AT&T has been mailing letters to customers caught tethering without the benefit of an add-on plan that if they don’t stop, they will be automatically enrolled in a $45 tethering-data plan this Saturday.  But Stop the Cap! has learned some tethering customers have already been scheduled for enrollment in the pricey plan, even though they abandoned the use of the tethering application that got their account flagged.

The warning letter, dated May 31st, gave Stop the Cap! reader “K” less than 10 days to notify AT&T they are not authorized to make any plan changes without our reader’s explicit consent.  When “K” called AT&T, the company explained the account had been flagged for the ‘tethering violation’ and was scheduled to be enrolled in the $45 DataPro 4GB for Smartphone Tethering data plan this Saturday.

“K” is not the only reader discovering AT&T has plans to change their account this weekend, resulting in dramatically higher bills.

Kai from San Francisco noted he started receiving text warning messages about tethering starting last month, discontinued use of the app that allowed him to avoid paying AT&T’s tethering prices, and still received AT&T’s letter and further text message warnings anyway.  He says it is a good thing he called AT&T.

“I didn’t believe AT&T’s claim that I would not be auto-enrolled in this tether plan if I stopped the tethering, especially after receiving their letter,” Kai writes.  “Sure enough, AT&T had already scheduled my enrollment, which I was able to stop by calling them.”

AT&T is quoting some callers portions of their terms and conditions:

The company has also told some callers complaining about the tethering crackdown that use of third party applications to tether without payment to AT&T already represents a breach of the customer agreement, so waiving an early termination fee may not be an option.

Stop the Cap! recommends consumers who have received text warning messages from AT&T about unauthorized tethering call AT&T and explicitly opt out of any data plan changes scheduled by the company.  This is particularly important for customers grandfathered in AT&T’s unlimited smartphone data plan, because once forfeited (even by AT&T’s own actions), the company has declared you cannot get it back.

See the entire letter from AT&T below the jump.

… Continue Reading

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Merger Chorus 6-01-11.mp4[/flv]

Bloomberg News covers Sprint’s increasingly aggressive pushback against the merger of AT&T and T-Mobile.  But while Bloomberg points out consumer groups are using websites to help consumers file comments opposing the deal, they ignore the fact deal supporters are engaged in their own dollar-a-holler campaign to win the merger’s approval.  (2 minutes)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg ATT Concessions 6-01-11.mp4[/flv]

The opposition to the merger of AT&T and T-Mobile is growing louder and more organized as smaller carriers join Sprint’s opposition efforts. Consumer groups roundly dismiss the proposed merger as anti-competition and anti-consumer.  Michael Nelson, a securities analyst, tells Bloomberg News the vote for the merger’s approval could be close and the company will probably have to agree to more concessions than it thinks.  But considering AT&T’s enormous lobbying power, Nelson still thinks the deal will squeak through.  Nelson, however, warns the merger will bring about a considerable reduction in the disruptive pricing T-Mobile has engaged in — pricing that benefits consumers and forces larger carriers to follow suit.  To Nelson, eliminating an aggressive competitor like T-Mobile will bring about what he calls “a rational competitive environment.”  That means higher prices, no surprises, and a stagnant marketplace.  Wall Street understands the implications of this deal, all while knowingly winking at AT&T’s marketing/lobbying machine that claims reduced competition = better service.  (4 minutes)

In a desperate bid to inflate subscriber numbers, dealer commissions, and attract additional investors, some Clearwire retailers slashed credit standards resulting in widespread approval of customers who would later skip out on paying the bill.  At least one dealer offered to override any failed credit check for even the most credit risky customers, according to a Bloomberg News investigation.

Those charges, made by three former dealers and distributors, bring additional controversy to a wireless venture already facing lawsuits for false advertising and misleading business practices.

From late 2009 until earlier this year, Clearwire dealers were strongly encouraged to sign up new customers for its wireless services, which include a home broadband replacement offering “unlimited wireless broadband” to customers.  In many markets, scores of would-be customers in urban and poor areas failed the company’s credit checks.  One former salesman told Bloomberg as many as 60 percent of his would-be customers couldn’t pass the credit check without a manual override, often done with a copy of a driver’s license and evidence of residence in the area, such as two consecutive utility bills.

Millions of new Clearwire customers were signed up for service during 2010, with dealers and salesmen earning significant sign-up commissions and parent company Clear winning favorable media coverage for its high subscriber growth, used to attract new investment.

One distributor called the lax credit standards “a time bomb,” one that began going off as customers reneged on their contracts, didn’t bother to pay the bills, or simply canceled service while ignoring collection efforts.  But the credit standards remained surprisingly loose for an industry that routinely profiles potential customers before signing them up to service.

