Will Customer Outrage Ruin Verizon's Smartphone Campaign?

Verizon Wireless is on a roll: its Droid phones are making headlines, advertisements are getting under AT&T's skin, 4G is almost ready to roll and everyone seems convinced the carrier will eventually get the iPhone. But could customer animus destroy everything the company is working to build?

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Witness David Pogue's post this afternoon on Verizon's ethically dubious money-grabs. Starting next week, the nation's largest mobile carrier will double its early termination penalties for smartphones—cancel before your two years is up, and you could pay up to $350. The old penalty was $175. Congress looked into these fees in 2007, prompting some carriers to reduce them.

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Not only is Verizon "gouging" contract-breakers, Pogue says, but it's also siphoning off small amounts of money from hapless customers. One reader and Verizon customer who got wise to the scam describes it to Pogue in a letter. The reader says:

"Virtually every bill I get has a couple of erroneous data charges at $1.99 each—yet we download no data."

"Here's how it works. They configure the phones to have multiple easily hit keystrokes to launch 'Get it now' or 'Mobile Web'—usually a single key like an arrow key. Often we have no idea what key we hit, but up pops one of these screens. The instant you call the function, they charge you the data fee. We cancel these unintended requests as fast as we can hit the End key, but it doesn't matter; they've told me that ANY data–even one kilobyte–is billed as 1MB. The damage is done."

"Imagine: If my one account has one to three bogus $1.99 charges per month for data that I don't download, how much are they making from their 87 million other customers? Not a bad scheme. All by simply writing your billing algorithm to bill a full MB when even a few bits have moved."

Charging a couple of bucks erroneously to 87 million people is a great way to accrete some additional revenue, but it's also a hell of a way to infuriate those 87 million people. It doesn't much matter how good your network is—or how bad your competitor's network is—when your customers loathe you.

Neither of two area Verizon wireless spokesmen were immediately available for comment. We'll update this when they respond.

Just this summer, Verizon came under similar customer scrutiny for its voicemail system. Because its pre-programmed greeting is so long-winded, customers felt as if the company was eating up wireless minutes without giving callers the option to skip to the beep. Pogue undertook to change all that, and several carriers responded to his badgering. Verizon didn't.

All this pent-up frustration won't manifest itself much right away; two-year contracts keep customers trapped even as they fume. But customers don't forget the feeling they're getting screwed, and slow user-attrition is a specter that looms large. Apple/AT&T and Sprint may not need to do so much advertising or 4G-infrastructure investment if Verizon manages to keep up its self-sabotage. But then again, as Pogue points out in an update, it looks as if AT&T may be charging the same sketchy two bucks.

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  • Nwankama Nwankama

    This is a very good article. Indeed, Verizon, as a company, has a way of coming out with great products (FIOS for instance), but their schemes to milk "customers" are even more amazing. However, they seem to forget that such a dubious business model is bound to backfire at some point. Nobody or company should come out with a great product or service and think that people will die without it (Nwankama Nwankama)

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    Nwankama Nwankama
    All Hands Business Solutions, Inc.
    http://www.allhandsmgt.com
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