AT&T Mobility LLC v. Concepcion: How Class Actions Got Castrated by Contracts

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Have you ever looked at the terms and conditions of your phone contract?  I know I didn’t before law school.  What you might not have realized, though, is that you may have signed away your ability to sue the phone company.  Even more so, when a company has practiced deceptively across all of their customers, your chance to sue en mass may also have been signed away.  It all stems from a case called AT&T v. Concepcion.

The facts of the case are that the Concepcions saw AT&T offering a deal for a free phone when you signed up with them.  They signed up, but were surprised to find out that they still owed $30 in sales tax based on the phone’s value.  They found out that others had encountered the same issue across the country.  For one person to sue a company for $30 is foolish as they will spend exponentially more.  But in a class action suit, the cost is spread among the people and the accumulated $30 of thousands of people come make the case worthwhile.  The bigger incentive of class actions is to keep companies in check and keep them from shady practices.

Unfortunately, AT&T had written a mandatory arbitration clause into the contract.  They believed that each person had to go to arbitration individually, which would be pointless for each person.  In a controversial decision, the Supreme Court agreed with AT&T that the clause was binding and held that such clauses were enforceable, regardless of class actions.

While the ability to come to an agreement via contract is essential to a free market, the class action suit serves as a necessary check to unscrupulous businesses and harmful tactics.  Even worse is that the contracts are usually non-negotiable.  While the Court says you can always go elsewhere, this ruling all but guarantees that every phone company will have an arbitration clause.

An interesting footnote to this case is the new attempt by companies to stretch this holding to your likes on Facebook and follows on Instagram.  As the New York Times discusses, large food companies are adding legal terms to its pages in the hopes of having you agree to giving up your right to sue.  It is a fascinating side effect of $30 bill.

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What a Fast Lane on the Internet means for the average consumer.

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Fresh off a defeat in the appellate courts, the Federal Communications Commission decided to tweak its new rules by allowing Internet Service Providers to create fast lanes for web traffic.  Essentially this means that your regular ISP’s will be able to charge companies like Google, Netflix, and Disney for faster service to provide web content.  According to the New York Times, would likely raise prices for streaming video or any other higher volume websites.  While these companies can easily foot the bill for faster speeds, it is unclear to what extent these companies will pass the costs along to the consumer.

Charging more for companies that seem to use more bandwidth makes sense on its face.  But when we dig deeper down, we can see that these new rules will forever change the internet as it exists today and leave loopholes that are rife for abuse.  The first problem is that ISP’s will be able to double bill for their services.  As a middle man, the ISP’s will be able to bill customers and websites for their services.  This might be fine if we had the internet infrastructure like the rest of the industrialized world, but unfortunately we still lag far behind on download/upload speeds and pricing.  Further more, those services can be billed at varying degrees for websites.  If the companies that own the sites are unable to pay for the faster web speed, their traffic (and thus ad revenue will suffer).  While it may be gradual at first, faster internet speeds will be a must for companies that want to survive online.  This will result in the second problem of these new rules: the stifling of innovation

A major part of the internet’s growth and the rise of tech and internet companies has been the ability for programmers, web designers, and entrepreneurs to innovate on the web.  With all companies paying the same price, smaller startups have been able to grow.  Facebook, Twitter, and other common institutes of the internet grew because of high traffic communities.  As ISP’s are able to favor one company over another, smaller startups will be unable to grow.  Their slow speeds will be a turnoff to consumers.

In a previous post, I talked about the conflict of interest of having a cable company also provide the necessary infrastructure for streaming video websites.  With the FCC’s capitulation on Net Neutrality, it would be surprising to see those streaming sites suffer more.  And if you don’t think that the ISP’s are not above playing shady business games and taking any steps to make a profit, ask them what they did with $200 billion of tax payer money.

The Need for Better Infrastructure

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What is corporate doublethink?

Corporate doublethink is the ability of corporations to hold two competing markets and business plans at the same time in public view.  The most obvious instance of this is the existence of cable companies that also provide internet services.  Cable companies like Comcast have been able to hold two separate, competing views in the public’s eye while in private working towards only one.  They have the ability to provide cable subscription services while also providing internet services.  For years, these services have coexisted with few overlapping interests.  Today, though, with the rise of Netflix, Hulu Plus, Amazon Prime, and countless streaming websites, Comcast and other cable companies are finding themselves promoting opposite interests.  More and more people today in younger generations are forsaking the costs of cable TV for the costs of internet.  With less advertisements and more control over what to watch, younger adults are turning away from traditional cable packages.  As sporting events are streamed online, the cable companies are finding that their internet services are cutting into the bottom line of their cable services.

How does this affect my internet?

Well, the cable companies have chosen Television.  With data capping, a refusal to update infrastructure, and attempts to charge both ends of the internet (users and websites) for data, Comcast and are cable companies are fighting tooth and nail against change.

Can’t I just go elsewhere?

Luckily, this stagnation on the part of cable companies has pushed for innovation by other companies.  Competition by Google fiber and AT&T Fios are pushing data speeds faster than ever before.  Unfortunately, the expansion is slow and rife with roadblocks from politicians and the companies themselves.  Because most companies own the existing cable infrastructure, new internet companies must have the capital and incentive to take on building new networks.

Why hasn’t the government stepped in yet?

While the amount of lobbying and ignorance in the government should answer this, you may be surprised to learn that the government did try to improve internet across the country by giving $2 billion dollars to cable and internet companies.  Unfortunately, the money was never used for infrastructure and no audit has been done to actually determine what happened to it.  Tax dollars at work!

In the end, folks, the internet is the “New World” of the 21st century.  The capabilities of what can be done on it are still being explored.  Business, exchanges, communications, entertainment, and the myriad of other uses for the internet must be improved for a 21st century economy.  Here is one simple fact that I’ll leave you with.  In 2013, you could get 500 megabytes per second for over $300 per month through Verizon.  In Hong Kong, you can get 500 mbps for around $25 per month.