This AT&T customer was billed $12.95 in cramming charges. (Click image for more information)

AT&T and Verizon are among the top recipients of ill-gotten gains from so-called “cramming” incidents — customers who find unauthorized charges on their phone bill placed there by third party companies that maintain a cozy billing relationship with the two phone companies.

Boston-area resident Mike Cunningham paid $567 in phone charges billed “conveniently” to his Verizon Wireless phone bill.  Only he didn’t authorize them.

Cunningham recently sat down and reviewed nearly two years’ worth of dozen-page phone bills scrutinizing them for unauthorized charges.  Speaking to the Boston Globe, Cunningham didn’t initially notice the “enhanced voice mail’’ charges of $14.95 and $13.22 buried on pages five and six.  That’s not surprising, since many Verizon Wireless customers are now billed online and most customers don’t wade through multi-page online billing statements.

After Cunningham added several years of these monthly charges up, totaling $567, that got his attention.

Cunningham was billed by ILD Teleservices Inc., which said Cunningham’s grandson — then 10 years old — ordered its services while on a website that offers free video games. Cunningham said his grandson, who doesn’t have a cellphone, did not intentionally order voice mail — and knew nothing about it.

ILD generates an enormous number of complaints about unauthorized charges placed on consumer phone bills.  The company describes itself as a leading payment processor of online transactions between merchants and consumers, processing more than 120 million billing transactions per year totaling $500 million of third party charges placed on telephone bills.  Although the company claims to put its potential clients through a rigorous screening process, the avalanche of customer complaints, including the fact a 10-year old was able to be victimized by one of ILD’s clients, suggests otherwise.

Even worse, companies like AT&T and Verizon profit handsomely from fees paid by payment processors like ILD to gain the lucrative ability to charge customers’ phone bills for services, ordered or otherwise.  With a profit incentive to protect, consumers are getting the short end of the stick when calling Verizon or AT&T to complain.  More often than not they pass the buck (while keeping the change for themselves) back to the third party billing agency to try and secure refunds.

Only a staggering amount of potential earnings from such billing practices would seem enough to make risking the customer’s relationship with their phone company worthwhile.  After customers spend hours dealing with unruly and hostile customer service representatives working for such billing agencies, there is little chance that customer will be endeared to the phone company that put them through the nightmare in the first place.

Susan from Ambler, Pennsylvania is an excellent example:

“ILD Teleservices placed a charge on my Verizon phone bill for a service that was not requested, authorized or that would even work (ringtones for a land line!) on Feb 22, 2010. When I called Verizon to question the bill, they informed me the charge was not a Verizon charge but from a third party company,” she told Consumer Affairs.

David in Galt, California was billed by ILD on his AT&T phone bill for ordering a service over his home computer, an amazing feat considering he doesn’t have one.

“I received a charge of 14.95 on my AT&T phone bill from ILD Teleservices. They claimed that someone in the household went online and ordered the service. We did not have the capability to do that with no computer at the house,” he writes.

More than 3,000 complaints have been logged against ILD by Consumer Affairs, with customers highly annoyed that their phone companies refuse to stand by them when illegitimate charges show up on their phone bills. John from Wisconsin got no help from AT&T when identify theft allowed someone to add unwanted services to his phone bill under his wife’s name.

It turns out someone signed him up for TotalContactSolutions, a Florida-based company that charges $14.95 a month to alert up to 10 people with text or voice messages “during catastrophic events such as terrorist attacks or natural disasters.”  Perhaps the service will come in handy to contact those 10 friends and family members when you discover the charges on your phone bill and pass out on the floor.

John reports his credit rating is being terrorized by a company that refuses to refund the unauthorized charges unless he can prove, with an e-mail from AT&T no less, that nobody could have signed up for the service from John’s home.  Unfortunately for John, AT&T’s surveillance of its customers doesn’t extend that far, and the company refused to forgive the charges, instead threatening him with collections.

Unfortunately, your tax dollars are hard at work paying for state utility commissions, the Federal Communications Commission, and consumer service agencies to assist consumers who are victimized twice by cramming charges — once by Verizon or AT&T for allowing them on their bills in the first place, and a second time trying to deal with a third party company to reverse them.

