FCC Commissioner Mignon Clyburn

At least one FCC commissioner remains unconvinced that Verizon Wireless’ recent decision to double the fee consumers pay for service cancellation is justified.  Virtually every carrier offering discounts on handsets and other equipment tie those savings to a two year service contract, with a stinging early termination fee (ETF) if one decides to leave before the contract is up.

Commissioner Mignon Clyburn released a public statement Wednesday questioning Verizon’s logic in their explanation that doubling the cancel fee from $175 to $350 helped defray costs ranging from network expansion and marketing to paying to keep the lights on in Verizon Wireless retail stores.  Clyburn called Verizon’s answers unsatisfying at best, alarming at worst.

“I am concerned about what appears to be a shifting and tenuous rationale for ETFs. No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for ‘advertising costs, commissions for sales personnel, and store costs.’ Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business. So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served,” Clyburn wrote in a public statement.

Verizon also continues to get heat over mysterious fees appearing on some Verizon Wireless customer bills.  As Stop the Cap! reported back in September, consumers with basic service plans occasionally find $1.99 “data charges” on their monthly bills, and several have obtained refunds from the carrier after pointing out they do not use data features on their phones.

The mystery was suggested solved when a purported, unnamed Verizon Wireless employee engaged in some whistleblowing at The New York Times:

“The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I’ve had phones for years, and I sometimes do that mistake to this day, as I’m sure you have. Legal, yes; ethical, NO.

“Every month, the 87 million customers will accidentally hit that key a few times a month! That’s over $300 million per month in data revenue off a simple mistake!

“Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it—and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.

“Now, you can ask to have this feature blocked. But even then, if you one of those buttons by accident, your phone transmits data; you get a message that you cannot use the service because it’s blocked–BUT you just used 0.06 kilobytes of data to get that message, so you are now charged $1.99 again!

“They have started training us reps that too many data blocks are being put on accounts now; they’re actually making us take classes called Alternatives to Data Blocks. They do not want all the blocks, because 40% of Verizon’s revenue now comes from data use. I just know there are millions of people out there that don’t even notice this $1.99 on the bill.”

Verizon's new termination fee appears random and capricious, some company critics charge.

Verizon Wireless denies it charges consumers for accidental web usage that lands on their mobile phone home page, which they claim is exempt from charges.  But Clyburn isn’t buying that explanation either.

“I am also alarmed by the fact that many consumers have been charged phantom fees for inadvertently pressing a key on their phones thereby launching Verizon Wireless’s mobile Internet service. The company asserted in its response to the Bureau that it ‘does not charge users when the browser is launched,’ but recent press reports and consumer complaints strongly suggest otherwise,” Clyburn writes.

“These issues cannot be ignored. Wireless communications are an essential part of our lives, linking us to our places of business, our communities, and our loved ones. The bottom line is that wireless companies can truly earn their desired long-term commitments from consumers by focusing primarily on developing innovative products, maintaining affordable prices, and providing excellent customer service. I look forward to exploring this issue in greater depth with my colleagues in the New Year,” she adds.

Verizon Wireless is also the only carrier that has not responded to a campaign by a Times columnist to let customers get rid of the airtime-wasting 15 seconds of voicemail instructions people wait through when trying to leave messages, something the wireless industry admits is there precisely to use up airtime and maximize revenue.

Clyburn joined the Commission this year, appointed by incoming President Barack Obama.  Her father James is the third-ranking Democrat in the House behind House Speaker Nancy Pelosi and Majority Leader Steny Hoyer.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WIVB Buffalo Best and Worst Cell Providers 12-7-09.flv[/flv]

WIVB-TV Buffalo reviewed Consumer Reports’ findings regarding the nation’s best and worst cell phone providers.  Despite Verizon’s controversial fees, it remains top-rated by the magazine’s readers. (12/7/09 – 2 minutes)

A new report from Frost & Sullivan (pricey subscription required) warns wireless broadband providers may have to implement limits on the amount of data consumed by customers, a surprising result considering the vast majority of carriers already do.

The business research and consulting firm says some wireless carriers are struggling to balance the consumption they encouraged with the physical capacity of their networks.  Citing AT&T’s iPhone and its data-rich App Store, which lets consumers download data applications to run on their phone, the research shows data consumption has increased dramatically as consumers integrate smartphones into their daily lives.

“We all knew as an industry that mobile data would grow, and we saw these growth curves that were a 45-degree angle upward,” said James Brehm, senior consultant at Frost & Sullivan. “But the true growth of the iPhone, when you chart it, looks more like a hockey stick.”

The demand for data is pressuring the industry to invest additional money for upgrades, and Wall Street isn’t happy with a trend that guarantees expensive upgrades will be required to meet customer demand — upgrades that would come straight out of revenue, unless a dramatic shift takes place towards consumption-based billing.

