Verizon's Herd Mentality

Saturday will be the final day Verizon Wireless customers will be able to sign up for one-year service contracts and still get a discount on new equipment.

Effective April 17, customers will have just two choices for service — the ubiquitous two year contract with a steep early termination fee or month-to-month service priced artificially high to recover equipment subsidies off-contract customers do not receive.

Verizon claims the changes will “reduce consumer confusion,” which suggests customers couldn’t make up their minds between contracts for one year or two.  But the company claims most subscribers managed soon enough, usually choosing two year contracts to maximize discounts on equipment.

Some media outlets suggest the change is to discourage customers from abandoning Verizon Wireless for AT&T by holding them to longer two year contract terms.  But with AT&T losing customers to Verizon, that is an unlikely reason.

More likely is the company’s ongoing “simplification” of service plans, which has the unfortunate side effect of herding customers into plans that may not serve them well.  Verizon earlier did away with their popular “New Every Two” handset bonus plan which rewarded loyal customers renewing their contracts with additional $50 discounts.  The company also has cut back on other discounts on equipment, driving an increasing number of customers to third party retailers like Wirefly.

The one year service plan was established to let customers get some discount on wireless equipment without tying them down to a 24 month service commitment.  Since wireless providers build in cost recovery of the subsidies they “give” customers, you effectively pay back those discounts over two years by in the form of overpriced service plans.  Month to month “off-contract” customers do not get the benefit of any discounts for new equipment, but pay the same high prices for service everyone else does.

If your contract has recently expired, or you never had one, you might do better with Page Plus or Wal-Mart’s “Straight Talk” which both rely on Verizon’s network, but sell service at much lower prices, without a contract.

Verizon Wireless wins bragging rights this month as a new study shows fleeing iPhone owners on AT&T’s network were willing to put up money just to get out of their contracts and switch to Verizon. Two of every three departing customers paid AT&T up to $300 to break-up with the carrier and bought new iPhones that work on Verizon’s network.

The study, produced by Mobclix, found reception on AT&T’s network was by far the biggest issue cited by exiting customers, followed by Verizon’s offer of a personal hotspot add-on, and the perception Verizon runs a more robust network.

Mobclix found Verizon’s newest customers may have a point about who runs the stronger network.  Many AT&T customers are accustomed to relying on the company’s broadening Wi-Fi network to cope with 3G reception woes.  At least 53 percent of AT&T customers rely on Wi-Fi regularly for data connectivity.  On Verizon’s network, just 38 percent do.

But predictions of a stampede away from AT&T to Verizon have turned out not to be true, either.  Just 14 percent of America’s iPhone owners are on Verizon’s network.  AT&T serves the rest.

Analysts suspect the reason for this is that AT&T’s worst problems are in certain major metropolitan areas, but the carrier does respectably well providing service in many smaller and medium-sized cities.

Mobclix produced a map which may bear this out.  It shows the largest concentration of Verizon iPhone owners in the cities that are routinely cited as problem areas for AT&T:  San Francisco, New York, Seattle, Chicago, Boston, and Los Angeles.

“Based on our survey findings today, it’s clear that consumers are taking control of their mobile destinies by evaluating carrier criteria such as Wi-Fi usage, reception issues and reputation as part of their decision to remain with their carrier or make a switch,” said Krishna Subramanian, Mobclix co-founder.

(click to enlarge)

Here in West Virginia, cell phone reception is often by the grace of God.  The incredibly mountainous state makes “line of sight” communications a real problem when the nearest cell tower is blocked by a gigantic shale rock formation someone blasted through to build a road decades earlier.

AT&T probably still delivers the largest coverage of rural areas in the state because its towers expand beyond the major highways other carriers cover. But even with that expanded service, using a smartphone indoors is going to be a problem in many places.

Recently, AT&T sent letters to approximately 7.5 percent of their customers in the rural areas most likely to have reception problems, offering a free “MicroCell,” which is comparable to a mini cell tower inside your home or office.  The equipment works with your existing broadband connection to expand “coverage” inside your home.  For data purposes, the MicroCell doesn’t deliver anything your personal Wi-Fi connection couldn’t, but if you rely on a cell phone, having signal bars makes all the difference if you are waiting for an important call.

A considerable number of those letters reached families in West Virginia, and that is no surprise considering the state is by far the most difficult to blanket with wireless coverage in the eastern half of the country.

A letter to AT&T customers inviting them to receive a free MicroCell

But the problem is, some families are receiving the free offers, while others are not, and that is creating reception envy.

AT&T 3G MicroCell

Charlotte, who lives in Whipple, W.V., outside of Oak Hill, was visiting with her neighbor Joy last week and noticed her husband fiddling with the latest gadget on his computer desk.

“It looked odd because of the way it spread out on the bottom, so I asked Joy what in the world he was installing,” Charlotte says.

“It’s a cell tower thing AT&T gave us to get better reception,” Joy responded.