A Boston Globe review of more than 200 cramming-related complaints from consumers — filed with the Massachusetts Department of Telecommunications and Cable and the attorney general since 2007 — found that state workers reviewing complaints sometimes spent hours trying to resolve a single one.

The case of Soren Jensen, a retired engineer who lives in Duxbury, is typical. Jensen said he spotted four charges of $9.99 apiece for text messages on his wife and son’s cellphone bills starting in 2008. There was a common thread: Jensen’s wife and son said they had both taken IQ tests online, entering their cellphone numbers to receive the results. He suspected they mistakenly signed up for text messaging in the process.

After reviewing the fine print on his bill and doing some online sleuthing, he found Verizon Wireless had an agreement with Solow, a computer gaming website that contacts players using a text message service that charges $9.99 per message.

Jensen said he called Verizon Wireless to complain, and the company agreed to remove one of the $9.99 charges.

“I just don’t get why Verizon doesn’t want to protect us, as the customer,’’ Jensen said. “Verizon should not allow this kind of stuff. It raises a lot of questions.’’

The answers aren’t difficult to find when you follow the money.  Both AT&T and Verizon collect plenty from fees charged to cramming companies and billing agencies for the right to bill their services directly on your phone bill.  Neither company will disclose exactly how much they profit from such arrangements, but they are clear about who is responsible when mystery fees turn up on your phone bill:  you are.

Both companies told the Boston Globe they “encourage customers to scrutinize their bills to make sure they are not improperly charged for services.”

And they make that very easy by labeling mystery fees with such helpful billing descriptions as “enhanced calling service” or “enhanced voicemail.”  One of Stop the Cap!‘s readers was billed for services described as an “enhanced recovery fee” and another for “customer support and assistance.”

Verizon claims complaints about third-party charges are “infrequent” and says customers can contact the company and block all third-party charges from their bills, something we strongly recommend you consider doing before being victimized.

AT&T won’t go that far.  It told the Globe:

AT&T, which also allows third-party billing, advises customers to direct their complaints to the company assessing the fee. Names of third-party vendors are disclosed on AT&T bills, the company said. “AT&T’s third-party billing contracts require service providers to address cramming complaints appropriately, including issuing credits if customers have been crammed,’’ an AT&T spokeswoman said in an e-mail.

But AT&T is still in the business of scaring its customers.  TotalContactSolutions maintains a required AT&T customer disclaimer on their website, which includes several states where AT&T can disconnect your phone line over billing disputes:

You have the right to dispute the Employee Notification Services charges billed on your local telephone bill. You are not legally responsible for Employee Notification Services charges incurred by minors or vulnerable adults without your consent. Your local telephone service will not be disconnected because you fail to pay a charge by Employee Notification Services, except that nonpayment of certain regulated telecommunications charges may result in disconnection of service in AL, FL, GA, KY, LA, SC, and TN.

And we know what phone company lobbied their way into obtaining the right to cut your service off if you don’t pay, don’t we?

In the end, Cunningham got refunds for the unauthorized fees on his Verizon Wireless bill, after the companies discovered a minor child was involved.

ILD claims to have sent Cunningham $1,000 in coupons as part of a settlement, something Cunningham claims is a lie.  Cunningham is better off without them.  The $1,000 in coupons ILD offered is suspiciously similar to an offer from another ILD client that promises that amount in grocery coupons you can print on your computer… if you sign-up for enhanced voicemail service for $12.95 a month.

Was this the $1,000 in "free coupons" offered to Mike Cunningham? If so, it comes with some very expensive strings attached.

Cunningham is so disgusted with Verizon Wireless for putting him through this ordeal, he wanted to cancel his service and move on.  But Verizon knows how to hold customers captive.  Instead of sending him a refund check for $567, they applied it as a credit that can only be redeemed by remaining a Verizon Wireless customer until the credit is exhausted.

“It’s like salt in the wound,’’ he told the Globe. “I can’t leave. I’m a captive audience.’’

