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Verizon Tries to Stuff $90M Worth of Worms Back Into the Can

By Erika Morphy
Oct 5, 2010 5:00 AM PT

For years, Verizon Wireless has fielded complaints from customers about mistaken data charges.

Verizon Tries to Stuff $90M Worth of Worms Back Into the Can

This Sunday, the carrier announced it was providing a rebate totaling US$90 million to be distributed to the estimated 15 million customers hit by these charges. Most of the customers reportedly were clipped for $2 to $6, which will be credited to their bills in the coming months. Former customers impacted by the erroneous charges will receive a check.

After two years of escalating consumer complaints, not to mention several media stories, why is Verizon acting now? One obvious answer is that Verizon has begun to feel the heat from a Federal Communications Commission investigation of these so-called mystery fees, which the agency launched in January.

In fact, the FCC appears to be undeterred by Verizon's rebate. Questions remain as to why it took the company two years to reimburse its customers, and why greater disclosure and other corrective actions did not come much, much sooner, according to Michele Ellison, FCC enforcement bureau chief.

The enforcement bureau plans to continue to explore these issues, and Verizon is facing the possibility of additional penalties, she said.

The FCC and Verizon did not immediately respond to CRM Buyer's calls seeking comment.

Customer Reactions

The battle between the FCC and Verizon over this issue is bound to be one that will take months, if not years, to fully play out.

In the immediate term, Verizon has a bigger -- and potentially more devastating -- problem on its hands: a possible backlash from consumers. How the situation will play out depends on a number of factors, including the FCC's investigation and how the rebate is portrayed in the media.

It is easy to make the case that the company has engaged in some strategic nickel-and-diming of its customer base -- which only ceased after the government stepped in.

"Whether or not that was the case, this is going to wind up delivering a real blow to Verizon's reputation as a good customer service provider," said Michael W. Robinson, senior vice president of Levick Strategic Communications.

"Telecom is one of the most hyper-competitive sectors there is, and the money the providers spend to woo customers is extraordinary," Robinson told CRM Buyer.

Given that, it is amazing that Verizon would put its reputation at risk for an amount that is merely a rounding number for the carrier, he said. "Especially now, consumers are just sick of getting dinged with fees."

Consumers are also not in a forgiving mood right now, continued Robinson, especially for companies that are misleading or inaccurate about billing. "You get a bill, you have to trust it is accurate. A company that is off by even a few dollars is going to lose the trust of its customer base."

Dodging a Bullet

On the other hand, Verizon has a good chance of appeasing customers and walking away from this episode unscathed -- if it manages to make its own interpretation of what happened the dominant narrative. Individuals were only overcharged by a few dollars, it appears, an amount that may be easy to shrug off.

The situation got out of control, but it was not likely because of a deliberate intent on Verizon's part to prey on its customers, Andy Abramson, CEO of Comunicano, told CRM Buyer. "Customer service issues like this all too often get stuck at the front line or middle management level, where the focus is on procedure or policy. It is too hard for the company to see the big picture until it has gotten out of control."

What happened with these fees, Abramson said, started out as a tech issue that turned into a customer service issue that did not reach the upper level of management until it was too late.

Verizon has built up a lot of customer service good will, he maintained, especially when it is stacked up against telecom providers that are perceived as offering poor service -- such as AT&T Wireless.

"I think it is going to weather all this just fine," predicted Abramson.

More Oversight Needed

About the only certainty in this story is the need for ongoing vigilance by regulatory authorities and consumer watchdogs, said Jonathan Askin, assistant professor of clinical law at Brooklyn Law School.

This episode "demonstrates that, contrary to political and popular sentiment, the wireless industry is not quite as competitive and frictionless as the wireless carriers would like us to believe," he told CRM Buyer.

Changes to current laws -- as well as penalties -- would also be welcome, he said.

"If carriers are only compelled to pay the costs of over-billing when caught and without additional penalty, then carriers have no incentive to behave as honest service providers," reasoned Askin. " The consequences of over-billing must be more than a mere 'cost of business.'"

Also, telecom firms would be forced to treat customers better, he suggested, if it were easer to get out of contracts or transfer them to another carrier.

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