Verizon Wireless to Pay Millions in Refunds

Two stories, seemingly unrelated, illustrate how our free-market principles have been corrupted and polarized. David Pogue working in cooperation with the New York Times has exposed a disingenuous business practice by Verizon .  To summarize the issue, Edward Wyatt wrote: "In the last three years, the F.C.C. has received hundreds of complaints from Verizon Wireless customers who said they were charged for data use or Web access at times when their phones were not in use or when they mistakenly pushed a button that activated the phone’s Web browser."  David quotes Verizon: " “Approximately 15 million customers who did not have data plans were billed for data sessions on their phones that they did not initiate,” the company said on Sunday."  Evidently, this scam has been going on for sometime.

This incident, once again raises the specter that these companies are purposely implementing underhanded "things" to separate the consumer from their money. Think of it this way, Verizon is a technologically sophisticated company selling very sophisticated smart phones.  So given all the technological expertise at their disposal, Verizon should be able to design a simple "safety switch" to prevent these "accidental" charges. The fact that they have not implies that the management of Verizon is purposefully and willfully promoting disingenuous business practices.

Concerning the second story. Adam Thierer of the Technology Liberation Front wrote an article: Problems in Public Utility Paradise, Part 14: Muni Wi-fi Postmortem. Sadly this article is simply another typical diatribe lambasting attempts by Municipalities to provide their citizens with Wi-Fi services. The theme of the Technology Liberation Front is "... the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology." So what has this got to do with Verizon?

Verizon, as well as many other technology companies have been caught doing underhanded activities that are injurious to their customers. When companies pursue these strategies and piss-off enough people, regulations happen.  Furthermore, if companies truly want a free-market free of regulations; they need to realize that freedom also means responsibility. 

Unfortunately, many of the posts on the Technology Liberation Front are postured to vilify government without questioning the business practices of the private sector.  It's time for the Technology Liberation Front to look into the mirror  for some serious self-reflection concerning who is responsible for the ills in the American economy. If the Technology Liberation Front is truly championing the concept of keeping the politicians away, I would expect some of the commentators to expose bad corporate behavior and demand that the corporations clean-up their business practices.  It is a sad commentary on American culture when freedom is considered a right to steal and blogs supposedly defending the free-market, such as the Technology Liberation Front remain silent.  For a site based on Libertarian principles, this seems very un-Libertarian

As for me, if a company can't accept responsibility for the freedoms they enjoy, regulate.

Corporate Condescension

One of the irritants that we seem to have to deal with every day are disingenuous corporate "offers".  These offers are couched in verbiage to make it seem that they are doing you a favor.  The letter closes with "The power is yours,"  This letter also contains the proclamation "Rule the Air" as if you had a choice in making the rules or gasp, negotiating the terms of the so-called "contract".  (Click on the image to see it better.)


What is particularly galling about this "offer" is that Verizon is proposing to assist you in "conquering your overages".  The solution is simple, Verizon could simply stop charging you for overages!  Bank of America also offers a similar ridiculous service. So if these companies can change the "terms of agreement" at will and at any time, it is a no brainier for them to simply stop charging for overages, especially if you have been a good customer.

The Verizon letter above may not be an Enron or a Collateralized Debt Obligation, nevertheless it is another small indicator that corporations feel no ethical restraint in misleading their customers to get undeserved dollars. For more on Verizon's and other companies dishonest business practices click here.  If a company is not willing to be honest with you, why should you be honest with them?

Surreal Contracts

Contract law is one of the fundamental building blocks or our free-market democratic society. When people enter into a contract, they have entered into a mutual agreement for whatever action they have agreed to, such as buying a car or remodeling a house. Contracts, or at least some people claim they are, are used when you purchase a cell phone plan. Over at the Technology Liberation Front Adam Thierer wrote: "What is All This Nonsense about Smartphone Early Termination Fees?" The theme of his article is that early termination fees are a necessary business decision by the cell phone companies to recoup the cost of selling their phones below cost to attract customers. I won't be discussing that issue here.

What I will be discussing is his misplaced comment that: "AND THEN THEY FORM A CONTRACT WITH THE BUYER TO MAKE THE DEAL WORK. And that contract obligates both sides to live up to their end of the deal." Technically, Adam is correct - people negotiate a contract that defines the obligations of both parties to assure that the agreement is carried out. Unfortunately the reality of the situation, from my point of view, is that cell phone contracts are NOT valid contracts.

