Verizon Wireless became the Bank of America of late 2011 when it attempted to impose a $2 “convenience fee” on select customers who prefer to pay their monthly phone bills online or through an automated telephone attendant.  It’s just the latest experiment in customer gouging — the same kind of toe-in-the-water strategic experimenting that unleashed ubiquitous baggage fees on airlines, low balance fees on checking accounts, and the increasingly-common practice of charging customers extra to mail them their monthly bill.

An entire industry of consultants pitch their creative talents to companies like Verizon who want “a little extra” from captive customers.  These specialists sell their expertise identifying the most vulnerable (and least likely to leave), who will grin and bear just about any kind of abuse heaped on them. Many income and resource-challenged consumers are left feeling powerless to protest and reverse unwarranted extra charges.

The consultant gougers-for-hire made millions for large banks when they figured out how to score the biggest bounced check and overdraft fees (simply pay the biggest check first, opening the door to $39 bounced check fees for all the little checks that follow).  Verizon’s $2 fee targeted customers who couldn’t afford to let the company automatically withdraw their monthly payment, or didn’t trust the company to do it correctly.  Even more, Verizon’s fee would target more desperate past-due customers who needed to make a fast payment to avoid service interruption.  Consumer advocates wondered if Verizon was successful charging these customers more, would they expand the fees to cover all online or pay-by-phone payments?

We’ll never know because the public outcry and intensive media coverage during a slow holiday week combined to force Verizon into a fourth quarter revenue retreat, rescinding the fee 24 hours after announcing it.  But Verizon may be pardoned if they feel they were unfairly singled out.  That is because other telecommunications companies have been charging certain customers bill payment fees of their own for years:

Verizon's evolved position on the $2 convenience fee (Courtesy: WTVT)

• Stop the Cap! reader Larry writes to share TDS Telecom, an independent phone company, charges a $2.95 “third party processing fee” when accepting payments by phone.  “In its place you either have to revert to U.S. Postal Service, or agree to electronic billing for on-line payment access.”
• AT&T charges a $5 bill payment fee for “certain customers.”
• Sprint/Nextel not only has its own $5 bill payment fee for those paying at the last minute,  it also forces customers with spotty credit to sign up for auto-pay to avoid a mandatory surcharge.  Want a paper bill?  That’s $2 extra a month.
• Comcast charges a $5.99 payment fee, but only in certain states.
• Time Warner Cable charges fees ranging from an “agent assisted payment” fee ($4.99) to a statement copy fee ($4.99) in some locations.

While Verizon has agreed to drop its latest new charge, the company’s carefully-named bill-padding extra fees attached to monthly bills remain.  In addition to breaking out and passing along all government fees and surcharges, Verizon also bills customers administrative and regulatory recovery fees that, for other companies, would represent the cost of doing business.  These latter two go straight into Verizon’s pocket, despite the implication they are third party-imposed mandatory surcharges.

Had Verizon called their new $2 “convenience” fee a “business efficiency accounting recovery fee,” would they have snookered enough consumers to get away with it?

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WTVT Tampa Verizon cancels planned 2 bill-pay fee 12-30-11.mp4[/flv]

WTVT in Tampa says Verizon did a complete 180 on its $2 bill payment “convenience fee.”  (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNN Verizon Dumps Fee 12-30-11.flv[/flv]

CNN hints the FCC’s potential involvement in Verizon’s business may have had something to do with the quick shelving of the $2 fee.  (2 minutes)

This co-op provides 25Mbps broadband in rural Minnesota.

Parts of rural Minnesota are teaching the nation a lesson or two about how to deliver rural broadband — form a community co-op and provide it yourself, or wait forever for a commercial provider to deem it sufficiently profitable to deliver a reasonable level of service.

Minnesota’s Broadband Task Force indirectly proved the case for community Internet access with their first official report on the state of broadband in the North Star State.

While the populous Twin Cities are well-provided-for by large cable and phone companies, most of rural Minnesota gets far slower (and spottier) access to telephone company DSL, which is increasingly uncompetitive and inadequate for the 21st century knowledge economy.  Commercial providers have repeatedly told rural Minnesota their 1-3Mbps DSL service is plenty fast enough, at least for those who can purchase the service.  City slickers enjoy speeds of 10Mbps or more in Minneapolis and St. Paul.  But as many more rural residents and small businesses will tell you, DSL just cannot get the job done at current speeds, especially for higher bandwidth applications.

