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$48 million seems like a slap on the wrist. T-Mobile made $32 billion in revenue in 2015 and just posted $479 million in profit. I wish I could feel like thes

$48 million seems like a slap on the wrist. T-Mobile made $32 billion in revenue in 2015 and just posted $479 million in profit. I wish I could feel like these fines actually acted as a deterrent.

praxulus 10y ago
Comparing the fine to total revenue and total profit is completely meaningless. What's relevant is how much they were saving in infrastructure costs by throttling those users. E.g. If they saved less than $24 million and had a >50% chance of getting caught, this works perfectly well as a deterrent no matter how large there overall profits were.
- davesque 10y ago
  Very good point. I just hope that the penalties considerably outweigh the risks.
- roymurdock 10y ago
  Cost is only one side of the equation. You also have to factor in the approximate value of the revenue generated by subscribers who were misled into believing that they had unlimited, unthrottled data, and who might have selected a competitor's service had the secret quota been honestly advertised.
  - MichaelBurge 10y ago
    Maybe, but the revenue has to have the price of its competitor subtracted, and the remainder weighted by the percentage of the service that they would use the 'unlimited' data for. So if choice 1 is $70/month for 25GB and $10 for 10GB afterward, and choice 2 is $90/month for 'unlimited' with an expectation to use 45GB, then both choices are equivalent. If the choice 2 then reduces the utility of the service by 50% past 25GB, then the customer has paid $20 for $10 of utility, and so the loss should be marked as $10. And if you buy choice 2 because it says 'unlimited', but you only use 5GB, then you never actually lost anything due to their deceit. I'd expect a similar calculation to hold up here: For each customer, sum up the number of throttled hours over the number of total hours to get the "throttling percentage". Also, assign each zip code a 'statistical competitor' by combining all competing services using some model. Then multiply the throttling percentage by the difference in price multiplied by the percentage of utility lost.
M_Grey 10y ago
The best treatment that lobbying money can buy.
- DannyBee 10y ago
  Not really. The supreme court has repeatedly said there are constitutional limits on punitive damage. In fact, for federal common law, it's about a 1:1 ratio, and for everything else, it's supposed to be "single digit multipliers". See exxon shipping v. baker and following cases. So, of course, agencies keep their fines within precedent because they actually want to be able to defend them in court. Ignorance is bliss though, blame lobbying. (since some have privately asked: no, i think this kind of restriction is pretty much BS, but it is the law of the land, and it is one of the main reasons agency fines are so low in cases like this. The amount t-mobile gained by throttling unlimited data is pretty small, at least if their percent of users going over x amount of data numbers are correct)
  - M_Grey 10y ago
    Ignorance is bliss though, blame lobbying. Because disagreements must be rooted in ignorance (sarcasm). How pointlessly rude.
chillingeffect 10y ago
Now I hate TMobile for throttling me so many times over the last few years, BUT: That's more than a slap on the wrist. It's 10% of their profit. How would you like to be fined 10% of your leftover money after your bills are paid? That's a decent chunk of skin. I actually believe it's a pretty fair punishment. I believe comparing it to revenue is irrelevant because it's an extremely capital-intensive process. If it takes 32B to make 0.479B, their margin is about 1/64th!
- davesque 10y ago
  I see your point. I wonder, though, which fundamental the fine should be compared to. I'm not sure if profit is really the right one. Of course I'm no expert.
  - CaveTech 10y ago
    Increase your costs so you make very little "profit" on paper. Shareholders wouldn't like it, but your fines would be close to 0. Profit is a terrible metric, it measures the efficiency of your organization.
  - diydsp 10y ago
    The fine should be compared to the damages experienced by the victims. The comparison to fundamentals is really a red herring. PP probably only brought it up in response to the poster before them. It may not be easy to compute the damages, but I agree with the point above: the fine is NOT a slap on the wrist. It represents a sizeable chunk of the company's profit.
Analemma_ 10y ago
This is kind of an awkward question, but what was the actual harm to customers here? The throttling only affected a small percentage of users downloading much more data than the norm; and I doubt they would've gone to another provider if T-Mobile had clearly spelled out what was happening: they would've been charged hundreds of dollars do this on VZN/ATT/Sprint instead. It was deceptive advertising and it should be punished,but we're not talking about banks incorrectly foreclosing on homes here. I don't know if crushingly huge punitive fines are appropriate.