First, has anyone ever heard of an off-the-street consumer walking into the friendly neighborhood cell phone store negotiating (forming) a "contract"? Do the cell phone companies allow you to cross out sections on the "contract" that you don't like? I have not heard of the consumer being able to negotiate.

Second, contracts obligate both parties to live up to their end of the deal. Well the cell phone companies have a standard clause that they can change the terms of agreement anytime they wish. No such luck for the consumer, the consumer is locked in. Here is the what Verizon has: "Can Verizon Wireless Change This Agreement or My Service?" In that section, Verizon states: "We may change prices or any other term of your Service or this agreement at any time, but we'll send you written notice first. If you use your Service after the change takes effect, that means you're accepting the change. But if a change to your Plan or this agreement has a material adverse effect on you, you can cancel the line of Service that has been affected within 60 days of receiving the notice with no early termination fee." (Emphasis added).

Adam concludes with: "But, if you default on that loan by breaking your contract, you’ll be hit with a penalty — an early termination fee — since it would leave the carrier without a way to recoup the cost of that shiny new mobile mini-computer that they handed you on the cheap when you just absolutely had to have the hot new toy in town." But what recourse does the consumer have if the cell phone company cuts him or her off? The cell phone becomes a paper weight. I guess Adam believes that consumers are not hurt financially should their cell phone service be unceremoniously terminated.

While I don't consider cell phone contracts to be valid, there is an aspect of contract law related to adhesion contracts. Cell phone contracts could be considered adhesion contracts. Adhesion contracts, to me, are not valid since they cannot be negotiated. But then there is debate within the legal community about whether adhesion contracts are valid. I will leave that up to you to review. As for me, I am NOT a lawyer and my comments simply reflect my personal opinion.

Verizon's Onerous Terms of Use

The terms and conditions of use for this card are incredibly troublesome. Nothing new here, but its still worth looking at the disingenuous logic. (To see the terms and conditions better, click on the image.)



1. The card requires that you acknowledge reading the terms and conditions of use. Yet the card states: "Terms and Conditions of use are subject to change without notice." (emphasis added). So what is the point of agreeing to terms and conditions of use, if the company can change them at any time? (While this is not an online terms of service, take a look at District Court in Texas Rejects Online Terms of Service as Illusory and Unenforceable.)

2. Technically this card is supposed to be a convenience feature to prepay for your future use of the phone. One of the conditions is that: "Airtime expires 30 days from the date it is added to the account". So after thirty days your remaining money evaporates! This is a blatant rip-off.

So why does Verizon use in its ads the image of a friendly sympathetic guy backed-up by a large "we are there for you" staff? Based on the terms of use, this does not compute.

Great Net Neutrality Debate II

Evidently a Wall Street Journal article sparked a variety of posts related to Network Neutrality. One post was at the Technology Liberation: "Front, Bandwidth, Storewidth, and Net Neutrality", which in turn referenced the testimony of George Gilder before the Senate Commerce Committee in April 2004. What intrigued me with the narrative, was the following narrative.

Although American companies invented almost all the technologies crucial to the Internet, we have fallen behind many other nations in the deployment of these technologies.

The U.S. now ranks eleventh internationally in residential "broadband" access. Using the FCC’s silly 200-kilobit-per-second definition, some now say that 25 percent of American homes have broadband. But by the standards of Asia–where most citizens enjoy access speeds 10 times faster than our fastest links–U.S. residences have no broadband at all. U.S. businesses have far less broadband than South Korean residences. South Korea, for instance, has 40 times the per capita bandwidth of the U.S. Japan is close behind Korea, and countries from China to Italy are removing obstacles to the deployment of vDSL, fiber-to-the-home, and broadband wireless networks.

Asian broadband also proves there was no Internet "bubble." Today, Korea runs over the net between a three and five times larger share of its economy than we do. Riding the bus to work, Koreans watch television news and exchange video mail over their mobile phones. They enjoy full-motion video education and entertainment in their homes. Many of the dot-coms that failed in America due to the lack of robust broadband links are thriving in Korea. Consider that by this time next year Verizon Wireless’s 38 million customers will enjoy faster Internet access via their mobile phones than through their Verizon DSL connections to their homes. Only the most severe disincentives to invest could have yielded such a result, which defies the laws of physics. The American Internet "bubble" was actually a crisis of policy.