“You’re going to see some push back from consumers, but AT&T’s not going to be the only one that’s going to have to do this,” Brehm said. “Every service provider out there is going to ultimately change the way mobile data is consumed and priced over the next few years.”

The argument essentially comes down to how much revenue wireless carriers will be forced to invest in their networks, and how much noise they will hear from investors for doing so.  Wall Street prefers customers pay the costs for upgrades by increasing prices for data service, which would assure revenue expectations remain stable.  Customers demand wireless carriers invest some of their profits back into their networks to improve service and in return enjoy customer loyalty and any revenue earned from selling additional services.

Some carriers are choosing to stay out of the fight, claiming they already have sufficient capacity to serve customers.  Besides, most of them already have usage limits on their services, traditionally set at a maximum of 5GB of consumption per month.

T-Mobile believes it already has enough capacity to meet the growing demand from data-hungry smartphones.  It has invested in new technology that claims to triple current 3G speeds and works with current 3G phones,  meaning customers don’t have to buy a new phone to enjoy the faster speeds.

Sprint is constructing its 4G network and already sells service in several cities through Clearwire.  Sprint claims unlike some of its competitors, it intends to stay ahead of the growth curve by investing now in additional spectrum and technology to manage its networks.  Sprint claims it has plenty of room to expand capacity.

Verizon Wireless says it has more consistently upgraded its network over the past decade than any other carrier, and is well prepared to accommodate even the iPhone.

“We have put things in place already,” Verizon Wireless Chief Technology Officer Anthony Melone tells Business Week. “We are prepared to support that traffic.”  Next year, the nation’s largest wireless carrier will be rolling out 4G upgrades in America’s 30 largest cities, although primarily for mobile broadband service accessed through a mobile broadband dongle.

Verizon already limits consumption on its wireless plans to a maximum of 5GB per month, with overlimit penalties for those that exceed it.

Most of the attention remains focused on AT&T and the iPhone, because the data plan provided for iPhone customers does not carry a specified limit.

Vipin Jain, chief executive of Retrevo, a consumer electronics shopping Web site told the Chicago Tribune, “As soon as you put a cap (on data usage), there’s going to be a backlash.”

So what keeps wireless providers from upgrading their networks and keeping consumption billing and usage caps away?

In addition to pressure from Wall Street, another Frost & Sullivan report points to an unsettled marketplace.  The progression towards 4G has been stalled because of the economic downturn, the report says.

Frost & Sullivan ICT Program Manager Luke Thomas says carriers are still waiting for consensus on several issues, including support for voice and SMS and a harmonized frequency band for 4G traffic.  Thomas also says many cell towers have limited capacity to support additional traffic.  A tower can deliver only as much data as its connection back to the provider’s network can handle.  Once the “backhaul” link is saturated, calls start to drop and data speed slows.  Many still rely on dedicated, relatively slow copper wire circuits, although fiber optic links are becoming increasingly common.

Thomas also believes carriers will need additional spectrum, a minimum of 20MHz, to make 4G upgrades worthwhile.

Without all of these factors, Thomas believes the potential return on investment won’t be high enough to justify moving forward any time soon.

Verizon Wireless has defended their decision to double the early cancellation fee (ETF) for consumers purchasing “smartphones” and netbooks from the wireless carrier.  In a letter from Kathleen Grillo, Senior Vice President of Federal Regulatory Affairs, Verizon claims the new $350 fee is justified and actually benefits consumers by providing them with a substantial discount on the cost of the equipment they might not otherwise be able to afford.

“The higher [cancel fee] associated with Advanced Devices (click link to see a list of impacted equipment) reflects the higher costs associated with offering those devices to consumers at attractive prices, the costs and risks of investing in the broadband network to support these devices, and other costs and risks,” Grillo wrote as part of a 77-page submission to the Federal Communications Commission, which demanded an explanation for the price increase.

Grillo claims Verizon’s fees are actually good for consumers:

Verizon Wireless’ term contracts with ETFs promote consumer choice and broadband deployment. This pricing structure enables Verizon Wireless to offer wireless devices at a substantial discount from their full retail price. By reducing up-front costs to consumers, this pricing lowers the barriers to consumers to obtaining mobile broadband devices. It thus enables many more consumers, including those of more limited means, access to a range of exciting, state of the art broadband services and capabilities. The company’s pricing structure therefore promotes the national goal of fostering the greater adoption and use of mobile broadband services. At the same time, consumers are protected by Verizon Wireless’ detailed disclosure practices described in this response, by the Worry Free Guarantee, which allows customers to terminate within 30 days of activation without an ETF, and by the monthly reduction in the ETF amount.