Despite the fact the two families live only a few homes apart and signed up for AT&T service with the exact same phones within weeks of each other, Charlotte was never offered AT&T’s MicroCell.

AT&T notified qualified customers with a letter containing a personal reservation code, and the offer was not transferable.

“Maybe you got it and threw it away,” Joy offered.

“No, ever since the credit card companies started changing terms on us, we open every envelope that comes into this house,” Charlotte replied.

Assuming it must be an oversight, Charlotte dropped by her local AT&T store to inquire about the offer.

“We quickly learned we were not the first family to bring up this issue with AT&T as the store manager told us he was fielding complaints from all over town about the highly-selective offer,” Charlotte said.

Even worse, there was nothing the manager could do to rectify the situation.

“His hands were as tied as my patience was tried,” Charlotte tells Stop the Cap!

“The store manager offered to sell me the MicroCell for around $100 with a rebate, but why should I pay AT&T for better reception they should already be providing?” Charlotte asks.  “It seems to me if they are giving away these things to some people in a neighborhood, they should be doing it for everyone, because we pay the same bill our neighbors do.”

The seemingly random offers of MicroCell units are not limited to West Virginia.  We’ve noticed complaints from residents in northern California, the Pacific Northwest, and northern New England from others who get reception while outdoors or on the go, but find their phones useless for making and receiving calls at home.

In most cases, irate customers seeking redress from AT&T run into a bureaucratic brick wall.

Rick McGee, commenting on Engadget’s website:

I have talked to Marketing, Technical Support, and my local store, and nobody can tell me who to contact to qualify for a MicroCell. I have been an AT&T Mobility customer for over four years, with four family plan phones and two more phones on corporate contracts. The reception at my house is usually zero, at times maybe one bar, but never enough to maintain an incoming call or make an outgoing call. I guess I am a glutton for punishment, but this is the last straw.

If AT&T does not magically send me one of the MicroCell coupons, I will total up my termination fees and determine the earliest date I am willing to dump AT&T and try another carrier. In addition to the cell phones, I have two AT&T land lines, plus an AT&T internet account, so I am likely in the top tier of residential customers. With no reception at my house, I don’t see how I would fail to qualify for a MicroCell, but AT&T has no process to help individual customers with bad reception. Everyone I talk to claims ignorance. I’ve done my part, AT&T — either step up, or I am gone.

Others find similar experiences — apologies from in-person sales staff about the corporate roadblocks even they cannot navigate around.

But every once in awhile, one does.  Casey Robinson’s neighborhood lost all AT&T cell phone service when their local cell tower was destroyed in a storm.  The replacement redirected most of its signal elsewhere, leaving them with no bars.

After arguing with corporate phone support in the AT&T store for 2 hours they told me pay the $149 [for a MicroCell] or tough luck. I responded by telling them to take my family plan +2 lines, my roommates family plan +3 lines, and our Uverse U400 package with high speed internet and shove it, we will be changing carriers immediately since I have tower data from AT&T pre and post storm to show they breached our contract.

The AT&T store rep was amazing through all of this. He apologized continuously and said if it was up to them they would give out the MicroCell as soon as we walked in the door, unfortunately their computers physically block them from comping a MicroCell. While I was very distraught on the phone with AT&T, he called his manager at home and explained the situation. She drove in to the store, again apologizing for everything we had to go through, checked us out with the MicroCell then credited our account for the full purchase price and credited a month’s service to both my line and my roommate’s line for the issues we had been having. They are the only reason we still have AT&T. Of course we wrote to their district manager and AT&T corporate applauding the employee and manager, and of course from what we’ve heard they still haven’t been acknowledged for their good work.

Some others have had recent success filing complaints with the Better Business Bureau, when executive level customer service representatives come to the rescue with a free MicroCell.

Charlotte’s family intends to deal with the MicroCell Gap in their own way — by switching to Verizon Wireless, which improved service in the Oak Hill region a few years ago while they’ve been under contract with AT&T.

“We were willing to put up with the MicroCell doing the job their own cell towers should be doing, but because they don’t care about us, we’re done with them,” Charlotte says.

Customers accepting AT&T’s free offer must verbally commit to stay with the carrier at least 12 months or return the MicroCell when they depart.  If they don’t, AT&T will bill an equipment fee up to $199.

Engadget obtained this inside memo about the MicroCell offer.

Verizon Wireless isn’t entirely rolling out the welcome mat for new iPhone customers.  PreventCAPS, one of our regular readers, dropped us a note indicating Verizon quietly added something new to the terms and conditions for new customers as of Feb. 3rd, which just so happens to coincide with the date the company started taking orders for the Apple iPhone — it reserves the right to throttle your speeds and “optimize” your browsing experience with caching and network management techniques that could reduce the quality of online videos and other bandwidth-intensive graphics.

Important Information about Verizon Wireless Data Plans and Features

As part of our continuing efforts to provide the best experience to our more than 94 million customers, Verizon Wireless is introducing two new network management practices.

