Verizon’s California data throttling offers ethical lessons for companies

Verizon’s California data throttling offers ethical lessons for companies
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After the Federal Communication Commission (FCC) repealed its Obama-era net neutrality order, many Americans worried that internet service providers would abuse their newfound market freedom to throttle data speeds and squeeze more money out of their customers. This fear reached a fever pitch with recent news that Verizon slowed the data speeds of the Santa Clara County Fire Department and significantly impacted emergency services during the largest wildfire in California’s history. This data throttling occurred seemingly to coerce the fire department to upgrade to a more expensive data package.

Now, the Federal Trade Commission (FTC) is being asked to determine whether Verizon engaged in “unfair or deceptive practices” in violation of federal law. Did Verizon break the law? What can other internet service providers (ISPs) learn from this?

Did Verizon act illegally?

Those nervous about the FCC’s about-face on net neutrality worry this might be the start of a disturbing trend of large ISPs exploiting data plan customers for financial gain. Although the FTC doesn’t have legal authority to issue a regulation specific to data throttling, it does have the power to bring legal action against a company acting unfairly or deceptively — such as disclosing terms of service that are inaccurate or incomplete. Communications between Verizon and the Santa Clara County Fire Department (SCCFD), made public in a legal declaration by the SCCFD fire chief, shed some light on what Verizon disclosed to the department about its data plans.

Whether Verizon actually committed an unfair or deceptive practice in violation of the law remains unclear, as does the FTC’s interest in investigating Verizon’s behavior. What is clear is that the FTC response likely will set the tone for ISP conduct in the post-net neutrality marketplace.

Did Verizon act ethically?

While the legal and political ramifications of Verizon’s conduct are being sorted out, the ethical implications are much clearer. From an ethical perspective, companies must provide enough information about their products and services so that potential customers can make an informed choice about whether to purchase. If the SCCFD received that level of information from Verizon and understood the terms of service, then it was able to exercise meaningfully its freedom of choice. However, the terms of data plans aren’t always clear, complete or comprehensible. When this is the case, the purchaser doesn’t have the information to exercise freedom of choice and the company cannot ethically make the sale.

Of course, Verizon’s conduct during the course of the Mendocino Complex Fire also must be examined to see if it passes ethical muster. According to the SCCFD fire chief’s declaration, after Verizon slowed data speeds used by an emergency command and control apparatus to the point of rendering it unusable, the department requested immediate removal of the data throttling and explained to Verizon the importance of internet speed in providing for public and first-responder safety. The fire chief’s claims that Verizon wanted the department to switch to a costlier data plan are supported by email communications and Verizon isn’t refuting these claims.  

Although Verizon insists that its conduct was the result of a customer support mistake, its conduct effectively coerced the SCCFD into making a purchasing decision. Such coercion is unethical.

What could have been done differently?

There are many lessons that can be learned from this instance.

ISPs should clearly and prominently disclose data caps and speed limitations in their terms of service. For example, what’s the threshold for data speeds to be slowed? How slow will data speeds be once the threshold is surpassed? ISPs can minimize legal risk and avoid reputational damage by clearly and accurately disclosing terms of service in a way that allows the customer to make a truly educated purchase.

When dealing specifically with accounts of emergency service organizations, ISPs should flag these accounts and proactively remove any speed caps and give priority access during reasonably knowable emergencies, and emergencies that are communicated directly to them. Other industries do this sort of thing. For years, financial institutions have relaxed lending and deposit policies to help businesses and consumers affected by emergencies. National retailers such as Target and Walmart have disaster preparedness plans to ensure employees are safe and their stores are open and stocked with critical items as quickly as possible when a natural disaster strikes.

However, it is important to recognize that the onus isn’t entirely on ISPs in these situations. Public emergency service organizations need to ensure they understand their internet and data transfer speed needs, particularly in times of emergency. They need to then choose an appropriate plan that meets those needs and remain accountable for their choice.

In emergency situations, companies such as Verizon may not have any clear, legal obligations to assist first-responders, but they do have an ethical responsibility to provide aid, especially when human lives are at stake. ISPs must begin to understand that they can do well by doing good.

Professor Robert Föehl is the executive in residence of business law and ethics at Ohio University for the Online Master of Business Administration program. Prior to joining Ohio University, he served as Target’s first director of corporate compliance and ethics, and has 17 years of corporate law experience, including four years as the chief legal officer for ACA International.