Stop the Cap! notes the Federal Communications Commission is overwhelmed with cramming complaints that number well into the thousands every year.  Since telephone companies refuse to stand up for their customers, it is imperative that the FCC order phone companies to stop allowing all third-party billing unless and until a customer “opts-in” to such billing, in writing.  No third party “opt-in” requests should be permitted, and customers should not have to chase their phone companies to opt-out of a service that has a built-in profit incentive for funny business, fraud, and costly scams that cost customers enormous time and money to resolve.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/CBS News Cramming Charges 2-23-08.flv[/flv]

The CBS Evening News ran this item about cramming charges and the problems they cause customers more than two years ago, interviewing a representative from Verizon Wireless.  Very little has changed as the money, and complaints, keep pouring in.  (3 minutes)

Apple iPhone

The Wall Street Journal reports Apple is developing two new iPhones for launch this June, including one that’s designed to work with Verizon Wireless.

According to the report, the new iPhone models can run on CDMA networks, such as the one Verizon Wireless uses.  The introduction of such a phone would mark an end for the three year exclusivity agreement Apple has with AT&T in the United States.

“There has been lots of incorrect speculation on CDMA iPhones for a long time. We haven’t seen one yet and only Apple knows when that might occur,” an AT&T spokesman told the Wall Street Journal.

For AT&T, the Apple relationship has been crucial, helping to make the carrier the U.S. leader in lucrative smart-phone market share. According to comScore Inc., AT&T has over 43% of all U.S. smart-phone customers, compared with 23% for Verizon. These customers are especially attractive because they generally pay higher monthly rates for data plans.

For several quarters, AT&T’s growth has come almost single-handedly from the iPhone. In the fourth quarter of 2009, the carrier said it activated 3.1 million new iPhones. In comparison, it counted only a net total of 2.7 million new subscribers as some customers moved from other phones to iPhones.

“You’re not going to lose the iPhone [exclusivity] and make up growth somewhere else without bearing the cost,” said Sanford C. Bernstein & Co. research analyst Craig Moffett.

The impact on Verizon Wireless data network will be an important measure of whether American wireless broadband networks can sustain the demand customers have for wireless broadband service and speed.

[flv]http://www.phillipdampier.com/video/CNBC Verizon Getting iPhone 3-29-10.flv[/flv]

CNBC carried three reports about the Verizon Wireless iPhone story published in the Wall Street Journal and its potential impact on the American wireless marketplace.  (11 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Wall Street Journal iPhone On Verizon 03-29-10.flv[/flv]

The Wall Street Journal included this “web-extra” report on their story and what it means for consumers.  (2 minutes)

For those around in the 1980s, Verizon Wireless’ latest 3G ad slam against AT&T should have brought back some memories.

Someone at Verizon probably spent some time reviewing advertising collections of the 1970s and 1980s and ran across Big Red, the cinnamon-flavored gum with the long-lasting flavor.  First appearing back in 1976, the gum really took off in the early 1980s when the William Wrigley Jr. Company commissioned a catchy jingle for its advertising campaigns.  It stuck, and most still remember it to this day.

Verizon, which bathes its corporate image in red, made the connection, and managed to recreate most of the imagery of several Big Red commercials, mostly from the early 1980s, albeit with updated lyrics.  They certainly got the classic corporate 1980s Reagan-era jingle sound down pat.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Verizon Big Red.flv[/flv]

For those too young to remember Big Red gum, I’ve brought one of the original advertisements together with Verizon’s reproduction so you can appreciate the scope of their recreation.  Verizon actually borrowed from several Big Red ads, but you’ll get the point.  Too bad it’s the gum priced at 25 cents and not the 3G.  With the gum, you could have any many sticks as you wanted — no chewing limits either. (1 minute)

Tomorrow, the Federal Communications Commission is anticipated to release its long-awaited National Broadband Plan (NBP) for the United States.

The proposed road map to better broadband is supposed to bolster availability in rural communities, improve access in urban and suburban areas, and lay the groundwork for 21st century service and speeds.

FCC Chairman Julius Genachowski and Blair Levin, executive director of the FCC Broadband Initiative, have provided plenty of clues along the way.  But one thing is certain — the true impact of the NBP will be to pass a de facto national stimulus program for corporate lobbyists, who will spend the rest of the year loving the goodies in the plan and lobbying away the parts they don’t.