By mid-2010, Clearwire dealers were no longer even required to pull a hard credit report with a Social Security number.  Scores of immigrants, many without documentation, could now sign up for Clearwire service showing proof they had managed to make at least one rent payment on time.  Even customers with no credit experience were signed up for service, some who paid exclusively in cash.

One Texas dealer reported as many as 80 percent of his customers were approved with credit overrides.

Much of Clear’s dealer network is independently owned and operated, especially now that the company faces financial challenges.  The company provides dealers with strong financial incentives, including bonuses, for new customer signups.  Several former salespeople report distributors and dealers routinely pressured salespeople to sign up new customers at all costs.

“I always hear from reps ‘I’m not selling because no one can pass credit checks’,” one manager wrote. “The time has come for you to call BS and on your reps (and yourself if needed!) and for the credit excuse to END now! I will personally enter in the credit overrides under your dealer code.”

“PS, you can thank me later for DOUBLING YOUR COMMISSIONS!” the e-mail dated March 2010 read.

Some customers even managed to skip out paying on one Clearwire account while establishing another.  The runaway growth propelled network traffic for Clearwire, leading the company to implement “fair use” policies that restricted the use of the service, despite being pitched as “unlimited.”  In addition to customers who simply refused to pay their bills, some creditworthy customers signing up for service were gone within weeks after finding the service unusable.

Bloomberg notes Clear’s own numbers suggest the company had 688,000 customers at the end of 2009.  As of the end of the first quarter of 2011, that number is now 6.15 million.  But Clear’s numbers show the churn rate — customers coming and going — is high for the wireless industry at 3 percent or higher for the past seven quarters.  Verizon Wireless, in contrast, has a churn rate of 1.33 percent.

A high churn rate is a major problem because it requires Clear to spend more in marketing and sign up promotions to entice a steady supply of new customers replacing those who have left or been shut off.

Most providers who find a would-be customer saddled with sub-prime credit scores ask for a substantial deposit for service, or encourage a prepaid calling plan instead.  But Clear shows no indications of moving in either direction.

The company has managed to protect itself from financial losses from the customer merry-go-round, often at the expense of dealers who over-enthusiastically signed up deadbeat customers.  If a customer leaves or is shut off within the first six months, the dealer commission is forfeited back to Clear.

For some, this has meant the end of their business.  One dealer lost more than $500,000 in “chargebacks,” while others owe tens of thousands in repayments to Clear.

Clear’s business depends on more than just its own Clearwire customers.  Several cable companies, including Time Warner Cable and Comcast, resell Clearwire service under their respective brand names.  So does Best Buy.

Gov. Purdue: I Was for More Competition Before I Was Against It

Democratic Gov. Bev Purdue from North Carolina has managed to twist her logic into quite a pretzel over two statements from her office in the past two weeks.  On the community broadband front, Purdue protested legislation to reduce competitive choices in broadband in her state (all underlining ours):

May 20, 2011:

“My concern with House Bill 129 is that the restrictions the General Assembly has imposed on cities and towns who want to offer broadband services may have the effect of decreasing the number of choices available to their citizens. For these reasons, I will neither sign nor veto this bill. Instead, I call on the General Assembly to revisit this issue and adopt rules that not only promote fairness but also allow for the greatest number of high quality and affordable broadband options for consumers.”

Just 11 days later, Purdue inferred the exact opposite in her letter of support for the merger of AT&T and T-Mobile, which will reduce most of North Carolina to choosing among AT&T, Verizon, and in some cases Sprint.  One of her reasons?  The city of Raleigh is getting a new area code:

May 31, 2011:

The proposed merger of AT&T and T-Mobile presents another development in the marketplace which can benefit the people of my state.

The communications market in North Carolina, particularly in the wireless arena, is dynamic. Recently, the NC Utilities Commission announced the Raleigh area will soon implement a new area code, the eighth in the state, due primarily to the tremendous growth in wireless service.

In North Carolina we are committed to stimulating investments in advanced technology, and encourage quality service for the public. We look forward to working closely with AT&T to foster these important goals.

On behalf of the people of North Carolina, I appreciate your strong consideration in favor of the proposed merger of AT&T and T-Mobile.

Allow AT&T and T-Mobile to merge because Raleigh needs a new area code, proving wireless growth.  That may account among the most novel of all reasons to support a merger that will further reduce competition in the wireless market.

The $49 "cap" plan isn't your maximum monthly fee, it's the MINIMUM monthly fee. The company selling it was fined for misleading advertising.

Banking on the fact most consumers do not understand what a “gigabyte” represents, much less know how many they use per month on usage-capped broadband plans, large telecommunications companies enjoy a growth industry collecting enormous overlimit fees that bear no relation to their actual costs of delivering the service.

The social implications of “usage cap and tier” pricing are enormous, according to Australia’s Communications & Media Authority.  Australia remains one of the most usage-capped countries in the world, and broadband providers have taken full advantage of the situation to run what the ACMA calls a broadband Confusopoly.

