Rogers Wireless has withdrawn a proposal placed before Canadian regulators to force its competitors to pay up ex-customers’ unpaid cell phone bills.

In mid-January, Rogers filed a request with the Canadian Radio-television and Telecommunications Commission (CRTC) requesting the agency force other cell phone companies to make good on any past due balances left when customers switched providers.

When other providers didn’t get on board, the company withdrew the proposal.

Rogers’ proposal would have left a customer’s new cell phone provider on the hook for any past due charges left on that customer’s final bill.  With early termination fees running well over $100, that’s a big tab to drop on Canadian cell phone companies, particularly for new entrants in the marketplace.

Providers would have had to require verification of a “clean break” from a previous provider before taking on new customers, creating bureaucratic red tape, and a built-in incentive to hold customers in place.  But the company first advocated the proposal as a solution to the problem of past due balances.

“Customers porting out mid-contract with unpaid balances are costing Rogers, and most probably other wireless carriers as well, millions of dollars each year,” the company said. “The task of collecting these unpaid balances is made much more difficult once a customer ports their number to a new carrier as the relationship has been terminated.”

Rogers claims the problem of unpaid balances on canceled service became a problem after the advent of number portability in 2007.  Customers switching providers can keep their existing cell phone number.  With even greater competition in the Canadian wireless marketplace, customers are more willing than ever to take their business elsewhere, occasionally not paying their last bill.

Critics accused Rogers of trying to throw roadblocks up to make switching a hassle.

Michael Janigan, executive director at the Public Interest Advocacy Centre, a consumer watchdog, told CBC News Rogers’ move is an attempt to slow down the loss of Rogers’ market share.  Rogers’ new competitors, including Wind Mobile, and better prices from Telus and Bell are prompting customers to switch.

“This is the clear downside of long-term contracts for a supplier and now they want regulation to solve a problem brought about by market forces,” he said.

The provision would have benefited Rogers in at least two ways:

1. It would give Rogers advance warning a customer was prepared to switch, as soon as a new provider inquired as to that customer’s final balance.  That would allow Rogers to reach out to the customer with special incentives like retention deals, which could persuade a customer to stay;
2. Competitors would have had to build in a delay before they agreed to finalize a provider change, so they didn’t expose themselves to past due penalties from the former provider.  That inconveniences customers who would have to wait for their old provider to send a balance verification.

When asked why Rogers simply didn’t turn over past due balances to collection agencies, the company claims that method is not particularly effective.

“Collections and risk management systems are in place to mitigate the impact, but … the effectiveness of these measures is limited, especially in cases where the unpaid balance is significant,” the company said.

Some other Canadian providers weren’t impressed with Rogers’ proposal.

“Telus couldn’t disagree more with Rogers on their proposal,” said spokesman Jim Johannsson. “It’s not consumer focused, it’s not transparent, doesn’t promote consumer choice and runs counter to everything we are striving for as an industry.”

The blowback from customers was far worse.  A sampling:

“Canada has diversified its wireless market from Robbers and Bhell to allow for companies like Wind to offer much better prices/services & “CUSTOMER SERVICE”. What exactly is Robbers going to do? Send Jack Bauer? Their sub-par overpriced service deserves this. As Canadians we need to start a revolution against these monopoly giants who just leech off vulnerable middle-class Canadians. Even after we wash our hands of them, they still reach for our wallets.”

“Burn your bridges Rogers, keep tickin’ off your customers, and have the gall to expect their competitors to help them. It’s a tough world when you are not a monopoly, eh?”

“Rogers, they’re leaving you high and dry after you sucked the life out of your customers.  You expect respect when none is given. How the tides have turned.”

A few days after comments like that, Rogers flip-flopped and caved:

“We decided to withdraw it as it just didn’t seem appropriate,” said Jan Innes, a Rogers spokesperson.