$48 million seems like a slap on the wrist. T-Mobile made $32 billion in revenue in 2015 and just posted $479 million in profit. I wish I could feel like these fines actually acted as a deterrent.

praxulus 10y ago

Comparing the fine to total revenue and total profit is completely meaningless. What's relevant is how much they were saving in infrastructure costs by throttling those users. E.g. If they saved less than $24 million and had a >50% chance of getting caught, this works perfectly well as a deterrent no matter how large there overall profits were.

davesque 10y ago
Very good point. I just hope that the penalties considerably outweigh the risks.
roymurdock 10y ago
Cost is only one side of the equation. You also have to factor in the approximate value of the revenue generated by subscribers who were misled into believing that they had unlimited, unthrottled data, and who might have selected a competitor's service had the secret quota been honestly advertised.
- MichaelBurge 10y ago
  Maybe, but the revenue has to have the price of its competitor subtracted, and the remainder weighted by the percentage of the service that they would use the 'unlimited' data for. So if choice 1 is $70/month for 25GB and $10 for 10GB afterward, and choice 2 is $90/month for 'unlimited' with an expectation to use 45GB, then both choices are equivalent. If the choice 2 then reduces the utility of the service by 50% past 25GB, then the customer has paid $20 for $10 of utility, and so the loss should be marked as $10. And if you buy choice 2 because it says 'unlimited', but you only use 5GB, then you never actually lost anything due to their deceit. I'd expect a similar calculation to hold up here: For each customer, sum up the number of throttled hours over the number of total hours to get the "throttling percentage". Also, assign each zip code a 'statistical competitor' by combining all competing services using some model. Then multiply the throttling percentage by the difference in price multiplied by the percentage of utility lost.

M_Grey 10y ago

The best treatment that lobbying money can buy.

DannyBee 10y ago
Not really. The supreme court has repeatedly said there are constitutional limits on punitive damage. In fact, for federal common law, it's about a 1:1 ratio, and for everything else, it's supposed to be "single digit multipliers". See exxon shipping v. baker and following cases. So, of course, agencies keep their fines within precedent because they actually want to be able to defend them in court. Ignorance is bliss though, blame lobbying. (since some have privately asked: no, i think this kind of restriction is pretty much BS, but it is the law of the land, and it is one of the main reasons agency fines are so low in cases like this. The amount t-mobile gained by throttling unlimited data is pretty small, at least if their percent of users going over x amount of data numbers are correct)
- M_Grey 10y ago
  Ignorance is bliss though, blame lobbying. Because disagreements must be rooted in ignorance (sarcasm). How pointlessly rude.

chillingeffect 10y ago

Now I hate TMobile for throttling me so many times over the last few years, BUT: That's more than a slap on the wrist. It's 10% of their profit. How would you like to be fined 10% of your leftover money after your bills are paid? That's a decent chunk of skin. I actually believe it's a pretty fair punishment. I believe comparing it to revenue is irrelevant because it's an extremely capital-intensive process. If it takes 32B to make 0.479B, their margin is about 1/64th!

davesque 10y ago
I see your point. I wonder, though, which fundamental the fine should be compared to. I'm not sure if profit is really the right one. Of course I'm no expert.
- CaveTech 10y ago
  Increase your costs so you make very little "profit" on paper. Shareholders wouldn't like it, but your fines would be close to 0. Profit is a terrible metric, it measures the efficiency of your organization.
- diydsp 10y ago
  The fine should be compared to the damages experienced by the victims. The comparison to fundamentals is really a red herring. PP probably only brought it up in response to the poster before them. It may not be easy to compute the damages, but I agree with the point above: the fine is NOT a slap on the wrist. It represents a sizeable chunk of the company's profit.

Analemma_ 10y ago

This is kind of an awkward question, but what was the actual harm to customers here? The throttling only affected a small percentage of users downloading much more data than the norm; and I doubt they would've gone to another provider if T-Mobile had clearly spelled out what was happening: they would've been charged hundreds of dollars do this on VZN/ATT/Sprint instead. It was deceptive advertising and it should be punished,but we're not talking about banks incorrectly foreclosing on homes here. I don't know if crushingly huge punitive fines are appropriate.