Thursday, October 14, 2010

The Verizon Wireless Data Rip Off—A Case Study

            For over three years, without unilateral amends by the company, or intervention by the FCC, Verizon Wireless, has profited handsomely when subscribers push a wrong button on their handsets and unintentionally access the Internet.  15 million subscribers initiated data sessions generating over $90 million in revenues for Verizon.  The revenue number is so high, because many handsets offer one button Internet access and even a few seconds of access generated a $1.99 fee as data users, lacking a monthly plan, trigger a per Megabyte fee regardless of whether only a few bytes got transmitted.  See Data Fee Mystery
            Okay we have an honest mistake, apparently easily made by lots of people texting in the dark and otherwise pushing the wrong number.  Verizon’s wireline venture typically provides a zero cost exit for misdialing.  For example, if you mistakenly end up at a dial a porn site, the meter does not start until after you are notified about charges for the call.  Verizon Wireless simply started the meter.
            What I find remarkable about this rip off is the “mystery” of how the charges rose to $90 million without either the company or the FCC doing something about it.  Might Verizon have grown to assume such revenues would contribute to “making its numbers”?  Might the FCC get all too easily persuaded that Verizon Wireless eventually would do the right thing?
            As a multi-decade observer of carriers and FCC behavior, I can readily attribute a cynical, but possible on point explanation to such cavalier attitudes.  So in the spirit of trying to make sense out of how this $90 million overcharge could continue for so long as an unsolvable “mystery,” I have a few rationales to suggest:
1)         FCC inaction
            The FCC has clear statutory authority (Truth in Billing laws) to investigate carrier billing anomalies and overcharges, regardless whether the carrier offers a telecommunications service, and information service, or both.  Similarly the FCC has statutory authority under Section 208 of the Communications Act to investigate complaints about carrier behavior.  Yet the Commission did nothing for three years even after having received ample notice, through consumer complaints, that unjustified data billing charges were accumulating. 
            I believe the FCC wants to serve the public interest, but often fears it cannot do the right thing if such action comes across to Congress and other stakeholders, like Verizon, as too aggressive.  Put another way without a forceful trigger the FCC cannot intervene and order refunds, or secure a Consent Decree to achieve the same outcome without the carrier’s acknowledgement of guilt. The trigger occurs when the Commission receives a sufficient number of consumer complaints, media inquiries, congressional letters and the like to outweigh carrier claims that they are “working on the problem.”  Until such time as a critical mass of complaints arrives, the Commission can defer to carrier claims that no problem exists, or that a minor billing anomaly will get fixed soon.
            Perhaps as well on a philosophical basis, the Commission is reticent to act when there are stakeholders that have framed every policy and regulatory issue in terms of whether the marketplace offers a better solution.  Applying that premise, the FCC should not intervene because consumers can vote with their feet and subscribe to another carrier that does not impose such false charges.  Alternatively, at least until so-called tort reform all but eliminates class action law suits, subscriber representatives can sue for collective refunds.
            The marketplace reliance rationale fails if all carriers offer similar handsets with Internet access buttons and similarly start the meter without providing subscribers notification that a charge will result if they stay online.  The rationale also suffers if the cost of litigation vastly exceeds the likely refund any single subscriber would win in litigation.
2)         Verizon Wireless’ Inaction
            I find it hard to believe that Verizon Wireless could have generated $90 million without ever asking why so many subscribers continuously triggered a $1.99 charge, but did not come close to using the 1 Megabyte allocation.  Perhaps Verizon lacked the metering or monitoring capability to detect such user mistakes.  If so the company could be excused from installing an intermediary web page warning that additional charges will ensue.  Again Verizon Wireline does this when for example, one calls a busy telephone number.  A recorded message offers to call you back when the line becomes available and dutifully notifies you that “an additional charge may apply.”
            I conclude that the folks at Verizon Wireless assumed they had little regulatory responsibilities to rectify the problem and that subscribers bore the obligation (“caveat emptor”—buyer beware) to detect overcharges and to invest the time and effort to dispute them.  Because $1.99 probably is too little over which to quibble, it is quite possible that Verizon Wireless management grew to expect revenues to accrue from subscriber button pushing mistakes.  In turn this revenue enhancer becomes “baked into” revenue projections.
            So for different reasons both the FCC and Verizon were willing to leave well enough alone.  But doesn’t this $90 million dollar false mystery evidence the need for a cop on the beat with a sufficiently stiff backbone to act on less than three years’ notice.

3 comments:

Rudolf said...

Chris Marsden pointed this out to me. Looks great!

What do you think of accidental data roaming charges. Suckers (American Consumers) who visit Europe quite often forget to kill data roaming on their devices. Their hiptops, blackberries etc. connect home a gazillion times a day. Every time incurring a small charge. A small European operator collected 10.000 dollar per day this way and felt uneasy about it. No data was transferred except for signalling traffic over IP. When they called the American operator to tell them to warn the customers, they were told to shut up, as they got their share of the action.

Anonymous said...

I had got a text 1-13-11 that my Verizon bill Is $6,790.29 I was
shocked. We just got back from a vacation in Cancun, Mexico.
Before our trip my husband went to the local Verizon store on 12-17-2010, to let
them know we would be in Mexico and what he needed to do. He was told
that calls and text messages would be about $1 per minute, they told to limit his calls
and text messages. He was not told about roaming data charges.
When in Mexico we could only use internet application in a WI-FI area,
which we had to purchase time from the hotel. My husband checked emails
at this time. We left the phone in the room, we did not carry it with us, during
our excursions.
During the trip his phone was shut down completely, by Verizon, they had sent
text messages warning us, the first warning December 20, at 11:47 am to the last
warning on December 21 at 10:37 am. Within this time they charged us over $6500.00
in data roaming fees. How can Verizon charge $6500 for data roaming fees in less than a 24hour period???
We have traveled to Mexico before, and have never come back to an
outrageous bill.
I spent a lot of time on the phone, and we spent a lot of time at the
local store and have gotten nowhere.
I will be determined to get my story out there.
Please send this email on to as many people as you can.
Please feel free to contact us at:
563-580-9065 or 563-580-9066
563-557-6266 weekdays

Sincerely
Ronald & Susan Shaw

Anonymous said...

I use to referr all my friends to VERIZION till now they will rip you off on the unlimited date upgraded a phone was told my plan and rate would not change then get a text at 50 % usage of data I called and was told if you upgrade your plan will change (not what I was told by rep. ) was also charged more for phone then what I was told and was charged a 30. upgrade fee I was not told about . What I tell friends now Verizion Wireless Suck!!!!!! stay away as soon as I can I'm changing .