How dumb do you think your customers are, AT&T?

By Mark Sullivan

There’s a lot of money riding on whether wireless carriers and phone makers can make consumers understand the next generation of wireless service, 5G, and why they should want to buy into it. Many Americans are just now hearing of the new, faster service, which will deliver blazing speeds with very little latency. Meanwhile, the carriers are spending millions building the networks that will support the new service, and phone makers are working on the first wave of smartphones that will support it.

That’s why it’s amazing that one of the industry’s biggest players is intentionally trying to confuse the marketplace about what 5G is, and when it will be arriving in your neighborhood. As it’s done before, AT&T is getting ahead of a wireless transition, and will begin labeling some of its 4G phones as 5G models. The company says that it’s justified in doing so because it’ll use the brand name “5G Evolution,” meaning that the service is “evolving” toward real 5G.

Just imagine some other company doing that for some other product. Would it be fair to consumers and the industry if Samsung decided to sell a cheap 1080p TV at a high price by slapping an “8K Evolution” label on it? After all, 1080p was part of the “evolution” to 8K. Of course not.

Here’s how AT&T spokesman Michael Balmoris explains his company’s justification for labeling a 4G phone 5G: “We’ve been hard at work laying the foundation for 5G with technologies like 5G Evolution, now available in over 400 markets,” he said in an emailed statement. “To let customers know when they’re connecting to a 5G Evolution tower, we’re rolling out a ‘5G E’ indicator initially on a handful of 5G Evolution capable devices.”

According to numbers provided by AT&T, the 5G E service is “up to” twice as fast as regular old AT&T LTE service. I don’t doubt this, but it’s still not 5G. To my knowledge, AT&T is not yet using its 5G E marketing term in its advertising to sell phones or tempt people to upgrade to faux 5G, but if history is any guide, it will get around to doing that, too.

At CES in 2011, AT&T began to label its 3G HSPA+ service as “4G” when the service did not fit either the speed or technical requirements of the new standard. Its HSPA+ network was built on GSM technology, which was designed to handle voice communications and only later retrofitted to handle the mobile data boom. And yet, just months earlier, AT&T had sued T-Mobile when the smaller carrier began to slap the 4G label on its own GSM-based HSPA+ service.

Flash-forward to the current wireless generation transition. AT&T appears to want to make damned sure it’s first in line to abuse the definition of the new standard. Verizon ran a full-page ad in the Wall Street Journal, New York Times, Washington Post, and USA Today to call out AT&T’s 5G label. “The potential for 5G is awesome, but the potential to overhype and underdeliver on the 5G promise is a temptation that the wireless industry must resist,” the ad read.

T-Mobile’s response was a lighter and funnier:

If AT&T is giving any second thoughts to its move, it isn’t showing them. Speaking at CES on Wednesday, AT&T Communications CEO John Donovan said it makes him “very happy” that AT&T’s competitors are calling foul on his company’s premature use of the 5G label and that the whole affair makes him “smile.”

Where are the regulators?

You might consider AT&T’s use of “5G E” deceptive advertising and expect regulators to pounce. But the company never suffered any consequences for its mislabeling in 2011, and there are no signs it will be punished for doing it again. (Of course, the U.S. federal government happens to be shut down at the moment: The Federal Communications Commission [FCC] and the Federal Trade Commission [FTC] are closed, and neither responded to requests for comment.)

A Washington source close to the FCC told me it’s possible that the agency is now powerless to act because it gave up its jurisdiction over broadband services when it repealed the Open Internet Order (containing network neutrality rules) in late 2017. Chairman Ajit Pai’s FCC systematically ignored public comment and capriciously moved to reclassify broadband from a “telecommunications” service under Title II of the Telecommunications Act to an “information service” under Title I, thus ceding its authority to regulate the service to the FTC.

The FCC traditionally shared jurisdiction with the FTC on telecom regulation issues and often worked together to address breaches of the law. The FCC offered the telecom expertise, and the FTC offered the enforcement power. Now that Pai has taken taken the FCC out of the game, it’s all on the FTC.

In the AT&T matter, the FTC would most likely rely on Section 5 of the Federal Trade Commission Act. The law says marketing and advertising “representation, omission, or practice” is deceptive if it’s likely to “mislead consumers and affect consumers’ behavior or decisions about the product or service,” and if the injury it causes, or is likely to cause, is “substantial, not outweighed by other benefits, and not reasonably avoidable.”

Complaints about deceptive wireless service claims have also ended up in the courts. In 2015, a false advertising class action suit was brought against Cricket Wireless, whose parent company, Leap Wireless, AT&T bought in 2013. The suit claimed that Cricket misleadingly marketed its phones as “4G/LTE” and assured customers that the devices could receive a 4G/LTE signal. Cricket actually lacked the capability of delivering that kind of signal to the majority of its customers. After the case was transferred to a federal court, the AT&T lawyers defending the case decided to settle with members of the class action for an undisclosed amount.

When wireless carriers fudge the facts, there’s a temptation to say, “Well, that’s how it’s always been,” and leave it at that. But regulators having let it go back in 2010 and 2011 doesn’t justify ignoring new and misleading claims.

As for AT&T, nobody should be shocked to find it at the center of this situation. The company has abused the trust of the public when it served its purposes on many occasions in the past. On top of that, it tends to rely on lawsuits to settle its problems, and on its powerful (and almost always successful) lobby at state houses and in Washington to stifle oversight and limit competition. At a time when honesty itself is under attack as a social and business norm, AT&T has associated itself with people who don’t value honesty at all. Recall, for example, that the company retained the services of Donald Trump’s personal attorney, Michael Cohen–who has now been formally charged with lying to Congress–to help it understand Trump’s Washington. (The company did admit that that decision was a mistake.)

AT&T employs a lot of people, and this is no jab at the rank and file who dig the trenches and install the services. But AT&T’s leadership, Donovan included, should realize that sometimes winning at all costs isn’t winning at all.

 

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