left the phones completely untouched for 10 days, Davis said AT&T billed the phone for 35 transactions.

"It was nothing he requested," Davis said, adding that the engineer did not download any applications beyond the ones that came with the phone and disabled all push notifications, email programs and location services.

Davis said AT&T has until later this summer to submit a formal reply, but in a statement the company refuted the lawsuit's allegations.

"Any claim that we overbill our mobile data customers is absolutely false," said Mark Siegel, an AT&T spokesman. "We properly charge for all data that our customers send and receive."

As referenced in the company's wireless customer agreement, AT&T said that data charges on smartphones apply not just to customer-initiated activities (like emailing, downloading applications, Web browsing, and music and video streaming) but also background activities related to software updates or diagnostics.

For example, even if a customer doesn't open the calendar application on a smartphone, the customer could still be charged for data usage when the calendar automatically updates. The same billing rules apply for many other applications, like those for weather and sports.

As for the so-called "phantom" charges, AT&T said it records data activity nightly to create a record of each customer's bill in its system. The action may appear on a monthly statement as a mysterious late night charge, but the company said that's because time stamp corresponds with when the device connected with the network, not when the customer sent or received data.