Light Reading

Lawsuit Accuses Clearwire of Subscriber Fraud

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
4/1/2011
50%
50%

A new motion in a class action suit filed against WiMax service provider Clearwire LLC (Nasdaq: CLWR) alleges that in mid-2008 the operator intentionally started a scheme to sign up customers outside of its coverage areas in order to boost subscriber numbers and collect on termination fees when the aggravated users left.

The motion was filed Thursday with the United States District Court for the Western District of Seattle alleging that Clearwire’s practices with respect to Early Termination Fees (ETFs) are unlawful. You can read the motion here and associated documents here.

The motion and associated documents claim that top executives at Clearwire knew of a scheme -- supposedly called "Project Star Trek" internally -- that changed the coverage area of the operator's towers in its "pre-qualification" tool so that it appeared that potential customers were in signal range when they weren't.

Clearwire responded to the allegations early Friday afternoon calling them "baseless and absurd."

"We flatly deny any inference of fraud," a company spokesman told us in an email. "We will vigorously defend ourselves against any such allegations.”

On the back of the these new allegations, plaintiffs in a class action suit against Clearwire have asked the court to grant leave for a ruling on a second amended complaint against the operator. The initial class action case was filed in April 2009. The court originally granted Clearwire's motion to dismiss the case in February 2010, but the plaintiffs claim they now have new information at hand.

From the papers filed, much of the new material in the case appears to hang on information offered up by former Clearwire employee Donald Hammond, an ex-general regional manager at the operator, who worked for the company for four years before leaving in early 2010. Hammond claims that executives including former CEO Ben Wolff and COO Perry Satterlee knew of the scheme.

As well as other testimony, Hammond has also provided an email dated May 22, 2008, purporting to be from Gabe Suarez, who is named as a "director of engineering" at Clearwire and "a direct report" to Satterlee. The email states that "last night, the sector limits were changed in the markets below to increase the potential PQ opportunities." The email lists some 20 markets.

The motion goes on to claim that the pre-qualification limits around the fixed wireless towers Clearwire was operating were pushed out from 1.5 miles to 2.5 miles. This is the crucial detail because the motion claims that the executives knew that the towers didn't work well -- or at all -- in providing coverage beyond 1.5 miles to 1.7 miles. The alleged re-programming of the pre-qualification tool, however, would increase the coverage area "passed" by the tower by 280 percent, from nearly eight square miles to 19.6 square miles.

The motion claims that the distance requirements held true for both the Motorola Inc. (NYSE: MOT) Expediance technology that Clearwire used in its first 48 markets and the WiMax technology it began to deploy during 2008. The company launched its first "Clear"-branded WiMax market in January 2009. (See Clearwire Sets Portland WiMax Launch.) The motion claims that this had a two-fold effect for Clearwire. It allowed the operator to try to boost its gross subscribers at a time when this was an "important metric" for Clearwire's potential strategic investors.

Clearwire completed its asset merger with Sprint Corp. (NYSE: S) on November 28, 2008. At the same time, it received a $3.2 billion infusion of cash from Intel Corp. (Nasdaq: INTC), Google (Nasdaq: GOOG), Comcast Corp. (Nasdaq: CMCSA, CMCSK) and others. (See Clearwire, Sprint Complete Merger.)

Furthermore, the motion claims that Clearwire management called for staff to strictly enforce ETFs for customers canning the service within 30 days. The instances of customers wanting to drop their Clearwire service contract allegedly tripled following the claimed pre-qual tool changes that were said to have been made in May 2008.

— Dan Jones, Site Editor, Light Reading Mobile

(2)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
joset01
50%
50%
joset01,
User Rank: Light Beer
12/5/2012 | 5:08:51 PM
re: Lawsuit Accuses Clearwire of Subscriber Fraud


Really interested to see how this plays out.

estrategy
50%
50%
estrategy,
User Rank: Light Beer
12/5/2012 | 5:08:46 PM
re: Lawsuit Accuses Clearwire of Subscriber Fraud


What I don't understand is why this is any different than AT&T and Verizon claiming coverage when they don't have it? 


http://www.deadzones.com/2011/04/clearwire-false-advertising.html

Flash Poll
From The Founder
Network architects aiming to upgrade their networks to support agile, open, virtualized services in the 21st century need to consider new criteria when choosing between technology suppliers.
Live Streaming Video
BTE 2015 Sponsor Keynote: HP
Dr. Prodip Sen, CTO, Network Functions Virtualization, HP
LRTV Custom TV
The New IP Goes Mobile With vEPC