Everyone but consumers have plenty of cash on hand to pay for a full assault on Capitol Hill, bending the ears of lawmakers to deliver the changes they can believe in, and outlawing the changes they don’t.  Since those words will be underlined with fat campaign contributions, more than a few lawmakers are likely to listen.

National Public Radio’s Morning Edition asked the question, will the National Broadband Plan come up short? (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The Winners

Public Institutions: To be a health care provider, a school, or library is a good thing these days.  Some of the most generous and non-controversial elements of the NBP will be directed to public institutions.  The cosmetic impact can’t be beat.  Every elected official sees great potential from ribbon-cutting a showcase project that improves health care, local schools, or a nearby public library.  To all three will come fast access fiber connectivity, tele-learning funding, and support for educating the public about broadband.  Libraries will be given special attention to address connectivity, schools will likely find free or low cost fiber in their future, and the digitization of health care records and results will also promise improvements in health care delivery.

None of these projects will create a significant competitive impact on current broadband players, and even earmark-wary politicians will pose for the cameras to launch an inner-city library’s fiber project.  Public safety will also be provided for with plans to improve connectivity and leveraging broadband for our first responders.

Wireless Companies: It can’t hurt to be a big telecommunications company with a wireless division, either.  That’s because one of the major priorities for the NBP will be finding additional wireless spectrum to improve mobile data services in hopes they can provide increased access in rural communities and increased competition in urban ones.

More airways for mobile data will be “a core goal,” FCC Chairman Julius Genachowski said in February.  That means AT&T and Verizon stand to gain the largest benefits from expanded spectrum.  Smaller carriers like T-Mobile and Sprint will also benefit to a lesser degree.  The FCC wants to double the number of frequencies available to wireless carriers — 500MHz that must be reallocated from other uses and delivered to providers in new broadband spectrum auctions.

Those with the deepest pockets will win the most spectrum, which assures in priority markets where spectrum is in demand, AT&T and Verizon will likely outbid others.

With a mobile broadband future at stake, that guarantees added pressure on smaller players to merge so they can pool resources to compete for needed airwaves.  That could ultimately reduce competition and choice among wireless providers. Pricing is unlikely to drop either, so long as providers try and recoup their auction expenses.

Levin, in particular, is a proponent of wireless competition.

“We don’t know necessarily whether wireless is going to provide perfect competition to wired. But we do know it’s a very important piece of the puzzle,” Levin believes.

Consumers know better, especially in a country replete with $60-for-five-gigabytes monthly usage plans.

Since wireless broadband is increasingly delivered by the same companies providing wired broadband, wired providers show few signs of fear from bolstered wireless competition.  AT&T U-verse and AT&T Mobility are AT&T.  Verizon FiOS, DSL, and Verizon Wireless are all Verizon.  Comcast and Time Warner Cable are both major investors in Clearwire, a wireless “competitor.”

Equipment & Infrastructure Providers: If you haven’t bought shares in Corning, manufacturer of fiber optic network components, or Cisco, which supplies broadband infrastructure, you might want to consider it.  Both companies, among dozens of others, stand to reap millions in profits from the sale of components to construct 21st century broadband.  All of the major equipment manufacturers and their respective trade associations have already submitted piles of comments to the FCC to help identify priorities and speed implementation of the NBP.  Not only do they promote the use of their products, they also speak in terms of helping to create  thousands of new jobs for those building the next generation of broadband.  What’s not to like about that?

Big Broadband Users: Major companies like Google and Amazon are expected to benefit from improved broadband, especially if it also includes increased competition and open access to privately owned networks.  Constructing larger national and regional networks assures increased capacity and reduced pricing, especially if networks face additional competition.  To underscore the point, the NBP is expected to announce a review by the FCC of the wholesale rates big carriers charge for access.

The Losers

Broadcasters: The nation’s broadcasters are clearly the biggest potential losers in the NBP.  Threatened with plans to capture large amounts of the UHF television band and selling it off to wireless providers may cripple at least some of the nation’s free over-the-air broadcasters.  For some at the FCC, the fact that less than half of all Americans watch television over-the-air must have made their frequencies a rational target.  Most Americans pay a cable, telephone or satellite company to deliver local stations.  If the FCC reallocated half of the current UHF dial and sold it to wireless carriers, the remaining channel space would mean a far more crowded, interference-prone TV dial.

