By Cecilia Kang
Washington Post Staff Writer
Thursday, October 28, 2010; 10:31 PM
The Federal Communications Commission reached a record $25 million settlement on Thursday with Verizon Wireless over false data charges, in a move meant to show that the agency is stepping up scrutiny of consumer billing practices.
The settlement brings the total cost of Verizon's flap over mystery fees to more than $77 million - one of the biggest payouts for consumer protection violations by a telecom service provider.
Verizon Wireless said this month that it would refund $52 million to 15 million subscribers for wrongly charging them for accessing the Web and for other data programs they didn't want. The company said the charges were inadvertent and were caused largely by a software glitch.
The explanation didn't assuage concerns at the FCC, which said wireless and broadband customers are increasingly complaining of surprise fees and growing communications costs.
"Today's consent decree sends a clear message to American consumers: The FCC has got your back," Chairman Julius Genachowski said in a statement. "It will serve as a significant deterrent to others in the future."
The FCC also demanded that Verizon Wireless pay back customers immediately and offer data blocks for subscribers seeking to avoid data charges.
With the settlement, the FCC announced it had closed a 10-month investigation of Verizon's mystery fees after consumer complaints and news reports. A spokeswoman declined to comment on how the settlement might affect separate reviews of other carriers' billing practices.
Verizon said the vast majority of charges were about $1.99 and were caused by pre-loaded software on certain phones that charged users for data services they didn't intend to use when they simply clicked on an "acknowledgment" function. Verizon Wireless, the nation's biggest wireless service provider with 90 million subscribers, promised the FCC it would repay customers in October and November.
"We accept responsibility for those errors, and apologize to our customers who received accidental data charges on their bills," Verizon said in a statement.
The payment to the FCC will go to the U.S. Treasury and is the largest settlement in FCC history. In 2007, Univision paid a $24 million settlement for violating television programming rules.
Earlier this month, the FCC introduced a proposal that would require cellphone network companies to alert users through free text and voice messages when they are approaching their monthly limits for various services. After surveying cellphone users, the agency estimated that 30 million cellphone customers have experienced "bill shock" from extra charges on their monthly statements for data overcharges and other fees.
Genachowski has indicated that he will also look into regulatory fixes for the growing fines associated with breaking long-term service contracts. Verizon Wireless and AT&T have both raised early termination fees for certain smartphones, saying they are incurring higher costs for subsidizing the phones for subscribers.
But public-interest groups say the fees also go to operating costs, such as running retail stores and ads, according to filings by the carriers to the FCC.
And they urged the FCC to follow through with regulations to protect consumers from false billing practices for wireless, broadband Internet, cable and phone services.
"Verizon would not have been willing to settle were the commission not poised to pass rules against such practices," said Chris Riley, policy counsel at the public-interest group Free Press. "Threats of regulation have a very short shelf life if not consummated."