Verizon Wireless overcharged approximately 15 million customers for data services they didn't use and will begin refunding them-a move that could cost the carrier a reported $90 million.
Verizon Wireless improperly billed about 15 million customers on
their wireless service statements over the last several years and now
the nation's largest wireless carrier is beginning to reimburse them.
While the individual refunds are in the range of $2 to $6, Verizon
said in an Oct. 3 statement, a New York Times report estimated the
total damage to Verizon to be between $30 million and $90 million-
though "people close to the settlement talks," which have been
occurring with the FCC (Federal Communications Commission), expect the
figure to be closer to $50 million.
The refunds are related to data-related charges of $1.99 that were
levied against customers without data plans, either due to software on
their phones or because they accidentally launched the browser, even
when they quickly cancelled the command. Current customers will see the
refunds credited to their statements, while former customers will
receive refund checks.
"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," Mary Coyne, Verizon's deputy general counsel, explained in
the statement. "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. The majority of the data sessions involved minor
data exchanges caused by software built into their phones; others
included accessing certain web links, which should not have incurred
Verizon said both issues that instigated the charges have since been addressed.
"When we identify errors, we remedy them as quickly as possible,"
Coyne added. "Our goal is to maintain our customers' trust and ensure
they receive the best experience possible."
According to the Times, over the last three years the FCC has
received hundreds of complaints from Verizon Wireless customers who
said they were charged for data use after inadvertently activating
their phones' browsers. The FCC and several media outlets reportedly
followed up on the charges, which Verizon denied in December 2009.
"In order to protect customers from minimal, accidental usage
charges, Verizon Wireless does not charge users when the browser is
launched, and opens to the Verizon Wireless Mobile Web homepage,"
Kathleen Grillo, a senior vice president for federal regulatory affairs
at Verizon, told the FCC in a December 2009 letter, according to the
In January, the FCC launched a formal investigation into the
allegations, and it's now looking into just how long Verizon was in
fact aware of the problem - and the overcharges. It can still charge
the carrier with a formal Notice of Apparent Liability, a move Verizon
appears to be trying to avoiding, in issuing the mea culpa.
"We're gratified to see Verizon agree to finally repay its
customers. 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," Michele Ellison, the FCC's
Enforcement Bureau chief, said in an Oct. 3 statement. "The Enforcement
Bureau will continue to explore these issues, including the possibility
of additional penalties, to ensure that all companies prioritize the
interests of consumers when billing problems occur."
Verizon has additionally been investigated by the FCC for its early termination fees (ETFs),
which it doubled in November 2009, raising the penalty it levied
against customers who left their contracts early from $175 to $350. In
December, several U.S. senators introduced legislation that would set
limits on ETFs, and in January, the FCC launched a Consumer Task Force, the first action of which was to examine consumers' experiences in the wireless market.
On July 23, Verizon announced second-quarter revenue of $26.8 billion,
though a loss of $198 million, largely due to several one-time issues.
Cash flow for the quarter was up 76.7 percent year over year, and
the carrier added 1.4 million net new customers.
Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University, and in her spare time obsesses about food. Her first book, The Gastronomy of Marriage, if forthcoming from Random House in September 2009.