Verizon’s $25 Million Fine May Be Big Deal For FCC, But Not For Verizon

The Federal Communications Commission trumpeted its “historic” consent decree with Verizon Wireless that provided for a $25 million fine as proof that the FCC is there for consumers.

There is no question that the fine is a record for the FCC, but for Verizon Wireless, which earns around $4 billion each quarter, its a drop in the bucket.

Let’s see what Verizon was caught doing for almost three years:

“The investigation found that approximately 15 million “pay-as-you-go” customers were or may have been overcharged for data usage over the course of three years, from November 2007 to the present. According to the settlement, the erroneous mystery fees from Verizon Wireless were caused by:

• unauthorized data transfers initiated automatically by applications (like games) built into certain phones;

• accessing certain web links that were designated as free-of-charge (e.g., the Verizon Wireless Mobile Web homepage);

• unsuccessful attempts to access data when there was insufficient network coverage to complete the requested data transfer; and

• unwanted data transfers initiated by third parties and affecting customers who had content filters installed on their phones.”

Verizon however denies that it did anything improper on purpose and maintains that it is making a voluntary payment to the treasury and is not considered a fine.

You be the judge. The following are the complete statements from the FCC and after that from Verizon:

Washington, D.C. — Today, the Federal Communications Commission’s Enforcement Bureau announced an historic consent decree with Verizon Wireless — including a record $25 million payment to the U.S. Treasury — regarding “mystery fees” the company charged its customers over the last several years. The payment is the largest in FCC history and the settlement concludes the agency’s ten-month investigation into these overcharges. In addition to Verizon Wireless’s payment to the Treasury, the company will immediately refund a minimum of $52.8 million to approximately 15 million customers and ensure that consumers are no longer charged the mystery fees.

“Mystery solved: today’s settlement with Verizon Wireless is about making things right and putting consumers back in the driver’s seat,” said Michele Ellison, Chief of the FCC’s Enforcement Bureau. “Today’s settlement requires Verizon Wireless to make meaningful business reforms, prevent future overcharges, and provide consumers clear, easy-to-understand information about their choices. I am gratified by the cooperation of the Verizon Wireless team in the face of these issues, and pleased they are taking the high road.”

The Enforcement Bureau began investigating Verizon Wireless in January 2010 after large numbers of consumer complaints and press reports about unexplained data charges. The investigation focused on “pay-as-you-go” data fees — charges of $1.99 per megabyte that apply to Verizon Wireless customers who do not subscribe to a data package or plan.

The investigation found that approximately 15 million “pay-as-you-go” customers were or may have been overcharged for data usage over the course of three years, from November 2007 to the present. According to the settlement, the erroneous mystery fees from Verizon Wireless were caused by:

• unauthorized data transfers initiated automatically by applications (like games) built into certain phones;

• accessing certain web links that were designated as free-of-charge (e.g., the Verizon Wireless Mobile Web homepage);

• unsuccessful attempts to access data when there was insufficient network coverage to complete the requested data transfer; and

• unwanted data transfers initiated by third parties and affecting customers who had content filters installed on their phones.

This action is part of the FCC’s ongoing commitment to empowering and protecting consumers. Earlier this month, as part of its Consumer Empowerment Agenda, the FCC proposed rules to prevent bill shock – – sudden, unexpected increases in consumers’ monthly mobile bills.

To ensure that all affected consumers are repaid and the mystery fee issue is resolved, Verizon Wireless has agreed to key consumer protection measures, including:

• No more mystery fees: Verizon Wireless must cease charging customers the incorrect fees. In addition, the company has agreed to take affirmative steps to prevent future unauthorized data charges.

• Immediate repayment of 15 million customers: Customers who have been identified by Verizon Wireless as being potentially overcharged for data usage will receive refunds or credits on their October or November bills.

• Right to appeal: Verizon Wireless’s repayment obligations are not capped at the estimated $52.8 million in refunds identified by the company. Customers who do not receive a refund but believe they had unauthorized data charges have a right to appeal, receive a good-faith review, and reach resolution within 30 days. Verizon Wireless is required to disclose any unresolved complaints to the FCC.