Not all of Minnesota is stuck with second-class Internet access.  Two sections of the state where residents were unwilling to accept the broadband status quo now have speeds that rival anything on offer in Minneapolis or St. Paul, because they decided to provide the service themselves.

Farmers Mutual in Madison, Federated Telephone in Morris, and Paul Bunyan Communications in Bemidji have been running fiber optic cables up and down area streets and delivering next generation broadband to some very happy customers.  All are cooperatives — community-owned providers that put their customers (who also happen to be the owners) ahead of Wall Street shareholder profits.  The result: modern and reliable service, instead of “good enough for you” Internet access at sky-high prices from for-profit phone companies.

Farmers Mutual provides service at speeds up to 20/20Mbps, with faster service forthcoming in the future.  They also believe in an open Internet, free from provider interference.  Just outside of their service area, DSL (where available) often runs at speeds of 1Mbps or less.

Federated Telephone offers a unique Ethernet-based broadband service at 20/20Mbps speeds that advertises unlimited usage — a selling point when larger phone companies like AT&T now place limits on Internet access.  Outside of their service area, many rural Minnesotans are stuck using satellite Internet service or dial-up.

Paul Bunyan Communications goes one step further with a network that already delivers 25Mbps broadband in communities like Bemidji and Grand Rapids (Minn.)  Those speeds are simply unavailable from commercial providers in northern Minnesota.

Minnesota’s broadband story is retold across America.  Urban communities have fast speed, but high prices.  Rural communities have inferior DSL at high prices or nothing at all.  Only about 57 percent of Minnesota households now meet the statewide speed goal of 10/6Mbps service.  Cable operators have no problems achieving 10Mbps download speeds, but 6Mbps upload speeds are very uncommon.  Phone companies cannot reliably achieve either with traditional ADSL service.

The state’s broadband goals are aggressive:

By 2015, the state of Minnesota will:

• a. Be in the top five states of the United States for broadband speed universally accessible to residents and businesses; and,
• b. Be in the top five states for broadband access (availability); and,
• c. Be in the top 15 when compared to countries globally for broadband penetration (adoption).

Community owned co-ops are the most likely to help the state achieve their broadband goals. The state is currently ranked 24th in broadband speed.

Verizon Wireless has tucked some unpleasant news into their “change of terms” notices buried on the back pages of your monthly bill.

Effective Jan. 12, the wireless carrier will charge a $2 “convenience fee” when paying by phone or through Verizon’s website.  Only customers enrolled in autopay, authorize an electronic check payment, or who still mail a check to the phone company every month will escape the new bill padding fee.

Most likely impacted are customers who make their payment at the last minute or face disconnection over an overdue bill if they don’t authorize a partial payment immediately.  Verizon says the new fee will defray the costs of accepting online and phone payments, but considering an automated attendant usually handles pay-by-phone bill payments, the costs to Verizon are likely far less than the revenue the company stands to earn from the new fee.

Verizon Wireless’ “administrative fee” is also increasing, effective Jan. 1:

Notice Of Administrative Charge Increase
Effective 1/1/2012, the monthly Verizon Wireless Administrative Charge
for voice and email plans will increase from $0.83 to $0.99 per line for all
eligible customers. The charge for Mobile Broadband customers will
remain at $.06. For information regarding this charge, call
1-888-684-1888. Please consult your Customer Agreement for
information about rate changes.

More money in Verizon's pocket

While we used to indicate these changes were enough to allow customers to escape their two-year contracts under the “materially adverse” clause in the company’s subscriber agreement, Verizon considers that loophole effectively closed with the current terms and conditions made effective this past September:

What Charges Are Set by Verizon Wireless?
You agree to pay all access, usage and other charges that you or the user of your wireless device incurred. For Postpay Service, our charges also include Federal Universal Service, Regulatory and Administrative Charges, and we may also include other charges related to our governmental costs. We set these charges; they aren’t taxes, they aren’t required by law, they are not necessarily related to anything the government does, they are kept by us in whole or in part, and the amounts and what they pay for may change.

However, nobody says you have to agree to pay them.  If you call or write Verizon Wireless before 1/1/12 and tell them you do not agree to pay the increased fee and consider it materially adverse and grounds for terminating your service, customer service representatives have been authorized to refund the difference between the old and new administrative fee for the remainder of your two-year contract (or a straight $5 courtesy credit in some instances).

