Thanks to a divided 5-4 decision by the U.S. Supreme Court, customers trying to seek relief from unilateral fees and surcharges suddenly showing up on their Verizon cell phone bills will have to pursue individual arbitration claims with the cell phone company instead of joining forces in a class arbitration claim.

That Supreme Court case, AT&T Mobility v. Concepcion, is turning out to benefit Verizon Wireless as much as AT&T, because the Supreme Court found merit in contracts obligating customers to seek individual arbitration to settle differences while forbidding customers from pursuing organized legal action.

Now the 3rd U.S. Circuit Court of Appeals in Philadelphia has reversed an earlier ruling, reinstating a 2008 decision by U.S. District Judge Freda Wolfson that delivered victory to Verizon Wireless.

At issue was Verizon’s decision in October 2005 to unilaterally impose an “administrative fee” of $0.40 and/or $0.70, as part of the monthly charges for each Verizon cell phone line.  Customers upset with the new fees felt they violated the principle that, as part of their two year contracts, Verizon would deliver a fixed-price service.  The cell phone company has since implemented a variety of fees and surcharges on customers that are pocketed by Verizon, regardless of the contract price.

All Verizon Wireless customers are obligated by contract to challenge any terms and conditions they disagree with through an arbitrator of Verizon’s choosing, at a place also chosen by the company.  That means Verizon could place an arbitrator on retention in a city potentially thousands of miles away, and demand the customer make their case there, to an arbitrator whose livelihood ultimately depends on retainer fees paid by the company.  Few consumers would make such a journey to protest a fee that amounts to less than $10 a year per line.

Lawyers Keith Litman and Robert Wachtel, representing Verizon customers, decided to try a different approach — a class action arbitration.  The two attorneys would represent potentially millions of impacted customers themselves, making any travel cost concerns incidental, and providing a seasoned challenge before arbitrators, who would also hear counter-arguments from Verizon’s own legal team.

Verizon’s attorneys argued such class action arbitration was specifically forbidden in the company’s contract with customers.  Normally, a judge might decide at that point a customer agreeing to those terms and conditions was effectively up the creek.  But a series of legal challenges in circuit courts opened the door to invalidating those terms.

Litman and Wachtel argued that because the New Jersey Supreme Court, in Muhammad v. County Bank of Rehoboth Beach, Del. (2006), has held that an arbitration provision in a consumer contract that precludes class arbitration of low-value claims is unconscionable under New Jersey law, similarly, the arbitration provision in Verizon’s contract is also unenforceable.

Unfortunately for the two attorneys representing consumers, the decision by the U.S. Supreme Court effectively overrode that case, leaving Verizon on top with Judge Wolfson’s 2008 decision.

Wolfson

Wolfson’s written ruling on the case seemed unimpressed with claims that Verizon’s fees were unconscionable:

In this case, Plaintiffs are customers who chose Verizon as their wireless provider at least four years ago and continue to use Verizon today. They signed the customer Agreement with the arbitration clause and agreed to subsequent terms of service as added by Verizon. Plaintiffs do not allege that they did not understand the Agreement that they voluntarily entered into nor do they allege fraud or misrepresentation. The parties agreed “to settle [their] disputes . . . only by arbitration,” and the “agreement doesn’t permit class arbitration.” Therefore, [federal law] requires this Court to uphold the arbitration provision within Plaintiffs’ service Agreement.

But Judge Wolfson did recognize the effective impact of her decision:

“The Court recognizes the many hardships visited upon plaintiffs, such as in this case, based upon this ruling. First, it creates the opportunity for a different result depending on whether the case is brought in federal or state court. Second, it is also clear that compelling individual arbitration in this case will be tantamount to ending the Plaintiffs’ pursuit of their claims, as there is very little possibility that these Plaintiffs or any other plaintiff will pursue individual arbitration for claims that amount only to several dollars in damages. While this outcome is harsh, this Court is bound by Third Circuit precedent.”