We’ve heavily covered the proposed sale of Verizon landline service to Frontier Communications since the deal was announced last spring.  This should not come as a big surprise, considering Frontier Communications’ decision to insert a 5GB monthly usage limit in their Acceptable Use Policy in the summer of 2008 was what instigated the launch of Stop the Cap! in the first place.  Frontier’s decision was boneheaded at best in a city like Rochester with a very aggressive cable competitor only too willing to bash Frontier for implementing it if they thought it would win more customers.

But of course Frontier Communications’ Rochester operation is an anomaly for ‘rural America’s phone company.’  For the majority of rural customers, it’s far easier to slap customers around with a usage cap and 1-3Mbps DSL service when those customers have few, if any practical alternatives.  Unfortunately, there is real money to be made from their business plan serving frequently non-competitive communities with incrementally-upgraded “just enough” broadband service with unfriendly terms and conditions attached.

In several of the 14 states impacted by the proposed sale, the relatively small number of customers involved made it easy for regulators to quickly approve the proposal with few conditions attached. The deal flew under the radar and got scant press in most of these states.  Washington, Ohio, and West Virginia are another matter.  Regulators are taking a closer look at the deal in all three states where most of the controversy is taking place.  The deal is most contentious in West Virginia, where Verizon’s exit threatens to turn most of the state’s landline business over to Frontier Communications.

Stop the Cap! has been reviewing the public comments left on more than a dozen news sites, forums, and printed letters to the editor regarding the deal.  We’ve seen comments obviously coming from Frontier employees, union members, politicians, business leaders, and competitors.  But the vast majority come from ordinary consumers who have concerns about what the deal will do to their telephone and broadband service.  Most of the comments from consumers that embrace the sale don’t do so because they are fans of Frontier.  They simply loathe Verizon and want an alternative.  Boiled down, the consensus among those in favor of Frontier taking over is “let them try… they can’t do any worse than Verizon.”

[flv]http://www.phillipdampier.com/video/WCHS Charleston PSC Phone Hearing 1-12-2010.flv[/flv]

WCHS-TV in Charleston covers West Virginia’s Public Service Commission hearings reviewing the proposed deal.  Frontier employees arrived in Charleston to lobby for the sale. (1 minute)

Desperate for Broadband

There are a lot of West Virginians who still have no broadband options.  Frontier claims Verizon provides only 60 percent of their customers with a broadband option — DSL service that tops out at 7Mpbs, if you live in an urban area.  Those that don’t have often waited years for Verizon to extend DSL service into their communities or neighborhoods.  It’s a problem common in mountainous, often rural states like West Virginia where infrastructure costs can be prohibitive.  Customers believe that Frontier Communications will tolerate a lower return on their investment providing DSL service to those customers Verizon ignored.

Promising to expand broadband service in rural, unserved areas is a common sales point for all of the prior Verizon sell-offs.  Hawaiian Telcom promised improved broadband service and speed.  Fairpoint promised to expand DSL availability to 75 percent of all access lines within 18 months of the sale, 85 percent within two years and 95 percent within five years.  Frontier Communications promises to expand broadband service as well, claiming they already provide 92 percent of their existing West Virginia customers with the option.  Of course, Hawaiian Telcom and FairPoint both reneged on their commitments before going bankrupt.  Frontier Communications hasn’t yet been held to any specific commitment or timeline in West Virginia as part of their proposed takeover of service.

Consumer Reports rated TV, phone, and Internet providers, including Verizon and Frontier, in its February 2010 issue

To those suffering with dial-up or satellite fraudband, -any- broadband option seems like a miracle, even if it turns out to be 1-3Mbps DSL service with a 5GB allowance.  But as those kinds of anemic speeds arrive, cutting edge multimedia-rich broadband applications will become increasingly mainstream and leave these customers behind, again.  With a 5GB usage limit, it wouldn’t matter anyway, because customers will never be able to take advantage of services that will rapidly blow through those limits.  Make no mistake, a user’s broadband experience at 1.5Mbps with a 5GB allowance is going to be considerably different than a customer enjoying online multimedia from a cable provider or the next generation broadband service from Verizon FiOS or AT&T’s U-verse.  Think e-mail and basic web browsing, and that’s about all.

