WASHINGTON (Reuters) - The U.S. government filed a lawsuit against AT&T Inc (>> AT&T Inc.) on Tuesday, alleging the No. 2 U.S. wireless carrier sold consumers unlimited data plans but would reduce their Internet speeds once they exceeded a certain amount of data.

The Federal Trade Commission said this throttling of Internet feeds was deceptive and that in some cases data speeds were slowed by nearly 90 percent.

FTC Chairwoman Edith Ramirez said that AT&T wanted to retain longtime customers and so allowed them to buy unlimited data plans, in some cases after new customers were no longer offered unlimited plans. Then they unilaterally changed the terms, she said.

"They stopped providing the service that customers understood they had purchased when they entered into their contract," she said. "Customers would be subject to an early termination fee if they wanted to get out of their existing contract."

AT&T called the allegations "baseless" and said the practice was needed to manage network resources.

"We have been completely transparent with customers since the very beginning," said Wayne Watts, AT&T's general counsel. "This programme has affected only about 3 percent of our customers, and before any customer is affected, they are also notified by text message."

More than 3.5 million customers with legacy unlimited data plans had their Internet speeds slowed more than 25 million times by AT&T's practice, which began in October 2011, the FTC said.

AT&T says on its support website that people with certain plans can experience data slowdowns once they exceed certain limits. Customers with a 3G smartphone will experience slowdowns after using 3 gigabytes of data in a month, while those with 4G LTE smartphones can use 5 gigabytes before hitting potential slowdowns.

Those who dislike the throttling can use Wi-Fi or switch to a different plan, AT&T says on its website.

AT&T shares slipped briefly on the news but rebounded to close up 0.6 percent at $34.33 on the New York Stock Exchange.

Federal Communications Commission Chairman Tom Wheeler has said that his agency was troubled that some carriers singled out specific customers for throttling.

The FCC is reviewing wireless carriers' data management practices after Verizon (>> Verizon Communications Inc.) in July announced that the top 5 percent of high-speed data users on its older unlimited data plans might experience slower speeds starting in October.

Verizon, the largest U.S. wireless provider, ultimately scrapped the plan for the higher-speed 4G network, though the policy is in effect for unlimited subscribers on the 3G network.

Sprint (>> Sprint Corp) and T-Mobile US (>> T-Mobile Us Inc) continue to offer unlimited data plans.

The case in the U.S. District Court for the Northern District of California is Federal Trade Commission v. AT&T Mobility, LLC.

(Reporting by Diane Bartz; Editing by Ros Krasny, Alan Crosby and Phil Berlowitz)

By Diane Bartz