Verizon Wireless is making a bold move that could force an industry trend

Jennifer LeClaire, newsfactor.com Jennifer Leclaire, newsfactor.com – Mon Oct 4, 4:47 pm ET

Verizon Wireless is making a bold move that could force an industry trend. The wireless giant on Sunday announced a plan to repay as much as $90 million in refunds to 15 million cellular customers who were erroneously charged for data sessions or Internet usage. The announcement marks one of the largest customer-refund initiatives in telecommunications history.
The decision comes in the wake of Verizon talks with the Federal Communications Commission. Consumers had complained about unauthorized charges on their cellular bills, and the refunds appear to be part of a settlement with the FCC.
"We're gratified to see Verizon agree to finally repay its customers," said Michele Ellison, chief of the FCC's Enforcement Bureau. "But questions remain as to why it took Verizon two years to reimburse its customers and why greater disclosure and other corrective actions did not come much, much sooner."
Doing the 'Right Thing'
Mary Coyne, Verizon's deputy general counsel, said the company wants to do the "right thing" for customers. As Coyne explained it, about 15 million customers will be notified this month and in November through regular billing messages that the company is applying credits to their accounts. Verizon will also mail former customers refund checks. In most cases, she said, these credits are in the $2 to $6 range. But some customers will receive larger credits or refunds.
"As we reviewed customer accounts, we discovered that over the past several years approximately 15 million customers who did not have data plans were billed for data sessions on their phones that they did not initiate," Coyne said. "These customers would normally have been billed at the standard rate of $1.99 per megabyte for any data they chose to access from their phones."
Coyne said the majority of the data sessions involved minor data exchanges caused by software built into their phones. Others involved accessing the web, which should not have incurred charges. She promised that Verizon has addressed these issues to avoid future erroneous charges.
A PR Disaster?
"Verizon Wireless issues credits to customers from time to time based on regular review and monitoring," Coyne said. "When we identify errors, we remedy them as quickly as possible." The question is whether "as quickly as possible" is quickly enough to avoid a public-relations nightmare.
Mike Disabato, managing vice president of network and telecom for Gartner, isn't surprised at the billing error -- and he isn't surprised that Verizon is moving to pay out as much as $90 million. Ninety million, he said, is far less than $90 million plus legal fees plus FCC fines.
"Verizon's big deal is that they are better than AT&T. But now AT&T can come after them for the issue of hidden charges. There's a whole marketing and public-relations issue. Verizon has to nip this in the bud," Disabato said. "Verizon thinks they are going to get 30 percent of iPhone users to switch to Verizon when there's a CDMA iPhone. That would be really good. That's like 1.2 million subscribers. How would you like to lose that many because they think you are fraudulently billing them?"