What kind of broadband experience does Frontier Communications bring?  This month, Consumer Reports rated Frontier dead last among DSL providers that own and operate their own broadband networks (subscription required).  The magazine rated 27 regional fiber, cable, and satellite providers and Frontier’s DSL ended up #19 on the list, the lowest rating of any DSL provider selling service on its own network.  Only Earthlink, which usually buys access on other providers’ networks came in lower among DSL providers.  Verizon actually scored higher than Frontier.

Frontier’s DSL service merited a 67 out of 100 score, rating only fair on value, speed, reliability, and customer support, based on 56,080 Consumer Reports subscribers who have a home Internet account.

Frontier’s phone service rated even lower, second to last in the survey.  Frontier was rated fair on value, reliability and call quality.  Only Mediacom did worse.  Verizon scored much better on reliability.  The magazine’s survey of phone companies was based on 37,484 respondents with phone service and was completed in the spring of 2009.

The consumer magazine did not recommend DSL for broadband access, suggesting consumers would do better with fiber optic broadband first, and cable modem service second.

Union Bashing – The enemy of my enemy is my friend

A significant minority of comments were focused entirely on union bashing, completely ignoring the specifics of the Frontier-Verizon sale.  All these people knew was that if the Communications Workers of America or other union was involved, they were the “real problem,” accusing union bosses of opposing the deal until they were paid off.

Nonsense.

Reality trumps anti-union talking points.  Consumers can review for themselves who correctly predicted the outcome of the last two deals of the recent past.  They were the CWA and the International Brotherhood of Electrical Workers, who accurately identified the service problems, the network transition problems, the debt load that prevented service expansion and upgrades, and the eventual bankruptcies experienced at Hawaiian Telcom and FairPoint Communications.  It turns out that asking front line employees who work in the office and out in the field maintaining the network are well positioned to give an honest assessment of these transactions that others seek to candy coat to get the deal done.

[flv]http://www.phillipdampier.com/video/WSAZ Charleston Frontier Defends Deal 1-12-2010.flv[/flv]

WSAZ-TV in Charleston delivered this decidedly pro-Frontier news report on the company’s efforts to counter opposition to the proposed sale. (3 minutes)

The Opposition

A large number of comments from those who oppose the deal believe they will actually be far worse off with Frontier.  Most relate the experiences of themselves or their friends and family who live in Frontier service areas, and they’re unhappy with Frontier’s poor customer service, reliability, and slow speed DSL.  Many were also unhappy with Frontier’s automatically-renewing contracts committing customers to stay with the company or face a steep early cancellation penalty.  Many more lament the lack of a future with Verizon fiber optics.

David Swanson, who blogs from his home in Golden Valley, Arizona just dumped Frontier for his local cable provider – Golden Valley Cable & Communications.  He says he was overpaying for Frontier’s DSL and phone package.  Together, after fees and taxes, $90 a month went to Frontier and $73 a month went to DirecTV for television service.  With his new cable bundle, he pays $100 a month for everything.  He uses Boost mobile for his phone, and has no need for a landline.

Reviews on DSL Reports aren’t exactly positive about Frontier either.

One Rochester customer isn’t happy with the “spotty service” he’s experienced on Frontier’s aging copper wire infrastructure, noting they don’t seem to be in any hurry to upgrade facilities in western New York.  He’s stuck with unreliable DSL service far slower than what Time Warner Cable’s Road Runner service can provide. Another customer in Lowville, New York admits he has to live with Frontier’s slow speed DSL because there is no other provider available.  In Kingman, Arizona one customer rated the company’s DSL service “slightly better than nothing.”

Even customers who had had good things to say about Frontier in forums often acknowledge their service simply isn’t a good value when considering the high cost charged for the slow speed received.

What Can Be Done?

At this point, it is critical impacted customers contact their state utility commission and state representatives and tell them this deal does not work for you.  It is true Verizon wants out of these service areas, and should they win the right to withdraw someone will have to assume control of landline operations in these communities.  But the terms and conditions for the company seeking to provide service should favor customers and not the Wall Street dealmakers.  Strict financial pre-conditions should be in place to guarantee the buyer is up to the task of providing service and upgrades.  Historically, it’s been far too easy to simply renege on the deal with a quick trip to Bankruptcy Court to shed the debt these deals pile on, and be rid of the service commitments that were part of the approval process.

