• by Wendy Davis  @wendyndavis, March 3, 2008

AT&T has agreed to pay $2.5 million to the state of Florida and to provide rebates up to an estimated $10 million to resolve an investigation by the state Attorney General into deceptive Web ads for "free" ringtones.

Florida Attorney General Bill McCollum said his office continues to investigate four other wireless companies--Verizon, T-Mobile, Alltel and Sprint Nextel--and expects them to agree to similar terms. "If AT&T's doing it, it's very hard for the other four not to follow suit."

The AT&T deal, announced Friday, also calls on the telecom company to police ads for mobile content and take additional steps to ensure that consumers understand subscription terms before signing up for ringtones and other services.

The agreement, an "assurance of voluntary compliance," grows out of a broad investigation by McCollum's office into misleading Web ads for ringtones and other services. In the case of ringtones, the Florida authorities allege that companies trick people into providing their cell numbers in exchange for supposedly free mobile content, but then start billing them monthly fees for subscription services.

So far, the Florida authorities have also reached a deal with the ad network AzoogleAds, but the AT&T agreement marks the first time a wireless carrier has agreed to pay a fine or give rebates for the alleged practice.

McCollum also said his office is probing Web ads more broadly. "There's a lot of other false and misleading advertising on the Internet that's not directed to the cell," he said.

As part of the agreement, AT&T is expected to solicit additional opt-in consent before enrolling people in these types of programs. The company, which did not admit to liability as part of the agreement, has also promised to specify charges clearly on phone bills and to make it easy for customers to cancel services.

While McCollum estimates that rebates could run as high as $10 million, an AT&T spokesperson said the company was anticipating much lower numbers because it already had refunded many customers' money. "We believe we've already taken care of the vast majority of customers that were affected and that the number of customers that will seek a refund will be low," the spokesperson said.

The company also issued a statement saying it had "taken aggressive action to put industry-leading safeguards in place to protect our customers from unauthorized charges from third parties."