7|2|15   |   1:12   |   (0) comments


Heavy Reading's Gabriel Brown discusses results of a Light Reading survey sponsored by Brocade that shows a clear commitment by mobile operators to move quickly to virtual EPC deployment.
LRTV Custom TV
Making Business Sense of SDN

7|2|15   |   1:42   |   (0) comments


Results of a Brocade-sponsored survey show that CSPs have a clear sense of SDN use cases but are wrestling with the business case. Sterling Perrin of Heavy Reading looks behind the numbers.
LRTV Custom TV
NFV Will Be Here Sooner Than You Think

7|2|15   |   2:22   |   (0) comments


Forget the usual ten-year cycle for new technologies – NFV will be a core part of CSP networks in five years, based on results of a Brocade-sponsored survey, says Heavy Reading's Caroline Chappell.
LRTV Custom TV
The New IP Gains Traction With CSPs

7|2|15   |   1:42   |   (0) comments


Roz Roseboro of Heavy Reading analyzes results of a Light Reading survey sponsored by Brocade showing that CSPs are getting serious about making the transition to the New IP era.
LRTV Custom TV
It's (Real) Time for Analytics

7|2|15   |   1:42   |   (0) comments


Heavy Reading's Jim Hodges looks at how CSPs say they plan to use analytics to deploy new services in real time as part of The New IP, based on results of a survey sponsored by Brocade.
LRTV Documentaries
IoT in Action

6|30|15   |   1:39   |   (7) comments


Two co-workers discuss the benefits of IoT technology.
LRTV Interviews
Ericsson Opens Up on OPNFV

6|30|15   |   14:16   |   (1) comment


Martin Bäckström, VP and head of industry area Datacom at Ericsson, talks to Light Reading founder and CEO Steve Saunders about the emergence of OPNFV, the importance of standards and Ericsson's OPNFV plans.
LRTV Custom TV
NetNumber Founder Discusses NFV/SDN Impact on SP Networks

6|26|15   |   4:15   |   (0) comments


NetNumber Founder Doug Ranalli examines why SPs need a new network infrastructure for service agility. While NFV and SDN are the tools, the old ways of thinking about signaling control are inhibitors. Doug provides his recommendations.
LRTV Custom TV
Orchestrating NFV vCPE Services Across Multivendor Networks

6|26|15   |   5:46   |   (0) comments


Nirav Modi provides an overview of vCPE, the fastest-growing NFV use case, showing how Cyan's Blue Planet orchestrates vCPE services across a multivendor infrastructure to rapidly deliver new managed services for business customers.
LRTV Custom TV
ZTE at LTE Summit Amsterdam 2015

6|26|15   |     |   (0) comments


As one of the leading global telecommunications providers, ZTE presented its cutting-edge technology at LTE World Summit 2015 in Amsterdam. On display at ZTE's booth were the latest R&D achievements in wireless, 5G development, HetNet, deep convergence of FDD and TDD, and RCS/IMD/iSDN/vCN.
LRTV Documentaries
OPNFV Director Opens Up on Women in Tech

6|25|15   |   3:25   |   (0) comments


Heather Kirksey, the director of the OPNFV, gets real about the gender disparity in open source and standards and discusses how we can change both the conversation and the gender dynamics.
LRTV Custom TV
Symantec's Service Provider Security Strategy

6|24|15   |   7:06   |   (0) comments


Didi Dayton explores Symantec's emerging enterprise security strategies for service providers. Highlights include 'killing the password,' self-defense, advanced analytics and adaptive response in a service provider architecture.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
All Upcoming Live Events
Infographics
Hot Topics
Staying Productive With My Office-in-a-Bag
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/25/2015
Who's Feeding Fiber to LinkNYC Hotspots?
Mari Silbey, Senior Editor, Cable/Video, 6/29/2015
Eurobites: Activist Investor Takes Stake in AlcaLu
Paul Rainford, Assistant Editor, Europe, 6/30/2015
What's in Your Office-in-a-Bag?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/26/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Casa Systems has been going from strength to strength over the last couple of years. In 2013, it became the first vendor to ship an integrated CCAP device -- the ...
Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
Cats with Phones