We are implementing optimization and transcoding technologies in our network to transmit data files in a more efficient manner to allow available network capacity to benefit the greatest number of users. These techniques include caching less data, using less capacity, and sizing the video more appropriately for the device. The optimization process is agnostic to the content itself and to the website that provides it. While we invest much effort to avoid changing text, image, and video files in the compression process and while any change to the file is likely to be indiscernible, the optimization process may minimally impact the appearance of the file as displayed on your device. For a further, more detailed explanation of these techniques, please visit www.verizonwireless.com/vzwoptimization

If you subscribe to a Data Plan or Feature on February 3, 2011 or after, the following applies:

Verizon Wireless strives to provide customers the best experience when using our network, a shared resource among tens of millions of customers. To help achieve this, if you use an extraordinary amount of data and fall within the top 5% of Verizon Wireless data users we may reduce your data throughput speeds periodically for the remainder of your then current and immediately following billing cycle to ensure high quality network performance for other users at locations and times of peak demand. Our proactive management of the Verizon Wireless network is designed to ensure that the remaining 95% of data customers aren’t negatively affected by the inordinate data consumption of just a few users.

These kinds of “network management” techniques, which include speed throttles, reduced quality graphics, and caching (which can result in stale web pages being served to your mobile device), are all made possible by the Federal Communications Commission’s failure to implement Net Neutrality protections for wireless providers.  While Verizon stresses it will treat all content to the same network management techniques equally, the “improved” broadband experience Verizon claims to offer is more likely to improve the company’s bottom line from reduced spending on network upgrades.

Like most providers, Verizon isn’t willing to be specific about what amount of usage is likely to trigger the throttle, why it needs to be maintained for the remainder of the billing cycle even when network congestion is not a problem, and what speed customers will be stuck with for the rest of the month.

Broadband Reports reached out to Verizon for specifics and discovered the provider has not actually implemented these measures… yet:

“The notice yesterday simply reserves the right for new customers or renewing their contracts,” Verizon spokesman Jeffrey Nelson tells Broadband Reports. “We’re reserving the right to actively manage the network in specific ways should that need exist – and only for customers who are under contract that includes that provision,” he says. “Because this is down the road – if at all – it’s too early to tell what those triggers might be, or what throughput limitations would look like.”

Verizon may be concerned about the potential impact millions of data-craving iPhone customers will bring to its network in the coming weeks.  Existing customers with Android devices or Blackberry handsets are safe for now — the provision only impacts customers who sign new contracts as of last Thursday.

Verizon says it will retain its unlimited data option (with the right to throttle service) for a “limited time only.”

The date has arrived.  Existing Verizon Wireless customers are now invited to “pre-order” The Precious.

Strangely, Verizon’s website gave more prominence to the phone before they could actually accept orders for it:

Verizon Website 2/2/2011

Verizon Website 2/3/2011

Verizon wants you to think of its Apple iPhone as a fine wine, offering “exclusive” access to “our reserved quantity, while they last.”

When they’re gone, they’re… will be more on the way.  The Keebler Elves at Apple will certainly make more, plenty more, to sustain pent up demand for the phone on Verizon’s network.

AT&T is doing all it can to keep customers from switching.  In addition to earlier efforts to lock customers into those two-year contracts with early termination fees, lots of AT&T customers are also getting e-mail from the company reminding them AT&T is the only network that lets you talk and surf the web at the same time (with your iPhone).  They ignore T-Mobile, which also accepts unlocked iPhones and works the same way.  AT&T and T-Mobile utilize GSM technology while Verizon (and Sprint… and Cricket… and MetroPCS) use CDMA.  The latter technology, at least in its current implementation, allows users do one or the other, not both.

That probably won’t keep too many disenchanted AT&T customers from leaving, but some other factors might:

1. Apple will release the iPhone 5 in less than six months, if things run according to schedule.  The new phone might work on Verizon’s new LTE network, something iPhone 4 does not.  Is there a hurry to upgrade now when something better is around the corner?
2. AT&T Retention Agents are giving away the store to customers warning of their intention to depart.  Restoration of unlimited data plans, free upgraded phones to qualified customers, free accessories, and even credit for a month of service have all been offered, even as the company publicly announces it is pulling back from some of those giveaways and specials.
3. As potentially millions of AT&T customers leave, those remaining may find improved performance from the lighter load on AT&T’s network.  Plus, the impact of the iPhone on Verizon’s 3G network remains unknown.  AT&T customers could parade themselves into new headaches on Verizon’s network.

Verizon will allow new iPhone customers access to its “unlimited data” add-on plan “for a limited time.”  Verizon plans to join AT&T in officially ending the unlimited option sometime this year, but exact pricing and plan details remain unavailable.

Customers can begin booking their departure from AT&T Feb. 9, when Verizon begins taking orders from new customers and those intending to drop their current carrier.