Ruling upheld against Verizon customer-retention tactics

A federal appeals court on Tuesday upheld a ruling by the Federal Communications Commission to prohibit some of Verizon's tactics to retain customers.

Verizon had been contacting customers upon learning they were switching phone services to make one last appeal for their business. After three cable providers offering voice over IP services objected to the marketing tactic, the FCC ruled that the practice violated the Telecommunications Act. Verizon attempted to petition the decision, but the U.S. District Court of Appeals for the District of Columbia on Tuesday agreed with the FCC ruling and denied Verizon's petition.

Bright House Networks, Comcast, and Time Warner Cable filed a complaint with the FCC in February 2008 in objection to Verizon's "retention marketing." Once Verizon was notified it needed to hand over a customer's phone number to another provider, the company attempted to retain the customers by providing incentives for them to keep Verizon as a carrier.

This action, the three cable companies argued, violated the Telecommunications Act's restrictions on carriers' use of other carriers' proprietary information for marketing purposes. The FCC sided with the cable companies in a June 2008 decision.

"Of course the receiving carrier already knows its own customer's name and phone number," the court ruling (PDF) issued Tuesday said, "but the information that a competitor has just won the customer over, which is vital to the timing of Verizon's retention marketing, is proprietary information that the competitor discloses only because it must do so in order" for the customer to keep the same phone number.

The cable industry lauded the decision.

"Today's ruling promotes competition by protecting the rights of consumers when they make the switch to a new local telephone provider," Kyle McSlarrow, president of the National Cable and Telecommunications Association, said in a statement. "We are pleased that the court upheld the FCC's decision which permits even greater numbers of consumers to seamlessly join the millions of other Americans who now enjoy the significant savings and benefits provided by our industry's competitive digital voice services."

Verizon said it is reviewing the order.

"This looks like a loss for consumers, who now will have less information available when choosing between different competitors," said Verizon spokesperson David Fish. "By denying consumers information, the FCC's order denies them choice."

[c4s2k3]

Sounds good to me. My attitude is that a service provider (Verizon in this particular case) has every opportunity to satisfy a customer while he is one of their subscribers. If the subscriber is looking elsewhere, the provider already failed. Maybe they should have offered better terms/rates, etc. all along to keep that subscriber happy . . . .

My girlfriend had DSL service through a provider in the Orlando area and I noticed her internet service seemed a little pokey. I asked her what download rate she was paying for and how much she was paying a month. She was paying $45/mo. but did not know her bandwidth. I tested it and it was around 1.5 Mbit/sec. I told her I paid the same for cable modem service but was (at the time) getting 7 Mbit/sec. At that time, this DSL provider was advertising on TV that a 1.5Mbit connection could be had for $24.95. When she called and asked that they either drop her price or increase her bandwidth, she was told "Sorry, that offer is for new subscribers only." She immediately canceled and signed up for cable service.

[RobertAPierce]

"This looks like a loss for consumers, who now will have less information available when choosing between different competitors," said Verizon spokesperson David Fish. "By denying consumers information, the FCC's order denies them choice."

What the heck kind of stupid logic is that? The consumer has already made the decision to switch, having evaluated their options. Then Verizon is trying to change their mind about switching. That has absolutely nothing to do with having less information available or less choice at all.

[daves_done]

Hmm... Comcast and other cable co.s invoke the telecommunications act b/c they don't like Verizon trying to retain their customers? Wow. What do you think would happen if startup ISP's tried to use the Telecommunications Act against Comcast? Verizon and other telcos have to allow other DSL providers to use their networks for internet b/c it's running over a telco line. I think it could be easily argued that the Forced Access provisions could be used to bring a good case against Comcast and other cable providers to allow other services be provided over their networks. If providing telephone services over a network medium (like Comcast does) doesn't classify you as a telco provider, I don't know what does.

[Pete Bardo]

daves_done, this is about Verizon harassing it's customers not to leave their service after the customer has already made that choice. I'm in part of Alltel that has just been sold to Verizon. I despise Verizon deeply for having done this. When my contract finally expires, I will be changing providers and I had better not get a call from Verizon asking why--they'll get an earful.

[daves_done]

I"m aware of what it's about and I'm not trying to defend Verizon's tactic. I'm just pointing out that Comcast is siting a law that could arguably burn their whole monopoly business model. Competition would be opening up the network that Comcast claims they built (no they did not build most of it, they acquired it through M &A when the government de-regulated the industry) and let competing companies offer services. I've called Comcast with threats to cancel due to poor service and just like everyone else they will fight with you until you threaten to take your business elsewhere. Then they're your best friend and start throwing offers @ you.