Grillo claims Verizon customers can also purchase a phone at the retail price and avoid a service contract.  Verizon Wireless, for example, charges contract customers $199.99 for the Motorola Droid.  But customers who do not want a contract can purchase the phone from Verizon for $559.99.

In North America, most major cell phone companies subsidize the cost of wireless handsets and make up the difference over the life of a typical two-year service contract.  Cell phone companies claim consumers benefit from the arrangement because they are able to acquire a new phone every two years at a substantial discount.  Some consumer advocates and members of Congress disagree, suggesting carriers more than earn back the cost of the subsidized phone over the life of the contract.  Although customers purchasing a retail-priced phone don’t have to worry about a two year contract, they pay artificially higher prices for service plans designed to recoup the costs from those who did take discounted phones.  The result is a strong incentive to commit to a contract and take the phone, since you will essentially be paying for it anyway.

The Government Accountability Office found early termination fees to be among the top four consumer complaints filed with the FCC about wireless carriers.  Sen. Amy Klobuchar (D-Minnesota) re-introduced legislation December 3rd to try and limit early termination fees.

Senator Amy Klobuchar

“Changing your wireless provider shouldn’t break the bank,” Klobuchar said in a Dec. 3 statement. “Forcing consumers to pay outrageous fees bearing little to no relation to the cost of their handset devices is anti-consumer and anti-competitive.”

The Cell Phone Early Termination Fee, Transparency and Fairness Act would prevent wireless carriers from charging an ETF that is higher than the discount on the cell phone that the company offers consumers for entering into a multi-year contract. For example, if a wireless consumer enters into a two-year contract and receives a $150 discount with the contract, the ETF cannot exceed $150.

The legislation would also require wireless carriers to prorate their ETFs for consumers who leave their contracts early so that the ETF for a two-year contract would be reduced by half after one year and to zero by the end of the contract term. In addition, the bill would mandate that wireless carriers would provide “clear and conspicuous disclosure” of the ETF at the time of purchase.

Co-sponsoring the bill with Klobuchar are Sens. Russ Feingold, Jim Webb and Mark Begich.

[flv]http://www.phillipdampier.com/video/CNBC Amy Klobuchar ETF Fees 9-13-07.mp4[/flv]

Back in 2007, Sen. Klobuchar introduced nearly identical legislation to deal with mobile phone providers charging high termination fees.  CNBC ran this debate between Klobuchar and the cell phone trade association.  Klobuchar found herself in a 2-against-1 debate when the CNBC anchor defended the wireless industry.  (9/13/07 – 5 minutes)

Wind Mobile uses "home zones" as their version of "in network" calling. Placing calls outside of your home zone is akin to "roaming" and can incur additional costs. Here is their service area in the metro GTA (Toronto-Hamilton).

The Canadian Radio-television and Telecommunications Commission has been overruled in an upset decision by the Harper government to admit new competition into Canada’s mobile phone marketplace.  Earlier this fall, the CRTC denied a license to Globalive to begin mobile service under its Wind Mobile brand, agreeing with objections from incumbent providers Bell, Rogers, and Telus that the company was not sufficiently “Canadian enough” in its ownership to operate legally in the country.  The CRTC decision upset many consumers who saw the regulatory body overprotecting the interests of the country’s three large mobile providers, effectively keeping competition out of Canada.

Canada’s version of the FCC ruled that because the Toronto-based company received most of its funding from Naguib Sawiris, an Egyptian billionaire that runs Egypt’s telecommunications provider Orascom, it disqualified Globalive from doing business in Canada.  Cell phone providers in Canada must be majority owned by Canadian citizens.

Apparently the decision was so egregiously wrong, the Harper government overturned it on December 11th.  Industry Minister Tony Clement said a government review of Globalive found the company did meet Canadian ownership requirements and reversed the CRTC decision effective immediately.

The Harper government’s direct intervention in the Globalive matter rocked Canada’s existing mobile providers.

“If Wind is Canadian, then so was King Tut,” Michael Hennessy, head of regulatory affairs for Telus, wrote on his Twitter page. “When you have no effective opposition party, you can make the rules you want.”

Rogers has repeatedly insisted there is no room for a fourth player in Canadian mobile, claiming there isn’t enough business to go around.  Stockholders apparently agreed and shares of all three incumbents dropped when the news broke that Wind Mobile was on the way in Toronto and Calgary in as little as a week.  Indeed, some analysts predict Globalive’s entry could force two of the existing carriers to merge — most likely Bell and Telus.

Rogers CEO Nadir Mohamed: “There’s no question in my mind that Canada cannot support more than three national facilities-based players,” he said in an interview with Bloomberg News the day before the government decision. “It’s inconceivable to me.”