A company that believes they’ll earn plenty from this deal should be spending plenty to provide quality broadband service starting at 10Mbps, not the 1-3Mbps service Frontier provides most of its rural service areas.  What chance do communities in West Virginia have to stay competitive in a digital economy that requires faster broadband access without the ridiculously low usage limits Frontier includes in their customer agreements?  In fact, usage limits and other Internet Overcharging schemes should be explicitly banned as part of any sales agreement.

Holding Verizon responsible for the outcome of deals that benefit them and their shareholders while sticking customers with a bankrupt provider must be considered.  An important component of past Verizon’s landline-dumping-deals involves the Reverse Morris Trust — delivering a tax-free transaction for Verizon and piles of debt for the buyer. That puts all the risk on ratepayers, lower level employees who are among the first to go when cost-cutting begins, and head-scratching regulators wondering where it all went wrong.  The only ones not doing any hand-wringing are Verizon’s accountants and the executive management of both companies who conjure up such deals.  That’s because they are rarely held accountable, and often win retention bonuses even while a company is mired in bankruptcy.

Regulators should insist Verizon play a fundamental role in insuring that customers are protected even after the deal closes, honoring commitments and financing operations should the buyer fail soon after the sale is complete.  Under these conditions, customers are protected and Verizon might think twice about structuring a deal that loads the buyer down in insurmountable debt.

“This deal is driven by greed — and we can learn from Northern New England’s and Hawaii’s experience to make sure it does not come to pass here or in the other 13 states,” said CWA’s District Two Vice-President Ron Collins, who has been leading the campaign in West Virginia.

Customers unhappy with Sprint’s mobile service need not wait until the end of their contract term to switch providers without incurring an expensive early termination fee.  Sprint has changed its pricing for their monthly regulatory fees from $.20 to $.40 per month.  Although it sounds all-official-sounding, in fact it’s nothing more than pure profit padding.  It’s a “junk fee” thrown on to customer bills ostensibly to pay for the company’s costs of complying with legal regulations.  In fact, a lot of it probably ends up paying for their lobbyists.

No matter, because you can use this pesky fee to your advantage if you were thinking of switching providers.  Your contract with Sprint includes a clause pertaining to a “materially adverse changes” to your contract with Sprint, and paying even more for your Sprint service sounds mighty adverse to me.

This means you get to break your contract, leave, and pay them zero in cancellation fees on the way out the door.  If you are happy with Sprint service and want to stay, you can also use the extra charge to extract free add-ons, like a free texting plan or other calling feature.  Maybe you want a new and better phone now at a substantial discount instead of waiting until the end of your contract.  Or maybe you just want to refuse paying this junk fee.  All things are possible during your 30-day window of opportunity to your favor, depending on the representative you reach and their authority to act on your behalf.

The Consumerist has some great pointers to prepare you for the call or online chat you are about to have with Sprint.  Be prepared for some varying degrees of push back from the company representatives, many who will be under-informed about your right not to pay junk fees and get out of your contract without penalties:

• When you call, they will ask you why you are canceling and try to get you to say you are unhappy with some other aspect of the service. You need to stick fast to your guns and insist, no matter what, that the only reason you are canceling is because you are rejecting this materially adverse change in contract terms and conditions.
• Not looking forward to playing head-games over the phone? Some readers have had better luck using online chat. “They just copy-and-paste a few canned pleas for you to stay, and all you have to do is type no thanks,” says commenter ohenry. “Plus then you can save your chat.”
• Yes, you can keep your phone number and port it to another provider.
• Yes, you may be able to use this to switch to a month to month plan.
• You only have January 31, 2010 to cancel.

The Consumerist site has a comments section with the experiences of those looking for the exit.