• Commitment to offer data blocks on request: Verizon Wireless must offer data blocks to any customer who seeks to avoid data charges on his or her bill.

• Improved customer service: Verizon Wireless must launch several new customer service

initiatives to provide more information and more options to consumers. These include:

o Plain-language explanations of “pay as you go” data charges and data plans, and the available tools to reduce those charges;

o An online video tutorial to help consumers understand their bills; and

o Enhanced training on pay-as-you-go data charges to Verizon Wireless’s customer service representatives who interface directly with consumers and respond to consumer questions or complaints.

• Data Charge Task Force: Verizon Wireless must create a Data Charge Task Force, staffed by specially trained customer service experts who will monitor and resolve data charge complaints and other data charge-related issues going forward. The Task Force will issue regular reports to the FCC so the agency can ensure compliance.

• Strong accountability and compliance monitoring: Verizon Wireless must submit periodic reports to the FCC on its refund, training, and customer service initiatives (including information on specific complaints) to ensure the company’s compliance going forward.

“There is nothing more satisfying to the public spirit than to right a wrong or rectify an injustice,” said Ellison. “We salute the consumers who had the tenacity to call attention to this problem. We will continue to monitor the company’s compliance going forward. And, consumers, if you need us, our lights are always on.”

VERIZON STATEMENT

Verizon Wireless works very hard to simplify the wireless experience for customers and to ensure that customer bills are accurate. Nonetheless, internal billing processes can be complex and, in this case, we made inadvertent billing mistakes. We accept responsibility for those errors, and apologize to our customers who received accidental data charges on their bills.

We are issuing credits and refunds on our own initiative and because it is the right thing to do for our customers. Fixing this for our customers has been our aim since last year, as we stated publicly at that time. In September 2009, months before the Federal Communications Commission first contacted us, we implemented a free 50 kilobyte allowance to limit further inadvertent charges.

In a settlement with the FCC, we have agreed to a voluntary payment of $25 million to the U.S. Treasury even though the inaccurate billing was inadvertent.

The settlement acknowledges our prior announcement that we will reimburse about 15 million current and former customers who may have been mistakenly billed. The company will spend $52.8 million to reimburse those customers. We also will provide targeted information about data usage and tracking to new and existing customers, in both English and Spanish; establish a special internal team to track, identify and address customer data usage complaints; and provide additional training on data charge and credit issues to all of our customer-facing customer care employees.

We have already begun the process of repaying the 15 million customers for accidental past data charges that we discovered through our own investigation in response to customer inquiries. These inadvertent charges affect those customers who do not have data plans and choose to pay for data usage on a per megabyte basis. We are notifying eligible current and former customers that we are applying credits to their accounts or sending refunds in October and November. Current customers will be notified in upcoming bills; former customers will receive a letter and refund check in the mail. In most cases, these credits and refunds are in the $2 to $6 range; some will receive larger amounts. The rest of our customers, 77 million or roughly five out of six, are unaffected. We have taken steps to ensure this does not happen in the future.

By far the single largest problem, involving the vast majority of credits, was caused by a very small data “acknowledgment” session sent by software pre-loaded on certain phones. For customers who did not have data plans and who were not otherwise using data features on their devices, this triggered a “pay as you go” charge of $1.99. We never intended to charge customers for this “acknowledgment” data session. In other cases, we accidentally charged customers for access to website links that were not supposed to trigger data charges. Once again, this affected only some of the customers who did not have data plans, and who were not otherwise intentionally using the data features on their devices.

We have put in place additional improvements to resolve issues that caused these accidental charges. We are changing software on future devices to remove acknowledgments and prevent them from triggering the small data “acknowledgment” sessions. Other steps involve enhancing internal controls on website links that should be free to access, as well as additional software improvements.

We are a company that listens to its customers and in this case we got to the bottom of a problem and resolved the errors. We have taken this action because it is the right thing to do. We value our customers and their trust in us, and we do everything in our power every day to earn and keep that trust.