Some wireless industry advocates of the reallocation plan believe stations can get by with reduced power on a network of cell-tower-like relay transmitters delivering signals to more distant suburbs in their service area.  Reduced power means reduced interference, they advocate, although it also means significantly reduced coverage areas, especially for rural Americans which depend on distant stations for free over-the-air television.

Right now, the NBP reallocation proposal will likely be “voluntary,” meaning stations can give up their channel and move to a different one, earning compensation from a federal auction fund to pay 100 percent of the expenses involved with the channel change.  The National Association of Broadcasters, the television industry’s trade association, fears what begins as “voluntary” may evolve into “compulsory.”

Open Access Proponents: Least likely to be included in the NBP is a broad-reaching requirement that broadband providers open their networks, usually a duopoly in most American cities, to would-be competitors at fair terms and prices.  The industry has been down this road before with traditional telephone service, and spent countless millions fighting proposals that would allow consumers to choose different local telephone companies.  In the end, choice for residential phone service over landlines never really got off the ground because the terms and conditions never made economic sense to would-be competitors.

Should the FCC try to mandate that cable and telephone industry broadband lines be opened to third party competitors, that will unleash a full scale lobbying assault on Washington.  In an election year, antagonizing big telecommunications companies is unlikely.  Besides, the industry can always sue, claiming any open access mandate violates their corporate constitutional rights.

The Jury Is Out

Consumers: That’s you and I.  Don’t expect the FCC to announce large, government-constructed, fiber to the home projects for every American now living with a broadband duopoly that delivers the least amount of speed for the highest possible price.  When a significant minority of Americans believes any government project to improve broadband is really a Barack Obama Socialist Wiretapping project, no national scale version of municipal fiber is forthcoming.  Not even close.

Most of the media attention will likely focus on speed goals, cosmetic projects for local institutions, and general statements about increased competition.

The immediate benefits for consumers will be nebulous at best.  We’ll likely gain more from Net Neutrality protections.  The only likely direct benefit, should it come to fruition, is the plan to create a nationwide, free wireless network to ease the digital divide.  Specific speeds, technology used, and service areas aren’t known at this point.  But private providers will work particularly hard to prevent this plan from ever seeing the light of day.

Consumer complaints about telecommunications companies have been skyrocketing.  The Better Business Bureau reports that the most complaints the group received in 2009 pertained to cell phone providers and the cable, telephone, and satellite-providers.

Consumers are screaming for competition and they get rate increases instead.

Without clear measures promoting increased competition and oversight, American broadband will evolve into an expensive, usage-limited experience for most urban customers, and “good enough for you”-slow speed DSL service delivered by a de facto telephone company monopoly in rural areas.

Relief for consumers does not come from handing additional few-strings-attached benefits and resources to the same providers that are responsible for the current state of broadband service in America.

Hollywood: Lobbyists for the music and movie studios have been peppering Washington with demands that broadband-related legislation include increased penalties and restrictions to reduce copyright theft.  They seek a mandate that repeat copyright offenders be banned from broadband service, that consumer electronics incorporate digital rights management technology to thwart unauthorized distribution or access to copyrighted content, and increased financial penalties for those who try.

Should the FCC incorporate these concepts in the NBP, it will likely create a consumer backlash because of past memories of overzealous copyright controls that hamper legitimate use of purchased content.  It will also raise opposition from consumer electronics manufacturers.

Cable and Telephone Providers: There are benefits and risks to companies like Comcast, Time Warner Cable, Verizon, AT&T, Frontier Communications, and Windstream, among others.

Reform of the much-maligned Universal Service Fund, which currently benefits traditional telephone customers, could be a game-changer for many companies.  Currently, Verizon and AT&T pay more into the USF than they receive from it.  That is especially true for Verizon which is abandoning rural markets by selling off service areas to smaller providers.  The USF provides a subsidy for rural phone companies to deliver affordable service at comparable pricing enjoyed in larger communities.  By transitioning the USF into a Broadband Service Fund — using the money to construct and improve broadband service — many companies stand to benefit.

Frontier, CenturyLink, and Windstream are among those specializing in “rural phone service” and could use funding to defray the costs of broadband networks otherwise built with investor money.  Verizon and AT&T could earn broadband funding for projects in their service areas currently not delivering broadband, or only providing anemic DSL service.

