The US Federal Communications Commission (FCC) plans to land AT&T, the second largest operator in the US, with a $100 million penalty for misleading its subscribers about unlimited data plans.

The regulator alleges that the operator throttled the data speeds of subscribers and did not inform them that they could experience lower speeds than advertised.

AT&T started to offer unlimited plans back in 2007 and although it no longer offers such packages (it stopped in 2010) it allows existing subscribers to continue renewing their deals. In fact, it has sold “millions” of users new contracts for packages still labelled as unlimited, said the FCC.

In 2011, AT&T implemented a “maximum bit rate” policy and capped the maximum data speeds for unlimited users after they used a set amount of data within a billing cycle. The capped speeds were much slower than the normal network speeds AT&T advertised and significantly impeded its customers from accessing the Internet or using apps for the remainder of the billing cycle, said the regulator.

“Consumers deserve to get what they pay for,” said FCC chairman Tom Wheeler (pictured). “Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure.”

The operator is being charged under the FCC’s 2010 Open Internet Transparency Rule because it falsely labelled plans as unlimited and by failing to spell out to subscribers the maximum speed they would receive under its maximum bit rate policy.

For its part, AT&T accepts that it slowed data speeds for some subscribers on unlimited plans but a spokesman told The Wall Street Journal that the FCC previously backed the practice as acceptable. He also pointed to a disclosure on the AT&T website to prove the operator had been straightforward about its policy with subscribers.  AT&T plans to fight the allegations.

The operator’s position was supported by a dissenting opinion from one of the FCC’s five commissioners, Ajit Pai, a Republican who favours less regulatory intervention. “In the end, this case is really just a regulatory bait and switch. The flexibility the agency promised is being replaced by previously unknown and arbitrarily selected obligations. A once-approved network management practice is now out of favour and carries with it a $100 million penalty,” he fumed.

In a similar incident last year, the FCC last year challenged Verizon Wireless, the largest operator in the US, about throttling speed for subscribers on unlimited data plans. The operator defended its position as justifiable network management but was eventually forced to drop its practice of reducing data speeds for certain users in busy areas at peak times.