Stop the Cap! recommends using autopay for your monthly Verizon bill, and if you are in the habit of paying your credit card bill in full every month, associate your Verizon account with a credit card that offers a rewards program.  With cell bills routinely running $100 or more, earning something extra from a cashback or airline miles card is better than nothing.  Just make sure you don’t run a balance.  The interest rate charged on most rewards cards is well in excess of the value of the reward.

Tired of the gouging?  You can e-mail Verizon Wireless’ executive customer service team and let them know what you think:

[email protected]
[email protected]
[email protected]
[email protected]

Then tell the FCC, your two senators, and member of Congress.

Ebenezer Scrooge could successfully serve as the CEO of any large telecommunications company these days, and the New York Times knows a Christmas tale of woe when it sees one.  That is why the venerable newspaper printed a Christmas Eve editorial blasting Verizon’s new “non-aggression treaty” with America’s largest cable companies that puts coal in the stocking for any Verizon customer waiting for FiOS fiber-to-the-home service.  The newspaper believes the days of FiOS are numbered:

Verizon — Verizon Wireless’s main shareholder — relieved itself of the need to expand FiOS, its high-speed, fiber optic network, beyond the 18 million homes it set out to reach six years ago, a rollout that cost $23 billion. For the other 114 million homes in the country, it can simply bundle its wireless service with the cable and wireline broadband services of its partners. The agreement between Verizon and the cable carriers includes a joint venture to develop technology to integrate the wireline and wireless platforms.

Verizon’s cable deals squashed hopes that cable carriers’ purchases of wireless spectrum would lead to more competition against the dominant players, AT&T and Verizon Wireless. And it puts in doubt whether FiOS will ever be a serious competitor to cable, reducing the likelihood that video transmitted over broadband could break up cable’s regional oligopolies.

[…] Verizon’s deals suggest a future in which cable carriers will get uncontested control of high-speed broadband into the home while AT&T and Verizon will get uncontested control over wireless. For consumers with expensive wireless plans, pricey bundles of cable channels and costly, slow broadband, this does not look like good news.

Verizon’s economic future lies in the lucrative world of wireless.  Its FiOS network was an expensive gamble to reinvent its antiquated telephone network to drive customers to keep their landlines and spent a hundred dollars more on video entertainment and super fast broadband.  Wall Street hated the price and loathed the potential for costly competition that would force earnings down through aggressive price-cutting.  In some markets, Verizon FiOS has forced Comcast, Cablevision, and Time Warner Cable to be a little more generous with broadband speed and lighten up a little on the annual rate increases.

But convincing cable customers to switch remains a difficult proposition even when Verizon offers the superior service.  Verizon has not achieved the level of penetration it expected in many markets.  In short, people just don’t want to wait around for installers.  Besides, cable companies slash prices for customers threatening to depart.

Verizon’s deal with Time Warner and Comcast delivers Verizon Wireless desirable spectrum.  But the agreement to cross-market and cross-bundle product lines smacks of collusion, and is exactly the kind of turf protection that has kept cable companies from competing head-to-head with each other for more than three decades.  Is it more lucrative for Verizon to build out its FiOS network to compete or simply refer people to Time Warner or Cablevision for cable TV.  So long as cable doesn’t offer a competing wireless product, Verizon seems to think there is little harm done.

But for consumers, the absence of competition brings rate increases, reduced innovation, and declining customer service.

The one thing the telecom marketplace needs less of is the “take it or leave it” attitude that earned the scorn of cable customers everywhere.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Broadband Blindness.flv[/flv]

Toast Sacramento produced this 28-minute documentary which succinctly tells the story of North American broadband, and how commercial providers have set us up for long-term failure, especially in rural and suburban areas.  Whether you live in the United States or Canada, phone and cable companies dominate the telecommunications landscape.  Unlike other modern-day necessities, broadband is almost entirely in the hands of an unregulated free market that fails millions.  Where competition exists, customers can get reasonably fast service, but it costs more than it should.  Where competition is hard to find: slow speeds, spotty access, and out-of-sight prices predominate.

The documentary explores:

• the neglect of suburban and rural DSL from large phone companies like AT&T;
• how phony, industry-influenced broadband availability maps convince public officials there isn’t a big broadband problem;
• why the country’s broadband demands may be too great for providers to handle without major new investments, leading to usage limits and slowdowns to delay needed upgrades;
• and how the latest broadband technologies being installed overseas fall victim to Wall Street temper tantrums back home.