[SeizeCTRL]

I'm kind of iffy on this. While on one hand, the customer is probably already dissatisfied with their service, thus why they are attempting to switch carriers. On the other hand, Verizon should have the option to make better offers to keep their customers. Granted this should happen every time your contract is up for renewal and not when you are fed up with shoddy service.

[contentcreator--2008]

Yeah, but they can use this snippet of information to keep prices higher for everyone who isn't threatening to leave at that particular instant. Without the ability to do this, they should have to provide better services and rates all the time to everyone, instead of trying to make nice only with those people who actually are leaving. If the market was already more evenly distributed, Verizon would recognize that this kind of exit marketing is bad business (favors churn) -- it only makes sense for a near monopoly. I doubt they do it for wireless.

[docster87]

I've hated Verizon for years. I had a gripe and they totally blew me off UNTIL I said I was canceling ALL services. Then they wanted to help my issue? Where was the help the three months before I decided to cancel? And now they suggest that customers lose? Only if Verizon made the same deals with all their customers - not just the ones in middle of leaving - could that remotely be true....

[cmstratton]

I disagree with this decision. It's basically preventing customers from receiving additional incentives/benefits. They always have the option to turn it down and say no.

[Dalkorian]

No, it's preventing companies like Verizon from holding off those incentives/benefits until you sign up for a competitor. They could always provide those incentives/benefits *BEFORE* the customer is ready to leave. You know, entice the customer to stay and not look around to begin with.

[xcal78]

I agree with Dalkorian. If they had these incentives/benefits to offer why not offer them right before you confirm your cancellation request? When I cancelled my Vonage account they offered me 2 free months if I would stay a customer. I cancelled anyways since I disliked the service they provide but they tried the incentives/benefits at the right time. Lots of companies use your cancellation call as a 'last ditch' effort to keep you as a customer. Verizon needed to be slapped for doing their own thing against the law.

On a side note: Wouldn't this fall under the National Do Not Call also once you leave Verizon? They shouldn't be allowed to call you again once your leave if your on that list as well. I wonder if they violated multiple laws by doing this.

[evadsti]

Verizon was my regular phone provider at two residences. I signed up for Vonage on one line at one home. That switch went OK, so I decided to switch the second line. Verizon "lost" the paperwork to release my number, not once, but twice! I didn't think too much about it, at the time, but have since heard of other people with the same issue.

At my other home I switched one line to Cavalier, and had DSL installed. At the time my home was 9000 ft from the closest Verizon switch, so DSL worked pretty good. I had issues on my second line and Verizon had to come out to the house. They asked why I had moved one line to Cavalier. I used the excuse that I was just testing their service. After that my DSL started behaving slow. Cavalier did some troubleshooting and discovered that I was now 19,000 ft. from the closest Switch. Doing a little more research I found that it was possible to hook lines in my neighborhood up to one of two switches. Somehow, my line got moved from the closest switch to the other one.

So, now I'm stuck with paying a high price for cable internet, but at least I have all my home phone lines on Vonage! I even made Verizon come out and remove the overhead wire from my house to the pole - although I had to tell them it was because I was remodeling and it was in the way.

[Imalittleteapot]

I don't like this. If Verizon wants to call me up and offer me a better deal they should be able to call me up and offer me a better deal. If Comcast doesn't like it for example, then they can call me back and offer me a better deal. Then they can just fight over the phone with each other and we'll see who wants to give me the best deal. What's wrong with that? If I don't want it I can tell both of them to take a hike if I want.

[Dalkorian]

The issue is this: why should you have to actually leave and sign up with someone else BEFORE these deals start coming? Why can't they offer these deals beforehand?

It's amazing how some people love getting raped.

[xcal78]

If you've pissed me off enough to cancel a service then saving a few bucks isn't going to win me back nor is wasting my time by stalking me after I cancel that service. At that point your no longer a customer so all the 'new customer' deals apply so you know exactly what you'll get if you go back. If they offer anything better then the deal I had as a customer or the 'new customer' deals they should have tried to keep me before I cancelled not kick me to the curb then try to pick me back up.

[Imalittleteapot]

Oh wow. Forgot to come back and check this one. I agree with what both of you said. Yeah Verizon should offer before you leave, but I'm just saying that anytime someone wants to offer me a better deal I'm willing to listen even if they shoulda done it sooner.

[fairnesstoall]

The issue is this: the cable companies that complained are doing exactly what they are trying to stop Verizon from doing. Cable has been playing both sides of the game - using the Telecom Act to their advantage when it suits them and then claiming they are exempt from its requirements when it doesn't. All Verizon was doing was trying to level the playing field.

[xcal78]

Happen to have any references we can read to back up that claim? I personally have never had that happen by any cable company. They always beg me not to cancel but it ends there.

[johnericanderson]

If Verizon offered the incentives *before* the competition did, they might retain their customers.


Take care of your customers and they will not turn away.