For some time we've been tracking how Verizon has been socking customers with a $1.99 data access fee on many phones -- which was incurred by users even if the phone was off or the battery was dead. Even users who had data access on their phones blocked were socked by the fee -- given that the message sent to users to tell them they couldn't get data consumed 0.06 kilobytes of data
-- resulting in a $1.99 data fee.
The fee was first exposed by the Cleveland Plain Dealer last year
. It only gained the FCC's attention after David Pogue at the NY Times posted a column
featuring a Verizon insider -- who claimed Verizon was aware of the glitch -- but was too in love with the millions in additional revenue it generated to do anything about it.
Last December the news reports caught the FCC's attention, and the agency sent a letter requesting that Verizon explain themselves. Amazingly, despite employee leaks, thousands of impacted customers, multiple press reports, and the fact Verizon was already giving out refunds for the problem to Ohio customers
-- Verizon told the FCC the problem wasn't happening
Usage fees are not charged when a customer simply launches the Internet browser and lands on the Verizon Wireless Mobile Web homepage, which is the default setting.
After Verizon's response, things quieted down and the FCC began a more thorough investigation. Apparently that investigation was about to reveal the fruits of its labor, given that over the weekend, Verizon issued a press statement
acknowledging their over billing was very real. As such, Verizon says they're going to be refunding an estimated 15 million users who have been billed for data for years -- when no data use was happening:
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. 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 charges. We have addressed these issues to avoid unintended data charges in the future.
According to Verizon, "in most cases" the overbilling resulted in charges of $2-$6, but you can assume many customers paid considerably more than that. While it's nice to see Verizon finally pony up to the mistake, the Cleveland Plain Dealer was covering this story in early 2009, meaning it took Verizon more than a year and a half to finally identify and acknowledge a problem that was generating massive
So on to the math. Assuming Verizon is right and it was only fifteen million users, multiply those fifteen million users times $1.99 a month (at least) for the past several years
and you'll get quite an impressive total. The 50 million dollars Verizon is estimating as their payout may be the deal of the century for Verizon.
In an alternate universe where the Times didn't generate publicity and an FCC letter by piggybacking on the work of Cleveland Plain Dealer reporter Teresa Dixon Murray -- would Verizon have noticed and corrected a billing problem generating them tens of millions in additional monthly revenue? Did Verizon notice the billing problems and simply decide to not try very hard to resolve them? Update, correction
: We also noticed that the FCC issued a statement
(pdf) noting that they've been investigating Verizon for ten months already. Says the FCC:
"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. 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."