That has cable companies worried, particularly if the funds can be used to provide service in areas where they already offer service.  Even worse, the thought of a new wireless broadband entrant in a community already served by cable and telephone company broadband.

McSlarrow

The cable industry is also worried about a proposal to let consumers ditch cable-owned cable boxes in favor of their own purchased alternatives.

Cable companies rent tens of millions of cable boxes that they control and manage. The FCC wants consumers to be able to purchase and manage their own devices capable of utilizing the services cable operators provide, without having to pay several dollars a month to borrow one from the cable company.

Kyle McSlarrow from the National Cable & Telecommunications Association sent a letter Friday to Genachowski offering the FCC a compromise.  Offering seven points the NCTA says cable is willing to voluntarily abide to, McSlarrow suggests consumers should be able to buy such devices, but that they should not be required to access every possible service on offer from his cable members.  Indeed, such devices also must incorporate security and copyright controls to limit unauthorized access and use of cable-delivered content.

That guarantees the same success rate consumers have today with CableCARD technology, which few consumers use or understand.

Regardless of what comes from tomorrow’s National Broadband Plan, look beyond the happy talk, general promises, and visionary language.  The devil is in the details, definitions, schedules, and clear path from tomorrow’s platitudes into next year’s broadband improvement reality.

Woe to those who forget to sign up for a wireless data plan from Verizon Wireless.

The cell phone provider recently sent a $16,000 bill to one Hot Springs, Arkansas family for wireless data usage racked up on a daughter’s phone the family didn’t cover with a wireless data plan.

Chris Brown couldn’t believe his eyes when he opened his phone bill online.

“The first thing I think of is, this thing costs more than my truck.  It cost more than a house payment, I couldn’t fathom it, it’s mind-blowing,” Brown told KLRT-TV.

This isn’t the first time this has happened.  A month earlier, the Brown family was billed $3,000 for similar usage and the family asked Verizon Wireless to shut off access to data services on the affected phone, but the charges kept on coming anyway.

Brown says once he got to look at the phone usage online, he saw that the phone was connected to the Internet when the family didn’t even know it.

Verizon Wireless offers tips to customers with children:

• Limit the times of day they’re allowed to make calls.

• Keep your kids from getting onto your own phone’s Internet by setting up a password.

• If you have a limited plan, you will get an alert and have to give approval before you exceed your number of kilobytes or megabytes for the month.

Of course, had Verizon Wireless followed through on what Brown asked for — shutting data access off altogether, none of this would have ever happened.

Other Little Rock customers, especially those forced to move from Alltel to Verizon Wireless, are running into similar experiences.

Among the horror stories:

“My son had the same problem. He was told he had unlimited internet usage and then received a bill for more than $7,000. Verizon had recorded a phone call from my son to customer service and that was the only thing that saved him. But it took more than 4 months and his phone service being disconnected twice before the situation was resolved.”

“I’m not a bit surprised at that ridiculous bill from Verizon! I had the same problem for months last year, to the point that I had to put unlimited texting on both my grandsons’ phones. Then to top that off, we got a bill that had goo-gobs of texting billed to my husband’s phone (to the tune of $9.30), which is rarely used at all. But, this is the killer–all the texts received on his phone were from Verizon, all 62 of them! As soon as my contract is up with them, I will be switching. All the time we had Alltel we never had any problems. The problems started as soon as Verizon took over.”

“I’m not one bit surprised by the ridiculous phone bill that the Hot Springs family received. I also received my first month’s bill from Verizon last year for over $1500. I almost had a heart attack. Verizon lowered the bill, but two months later, even though we carefully monitored the air time, we went over by four minutes and they charged me an additional $90. That was it for Verizon. They are a bunch of crooks. I hooked up to my local phone carrier for $34 a month and I haven’t had one problem since. Verizon should be investigated.”

[flv]http://www.phillipdampier.com/video/KLRT Little Rock Hot Springs family gets $16,000 cell phone bill 3-3-10.flv[/flv]

KLRT-TV in Little Rock reports on the Hot Springs family that got a $16,000 surprise bill from Verizon Wireless.  (3 minutes)