As a growing number of mobile broadband customers in the United States and Canada approach the allowance limits on their mobile data plans, Australia’s long experience with Internet Overcharging foreshadows a North American future of widespread bill shock, $1000+ telecom bills, and families torn apart by finger-pointing and traded recriminations over “excessive use” of the Internet.

Not helping matters are providers themselves, some who distort and occasionally openly lie about their plans.  In Australia, Optus was fined $200,000 for advertising a “Max Cap $49” plan that led many to believe their maximum bill would amount to $49.  But not so fast.  Optus turned the meaning of the word “cap,” typically a usage limit, upside down to mean a capped minimum charge.  Indeed, the lowest bill an Optus customer could receive was $49.  Using data services cost extra.  The company also claimed customers could use accompanying call credits “to call anyone,” another fact not in evidence.

Another common marketing misconception is the “unlimited mobile broadband” plan — the one that actually comes with significant limits. In most cases, providers want “unlimited” to mean there are no overlimit fees — they simply throttle the speed of the service down to a dial-up-like experience once a customer exceeds a certain amount of usage.  Companies like Cricket disclose their usage triggers.  Others, like Clearwire, do not — and they are applied arbitrarily based on customer usage profiles and congestion at the transmission tower.  While annoying, at least these plans do not impose overlimit fees which lead to the growing problem of “bill shock.”

Bill Shock

North Americans getting enormous mobile data bills remains rare enough to warrant attention by the TV news.  Often the result of not understanding the implications of international roaming, customers can quickly run up thousands of dollars in mobile bills while touring Europe, cruising, or even just living along the Canadian-American border, where accidental roaming is a frequent problem.

But as Americans only now become acquainted with usage-capped mobile data plans with overlimit fees, bill shock may become much more common.

In Australia, which has had a head start with usage-capped mobile data, an incredible 58 percent of customers exceeded their usage allowances at least once in a calendar year, and this statistic comes from April 2009.  The bill shock problem has now become so pervasive in Australia, in 2010 the office of the Telecom Ombudsman received more than 167,955 consumer complaints about the practice.

In the United States, one in six have already experienced surprise data charges on their bills — that’s 30 million Americans.  The Federal Communications Commission found 84 percent of those overcharged said their cell phone carrier did not contact them when they were about to exceed their allowed service limits. In about one-in-four cases, the overlimit fee was greater than $100.

Sen. Tom Udall (D-N.M.) proposed legislation that would require a customer to consent to overlimit fees before extra charges accrue for voice, data, and text usage.

The Cell Phone Bill Shock Act of 2011 would also require carriers to send free text messages when a customer reaches 80 percent of their plan’s allowance.

“Sending an automatic text or email notification to a person’s phone is a simple, cost-effective solution that should not place a burden on cell phone companies and will go a long way toward reducing the pain of bill shock by customers,” said Udall, a member of the Senate Commerce Committee. “As more and more cell phone companies drop their unlimited data plans, this problem only stands to get worse. I am proud to stand up for cell phone consumers and reintroduce this important legislation.”

In Australia and North America, legislation to warn consumers of impending overlimit fees has been vociferously fought by the telecommunications industry.

Udall

The CTIA-Wireless Association in Washington said such measures were completely unnecessary because consumers can already check their usage by logging into providers’ websites.  Even worse, they claim, bills like Udall’s threaten to destroy innovation and harm the industry by locking a single warning standard into place.  CTIA claims that wouldn’t help consumers.

But Australian regulators, who have years of experience dealing with unregulated carriers’ usage limit schemes say otherwise, noting industry efforts to self-regulate have been spectacular successes for the industry’s bottom line, just as much as they are a failure for consumers who end up footing the bill.

Even worse, unregulated providers taking liberties with marketing claims can have profound social implications when customers find they can’t pay the enormous charges that often result.

The Brotherhood of St. Laurence, a charity, reported one instance of an elderly client who received a $1,200 broadband bill he couldn’t pay outright.  Even as he negotiated a monthly payment plan with the provider, the company shut off his home phone line without warning.

“His telephone service was particularly important because he used a personal alarm call system, which entailed wearing a small electronic device that he could activate in the event of a medical emergency,” noted a report on the incident.

The Australian Competition and Consumer Commission found a long-standing competitive feud by two large mobile providers in Australia — Telecom and Optus — has only brought more instances of marketing excesses that ultimately don’t benefit consumers.  The Commission increasingly finds it lacks the resources to keep up with the slew of questionable advertising.

Some industry critics suspect providers treat ACCC’s fines as simply a cost of doing business, and some like Optus have been rebuked more than once by the regulator for false advertising.

The ACMA says the longer government waits to protect citizens from provider abuses, the more consumers will be financially harmed, especially as data usage grows while usage caps traditionally do not.