The purpose of George Gilder testimony was to establish how America is falling behind due to "oppressive" regulation. The problem with the narrative is that it is logically flawed since Mr. Gilder has not delved into why the Asian internet is better than the US internet. One can't simply say that regulation in the US has made our internet "bad" when compared to the Asian internet. For all I know, the Asian internet could be even more regulated than the US internet. Or they have better network managers than we do? Mr. Gilder has simply overlooked these potential reasons.

The narrative, to me, is logically flawed in another manner. If the technology exists, it can be deployed. If it is not deployed then the corporate leaders have made a willing choice not to use it. I would say this is similar to regulations imposing automobile emission standards. The US auto industry said it couldn't be done and whined to Congress. The Japaneses called in their engineers and did it. Now, because they have failed to adapt the American automotive industry is facing bankruptcy.

If the Asian internet is better then the US internet, we need to examine what they are doing and then adapt that technology so that we will have a better internet. Effective corporate leadership means adapting, not whining to Congress for special breaks such as bailouts or less regulation. If our corporate leaders talk free market principles, they should live it through competition.

I also provided this comment at the Technology Liberation Front.

Julian Assange & Forbes Magazine

Andy Greenberg of Forbes Magazine writes: "Admire Assange or revile him, he is the prophet of a coming age of involuntary transparency. ... What do large companies think of the threat? If they’re terrified, they’re not saying. None would talk to us. Nor would the U.S. Chamber of Commerce. ...  How can an American corporation respond to a Wiki attack? Lawsuits won’t work: ... The best protection? With a dash of irony Icelandic Wiki­Leaks staffer Kristinn Hrafnsson suggests that companies change their ways to avoid targeting. “They should resist the temptation to enter into corruption,” he says."  (emphasis added)

Verizon, AT&T, Sprint, Staples, Intuit, PayPal, Ebay, Best Buy, Comcast, Bank of America and numerous others - clean-up your act.  If you want employee and consumer loyalty you must earn it.  The free-market is not about ripping the consumer off to make short-term profits.

Time Warner Joins the Dark Side

Well Time-Warner has just joined Staples, Verizon, and Intuit in my wall of shame. In this case Time-Warner proclaims that as a valued customer that they will continue to offer me a Price Lock Guarantee. As is typical with these so-called contracts, the only obligation is on the customer to pay. Time Warner, however, reserves to itself the right to discontinue any service at any time. In theory, Time-Warner could cut me off from all services and still charge me. (Click on the text to see it better) I learned of this from Christina Tynan-Wood's Gripe Line blog "Tales of misguided customer service". Soon after reading I received my own personal invitation to sign my life away. To be fair to Time-Warner, I do not have any complaints about their service. Also Time-Warner need some flexibility as does the subscriber. Nevertheless, it points to corporations abusing the English language and making promises that upon inspection are empty. Of course I can't resist using Time-Warner's non-nonsensical motto: "The Power of You"

Staple's Joining the Darkside?

I had long considered Staples to be one of the more reputable stores when it came to salesmanship. Now it appears that Staples may be dipping its toes into disingenuous business practices similar to Intuit, Verizon, and PayPal.

Recently, I went in to Staples buy some printer ink and was greeted by a variety of large colorful "sale" signs. Get $3 back they touted for recycling your old ink cartridges and 10% off the purchase of a new ink cartridge they screamed. Good news!

When I got home, I had the chance to finally sit down and read the terms and conditions of the "sale". See below.

It quickly dawned on me that this "sale" was illusionary. It required that I "earn" a minimum of $10 in reward points in a quarter. Failing to meet that goal meant that I would loose the money that I was supposedly saving from the "sale". Since I don't have much reason to buy lots and lots of stuff from Staples, the supposed savings from the "sale" price were a fallacy. I returned the items to Staples and bought the same items from Amazon.com at a cheaper price.

While I am at it, I might as well mention an article that appeared on TechDirt: "Yes, We Can Write Our Opinions Without Contacting The Company We're Writing About First". While this TechDirt article does not deal with the topic at hand, it does contains links to how companies are scamming their customers. One particular link leads to an article by Michael Arrington: "Video Professor Tries To Bully Washington Post, Fails". Additionally, Jim Harper wrote about shady business practices in: "The Negative Feedback Loop Begins". While Staples has not yet descended to these levels, the fact that Staples is toying with misleading sales points to possible continued future use of deceptive business practices. Our Country is on a slow agonizing downhill slide.