Customers in New York City attempting to order an iPhone direct from AT&T's website saw this message over the weekend

While much speculation about this week’s two-day unavailability of the iPhone for those in the Big Apple has often centered on the company running out of capacity, the more likely explanations are far simpler — the regional fulfillment center temporarily ran short after a holiday rush and AT&T wanted to stem the tide of increasing numbers of bottom-feeding eBay resellers doing business in the Tri-State area.

Customers in the New York metropolitan area discovered Saturday they couldn’t order an iPhone from AT&T’s website after entering a New York-area zip code.  Customers were told “we’re sorry, there are no Packages & Deals available at this time — please check back later.”  By Monday afternoon, orders were being processed normally.

The mystery deepened when some blogs began speculating the reason for the order blockade had to do with AT&T’s data capacity in New York City, suggesting the wireless company had reached its limit and halted sales accordingly.  They had the right to speculate if online chats with AT&T sales representatives were to be believed.  The Consumerist found two different explanations during their chats:

Daphne: Welcome to AT&T online Sales support. How may I assist you with placing your order today?

Laura: Hi, I was looking at the iPhone 3Gs and the system tells me that I cannot order one in my ZIP code. My zip code is 11231. (Brooklyn, NY) Is this true? Are iPhones no longer available in New York City?

Daphne: I am happy to be helping you today . Yes, this is correct the phone is not offered to you because New York is not ready for the iPhone.

Daphne: You don’t have enough towers to handle the phone.

Laura: Thank you for your help. So the phone is not available to people anywhere in the city?

Daphne: Yes this is correct Laura.

AT&T didn’t help matters with a non-denial denial issued by AT&T spokesman Fletcher Cook, who said only that the phone company periodically “modifies” its distribution channels. He had no comment about why the company resumed sales.

By not denying the capacity narrative that gained popularity earlier this week, it confirmed it in the popular press, including two local television news reports detailing the ‘sales outage.’

[flv width=”596″ height=”356″]http://www.phillipdampier.com/video/WNBC New York iPhone Sales Stopped 12-28-09.flv[/flv]

WNBC-TV reports on the unavailability of the iPhone in New York and AT&T’s ongoing problems with reception, service, and now PR in the Big Apple. (2 minutes)

With that story feeding the greater narrative that people “love the iPhone, hate the network,” AT&T better get on the phone with Luke Wilson and start taping some new ads.

In reality, Cook’s vague statement is something you’d expect from a spokesman who hasn’t been briefed on what really happened and needed to go with something to placate media speculation.  The data capacity theory would only make sense if the company suspended sales across all channels.  Except they didn’t.  Beyond the post-holiday low inventories found by some shoppers, New Yorkers could still find and purchase the iPhone in AT&T retail stores and through third-party retailers.  One could even order the phone from Apple.  Could unofficial ‘over-eager’ customer service representatives be responsible for the volunteered excuses noted above, either of which would ignite a firestorm of bad press for AT&T?

An increasingly annoying problem confronting cell phone companies is the eBay bottom-feeder and other gray market sales of the popular phone.  Both AT&T and Verizon have had growing problems with resellers who purchase a subsidized smartphone, agree to a two year contract, and immediately cancel it and resell the phone.  And they’ve been cashing in.

AT&T sells a new iPhone 3GS with 16 gigabytes of memory for $199.  When a reseller cancels the contract and keeps the phone, they pay a $175 early termination fee.  That means the phone costs them $374.  They then easily modify the phone to work with other cell phone companies and resell it for upwards of $600 or more on eBay, pocketing a nice $226 in profit.  Demand for the iPhone abroad is high, and considering the value of the dollar remains relatively low, Europeans can snap one up at a fire sale price.  Outside of North America, wireless phone companies don’t discount handsets like the iPhone.

Verizon Wireless has tried to deal with this problem by doubling the early termination fee on smartphones to $350.  That nearly eliminates the profit motive to resell affected phones.

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WABC New York iPhone Sales 12-28-09.flv[/flv]

WABC-TV New York calls the latest iPhone mess “salt in the wound” for many New York-area AT&T customers.  (1 minute)

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)