Verizon Reimbursement Fallout May Be Minimal, Despite $90 Million Payout

As Verizon Wireless begins a massive customer reimbursement campaign, it's unclear how much public opinion of the carrier, which tends to top service surveys, will sway.

As Verizon Wireless begins reimbursing approximately 15 million customers for erroneous, data-related charges, it remains unclear what the repercussions - if any - will be for the carrier, beyond the $30 million to $90 million the reimbursements are estimated to total.

On Oct. 3, The New York Times reported that Verizon customers without data plans had been charged $1.99 on one or more occasions, either due to software on the phones or because they had accidentally launched the device's browser. According to the Times, Verizon was aware of the issue for some time, as some customers had complained about it, but "played down the issue" in a December 2009 letter to the FCC (Federal Communications Commission).

In an official response from Verizon that same day, however, Mary Coyne, Verizon's deputy general counsel, said Verizon had already addressed the problems that led to the issue. "When we identify errors, we remedy them as quickly as possible," Coyne said in the statement. "Our goal is to maintain our customers' trust and ensure they receive the best experience possible."

The FCC responded with its own statement, in which FCC Enforcement Bureau Chief Michele Ellison said she was glad to see Verizon addressing the matter, but questioned "why it took Verizon two years to reimburse its customers and why greater disclosure and other corrective actions did not come much, much sooner."

Consumer watchdog Consumer Reports - while pointing out how highly Verizon tends to score on subscriber surveys - wrote in an Oct. 4 blog post that the potential public relations fallout from the refund situation could possibly be "the largest in U.S. telecom history." Analysts, however, suggest Verizon may not suffer much damage to its reputation - or may even use the situation to its advantage.

"I really don't think that this will be a big deal for Verizon except in the very short term," analyst Ken Hyers, with Technology Business Research, told eWEEK. "Even though about 15 million customers are affected, the amounts per customer are pretty small - $2 to $6 per subscriber. Provided Verizon moves quickly to identify and reimburse those customers, I think most will not be unhappy."

Hyers continued, "In fact, since most of those subscribers are apparently unaware that they are owed for improperly billed data fees, a speedy reimbursement by Verizon could actually work in the operator's favor since customers will get the impression that Verizon is proactively refunding them money that some customers don't even realize they are owed."

Consumer Reports writes that it's currently compiling the latest version of its cell service ratings report, which goes into more detail about how carriers respond to consumer complaints about their bills.

"Given the practices that came to light over the weekend," states the blog post, "we'll be especially curious about how Verizon fares in those responses."

Working in Verizon's favor may be a general feeling amongst consumers that such practices could as easily happen with any carrier. "Bill shock" or sudden extra charges, has been an ongoing subject of interest for the FCC, and according to the Washington Post, in mid-October the FCC plans to propose a regulation requiring cell phone users to receive text message alerts when they incur an increase in charges or fees.

"It's definitely caveat emptor with any wireless company. However, the public has learned to live with this type of inconvenience, which is outweighed by the practicality of mobile phones," analyst Roger Kay, with Endpoint Technologies, told eWEEK. "The Byzantine phone bills certainly support the carriers' goal of raising customers' monthly fees over time. Customers are essentially aware of this, but tolerate it."

Hyers likened the scenario to credit card billing. "Operators try to be proactive," he said, "but ultimately consumers still need to monitor their own bills each month to make sure that they aren't charged for services that they didn't use."