Lately, Verizon Wireless customers have been seeking other forms of relief when Verizon unilaterally changes or implements new fees or surcharges.  Many are invoking the “materially adverse” clause found in Verizon’s terms and conditions, which theoretically allows customers to exit their contracts penalty-free if they do not agree to the changes Verizon is imposing on customers.  Verizon Wireless appears to be increasingly aggressive in fighting these claims, too, refusing to allow customers to leave without stiff early termination fees.  That may become the subject of another lawsuit at some point in the future.

Small town media, always eager for an easy story to tell, is notorious for rewriting industry press releases and calling it news, but when a major “news radio” station in Chicago does it, it’s simply sloppy and embarrassing.

WBBM Radio decided AT&T’s merger with T-Mobile, announced several months ago, has suddenly become newsworthy.  Why?  Because AT&T has been sending out press releases touting the merger’s benefits for Illinois customers.

News that a merger with America’s fourth largest wireless carrier would suddenly bring widespread 4G coverage to communities large and small has become catnip for lazy reporters who never bother to research the claims.  Even AT&T’s attorneys are on a different page from AT&T’s public relations department.

But the extent of WBBM’s investigation by reporter Alex Degman began and ended with a proposed AT&T coverage map:

A coverage map of the proposed network coverage shows most of the state would indeed be covered, minus large sections of the Shawnee National Forest in southeastern Illinois and scattered pockets in west central Illinois. The merger is expected to be approved in January.

Degman’s report was little more than a disguised advertisement for AT&T, completely reliant on the company’s claims and ignorant of the fact AT&T would bring 4G service to anyone in WBBM’s local coverage area with or without T-Mobile.

Apparently there was no time for merger opponents.

WBBM Reporter Alex Degman “covers” the impact of the merger between AT&T and T-Mobile on Illinois. August 22, 2011. (1 minute)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Listener Seth Weintraub was not impressed.

“Are you kidding?” Weintraub wrote. “Is AT&T writing your copy now?”

“How about reporting on the FCC document filings instead of unsubstantiated claims made by the company,” writes listener Patrick Dailey. “This is what is wrong with media today.”

Some proponents for AT&T U-verse suggest people will quickly get used to AT&T's metal cabinets.

A coalition of neighborhoods opposed to the installation of more than 700 4-foot tall metal cabinets across the city of San Francisco have filed suit against AT&T in Superior Court demanding the city follow its own environmental codes and conduct an environmental impact assessment.

The suit comes in response to last month’s close 6-5 vote by the Board of Supervisors permitting AT&T to install up to 726 boxes on the public-right-of-way — typically street corners and sidewalks — to support expansion of its U-verse television, broadband, and phone service.

San Francisco Beautiful, San Francisco Tomorrow, the Potrero Boosters Neighborhood Association, the Dogpatch Neighborhood Association, and the Duboce Triangle Neighborhood Association are all parties to the lawsuit filed Wednesday, which calls the boxes graffiti targets, a safety problem for traffic and pedestrians, and just plain ugly.

Milo Hanke, past president of San Francisco Beautiful, accuses the city of ignoring its own rules to give a green light to AT&T.

“We really don’t want to sue, but we are left with no choice when the city refuses to uphold its own environment codes and is about to give away our sidewalks for the benefit of a private company without objective review,” Hanke told the San Francisco Chronicle.

Long time observers of city politics are frankly surprised AT&T won permission for the controversial boxes.

“It wasn’t that long ago that something like this would have been stopped dead in its tracks in [one] environmental review [after another],” said KCBS-TV reporter Phil Matier.  “But this year, whether it’s a change in the tone for business or for jobs it actually got the six votes needed, and that is going to be interesting as this plays out in an election year in San Francisco.”

Lane Kasselman, an AT&T spokesman countered: “This is about choice and competition for San Francisco residents. It’s about new, better technology that enhances peoples’ lives. AT&T thanks the San Francisco Board of Supervisors for supporting the deployment of U-verse throughout San Francisco. We’ve already started construction and are working as quickly as possible to bring next generation IP network services to every block and household that wants it.”