“We think Globalive clearly does not meet the requirements for Canadian control,” Bell officials said in a statement. “We’ll be taking a close look at the reasoning behind this decision.”

Canadian consumers are excited about the arrival of competition in a marketplace with three providers charging essentially identical high pricing for mobile service.

Wind Mobile could dramatically change the the entire business model of Canada’s cell phone marketplace because most of its plans offer flat rate service for Canadian customers with no overage fees.  It also does away with the nickle-and-dime fees consumers hate, with no charges for “system access,” “911,” and other non-government-imposed fees and surcharges.  Wind doesn’t even charge for incoming text messages or received long distance phone calls.  That means text spam doesn’t cost you anything beyond irritation.

In return for not subsidizing the cost of your phone, the company doesn’t compel subscribers to remain on lengthy service contracts.  That Blackberry Bold 9700 that costs $199 on AT&T or T-Mobile’s network in the United States costs $450CDN from Wind Mobile, but no two year contract is required.

The only downside?  Wind Mobile’s network is very limited at present to Toronto and Calgary, and while service is available throughout Canada, using it will incur roaming charges around 25 cents per minute.  Most early Wind Mobile customers will likely be those who don’t roam too far from home because of these limitations.

[flv width=”640″ height=”388″]http://www.phillipdampier.com/video/CBC Coverage Wind Mobile 12-11-09.flv[/flv]

CBC Television ran extensive coverage of the government decision to admit Globalive into the Canadian mobile marketplace.  We’ve combined several reports into a single clip that explores consumer reaction, the government’s logic in permitting Wind Mobile to start service, as well as the discontent from existing providers who feel the decision is unfair.  (12/11/09 – 21 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/CTV Coverage Wind Mobile 12-11-09.flv[/flv]

CTV News also covered the story, and included a more extensive review of what consumers can expect from the deal.  (12/11/09 – 5 minutes)

[flv]http://www.phillipdampier.com/video/Global CRTC Decision Lets Wind Mobile In 12-11-09.flv[/flv]

Global Television led its newscast with the story on December 11th, and included a pouting Telus representative.  (2 minutes)

More video coverage can be found below.

Wind Mobile Pricing & Features (provided by Wind Mobile, all prices in Canadian dollars)

Handsets / Devices:

BlackBerry Bold 9700 …… $450
HTC Maple ………………….. $300
Samsung Gravity 2 ……….. $150
Huawei U7519 ……………… $130
Huawei E181 data stick…….$150

Here’s what we don’t have:

• No system access fees
• No 911 fees
• No activation fee
• Never a charge for incoming texts
• No charge for incoming long distance calls
• No difference between plans for postpaid and prepaid
• No contracts. Our Customers stay with us because they want to, not because they have to.

What we do have:

• Nation-wide coverage with a domestic roaming partner
• Unlimited calling (incoming and outgoing) in the GTA and Calgary to start, followed by Edmonton, Vancouver and Ottawa in early 2010
• Unlimited WIND to WIND calling across Canada included on all plans
• Unlimited province-wide calling on the $35 plan
• Unlimited Canada-wide calling on the $45 plan
• Call control included on all plans (missed call alerts, caller ID, call forward, call waiting)

Wind Mobile's Voice & Text Plans

Wind Mobile's data plan has a 5GB per month "fair access policy" limit, similar to that offered by Cricket Wireless. Exceed it, and the company reserves the right to throttle your speeds until the month is up.

Watch more video coverage below.

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While Verizon Wireless and AT&T Mobility have settled their differences in the courtroom, agreeing to withdraw mutual lawsuits against one another over their advertising claims, the war on the airwaves continues.  We had some good response to the last round of ads and lots of people dropping by to watch them, so it’s time for another round of fun.  Most of the ads will appear below the page break, so be sure to select Continue Reading… to see the entire article.

In North America, the holiday season is  -the- time of the year to move mobile phone products.  They are a perennial favorite for gift giving and providers know it, so they pull out all of the stops on advertising.  Verizon Wireless upped the ante this year by vilifying AT&T’s 3G coverage areas to gain a competitive advantage.  A clearly stung AT&T has since struck back with Luke Wilson, going all out to challenge Verizon’s map claims with postcards and marbles, as well as a website to de-fang Verizon’s map comparisons.  We’re even back to AT&T taking pot shots at Verizon over those “milky minutes” that expire at the end of the month.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Marbles.mp4[/flv]

Verizon Wireless is full of marbles in AT&T’s view.  Luke Wilson tries to do damage control over Verizon Wireless calling out AT&T’s 3G map coverage.

… Continue Reading