But Hanke thinks the city has gone too far for the benefit of AT&T at the expense of local residents.

“This is a private enterprise with a benefit to private parties,” Hanke told KCBS.  “Why should the public be subsidizing a Dallas-based corporation, and having to look at these ugly boxes in the process.”

Sean Elsbernd, who serves on San Francisco’s Board of Supervisors personally thinks the boxes are a great idea, suggesting Comcast needs competition.

“I have a suspicion that four or five months after they are in, people aren’t going to notice them anymore,” Elsebernd said.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCBS San Francisco Groups Sue ATT 8-24-11.mp4[/flv]

KCBS in San Francisco covers the continuing controversy over AT&T’s 4-foot tall utility boxes and the lawsuit designed to stop or delay their installation.  (3 minutes)

[flv]http://www.phillipdampier.com/video/KBAK Bakersfield Homeowner fights utility project in her front yard 5-27-10.flv[/flv]

KBAK in Bakersfield shows what happened when AT&T brought their lawn refrigerator-sized boxes to that city in the spring of 2010 — one woman woke up and found AT&T crews tearing up her yard, without any notice, as part of a major construction project.  (3 minutes)

Cornell University students pay an average of $37,000 a year (before housing, student fees, and other expenses) to attend one of America’s most prestigious universities.  When they arrive on-campus, it doesn’t take long to learn the college has one of the nastiest Internet Overcharging schemes around for students deemed to be using “too much Internet.”

For years, Cornell limited students to less than 20 gigabytes of Internet usage per month, only recently increasing the monthly allowance to 50GB this summer.  Cornell’s overlimit fee starts at $1.50 per gigabyte, billed in megabyte increments.  Now some students are pushing back, launching a petition drive to banish the usage limits that curtail usage and punish the 10 percent of students who exceed their allowance.

Christina Lara, originally from Fair Lawn, N.J., started the petition which has attracted nearly 300 signatures over the past few weeks.

“Cornell students, along with students across the world, rely on the Internet to pursue their academics, independent research, and leisure activity,” Lara writes. “We should not be subjected to charges for our Internet usage, particularly because our curriculums mandate we use the Internet. Despite this, Cornell University continues to adopt NUBB (Network Usage-Based Billing), which charges students for exceeding the 50 gigabyte per month ‘allowance.'”

Lara incurred bills as high as $90 a month in overlimit fees last year, thanks to regular use of Netflix and Skype for online video chats with friends and family back home.

Internet fees for on-campus housing are included in the mandatory student services fee.  Although Time Warner Cable has a presence on campus, most residence halls don’t appear to be able to obtain service from the potential competitor, which sells unlimited Internet access in the southern tier region of New York where Cornell is located.  Instead, Cornell students on campus rely on the university’s wireless and Ethernet broadband network, and DirecTV or the university’s own cable TV system for television.

Lara

The apparent lack of competition makes charging excess-use fees for Internet usage easy, critics of the fees charge.

“It’s much easier if you live off-campus or in one of the apartment complexes students favor,” says Neal, one of our readers in the Ithaca area who used to attend Cornell.  “The only complication is getting access to the University’s Intranet, which is much easier if you are using their network.”

Neal says Verizon delivers landline DSL to off-campus housing, but not on-campus.  Because the service maxes out at 7Mbps, most who have other options sign up for Time Warner Cable’s broadband service instead.

“It’s cheaper on a promotion and much faster, and it’s still unlimited,” Neal says. “Hasbrouck, Maplewood and Thurston Court were the only residential buildings that offered the chance for Time Warner Cable on-campus, and only if the wiring was already in place.”

Neal notes many apartment complexes off campus have contracts with Time Warner Cable, which means cable TV and basic broadband are included in your monthly rent.  Some Cornell students who live on or near campus try to make do with a slower, but generally free option — the Red Rover Wi-Fi network administered by the University.  Others reserve the highest usage activities for computers inside university academic buildings, where the limits come off.

Lara complains Ithaca, and the southern tier in general, is hardly an entertainment hotbed, making the Internet more important than ever for leisure activities.

Time Warner Cable provides the rest of Ithaca with unlimited Internet.

“If Cornell was situated in a major metropolitan area with a vast nightlife that could accommodate the interests of most, if not all, our undergraduates, then many Cornellians wouldn’t be so inclined to stay in their rooms and get on the Internet,” Lara says. “But that’s not the case. Cornell’s Greek life dominates the social scene, making ‘nightlife’ a dividing factor in the community.”

Tracy Mitrano, Cornell’s director of information-technology policy, told The Chronicle the vast majority of students will never hit the cap, and those that do cannot be charged more than $1,000 a month in overlimit fees, regardless of use.  Those that do exceed the limit typically find a monthly bill for “overuse” amounting to $30.

“The approach that Cornell uses offers transparency and choice,” said Mitrano. She noted that Cornell provides students with clear information regarding their network usage by alerting them by e-mail when they are about to hit the limit and by setting specific rates for overuse fees.

“The choice seems to be using the university network or moving off-campus to buy Verizon or Time Warner Cable broadband to avoid the usage cap,” counters Neal. “I am not sure their ‘choice’ argument flies if students don’t have the option of signing up for Road Runner in their rooms on their own, bypassing the Internet Overcharging altogether.”

Both Neal and Gregory A. Jackson, vice president of Educause, seem to be reaching consensus on whether or not universities should be charging students for Internet separately from room and board.  Jackson notes it is a discussion being held at an increasing number of universities.  Neal thinks having a wide open access policy to deliver competition could solve this problem in short order, and students should make the decision where to spend their broadband funds themselves.

“If Cornell’s IT bureaucracy faced unlimited-access competition from Verizon and Time Warner Cable, do you think they’d still have a 50GB usage cap, considering only a small percentage of their captive customers exceeded it,” Neal asks.  “Of course not.”

[Thanks to PreventCAPS for the story idea.]

Rumors are swirling Sprint will begin selling Apple’s iconic iPhone this October, bringing the number of carriers supporting the wildly popular phone to three.  Sprint shares soared 10 percent on the news.  But while Sprint customers and shareholders are celebrating the potential imminent arrival of iPhone, launching the phone on the Sprint network is no simple matter, especially for the last remaining carrier delivering truly unlimited data.

On the Plus Side

Apple’s iPhone has become a must-have for a significant number of consumers.  They won’t leave the phone behind to switch carriers, not even for Verizon Wireless, until they introduced the phone earlier this year.  Now Sprint can win its own share of iPhone devotees.

Sprint’s iPhone promotions could draw customers away from larger carriers, especially enticed by Sprint’s worry-free unlimited data plan that has become extinct at other wireless companies.

The iPhone locks customers into new two-year contracts with Sprint, helpful security at a time when AT&T threatens to further consolidate the wireless industry in its efforts to acquire T-Mobile.

On the Down Side

Sprint’s phone subsidy expenses will skyrocket with Apple’s iPhone, which commands the highest subsidies in the industry.  Analysts suspect AT&T currently shells out up to $425 for iPhone 4 and $375 for iPhone 3GS.  Then AT&T sells the phone to consumers for $200 or less, making the subsidy back over the life of the two year contract.  That hits AT&T’s cash on hand hard.  For Sprint, regularly accused by Wall Street of spending too much on customer promotions, it will only increase those costs.  Sprint pays less than $150 for its top of the line Evo phones in comparison.

One guarantee the iPhone always delivers: Lots of data hungry users.  The introduction of the iPhone may ultimately threaten Sprint’s unlimited usage experience because of demand placed on an already burdened 3G network.  There is also no guarantee the first Sprint iPhone will support Sprint’s 4G network.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KMBC Kansas City Sprint May Sell iPhone in October 8-24-11.mp4[/flv]

KMBC in Kansas City talked with customers looking forward to Sprint’s iPhone.  Sprint is a major employer in Kansas City.  (2 minutes)