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
Anshul Sadana answers questions from Steve Saunders, Light Reading's founder and CEO, about Arista's CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (0) comments


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Between the CEOs
Video Exclusive With Basil Alwan, Alcatel-Lucent

7|24|15   |   26:44   |   (5) comments


Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
LRTV Custom TV
VDF: Enable the Financial With Mobile Money

7|20|15   |   06:53   |   (0) comments


Ian Ravenscroft discusses how operators can expand to occupy the entire digital services value chain through service innovation.
LRTV Custom TV
Telefónica on OSS Transformation

7|20|15   |   06:01   |   (0) comments


Jose Gonzales discusses the details of Telefónica's operation transformation program.
LRTV Custom TV
Judi Achmadi on Huawei's Cloud Storage Solution

7|20|15   |   03:33   |   (0) comments


Judi discusses the key business goals of TelekomSigma's public cloud service and how Huawei's solution helps them address challenges.
LRTV Custom TV
KPN Enlightening Digital Business & IT Transformation

7|20|15   |   06:19   |   (0) comments


Rob de Beer discusses the changes that operators need to make with service innovation now coming from the Internet world.
LRTV Custom TV
Stratus Telco-Grade Cloud Solutions & NFV

7|20|15   |   07:34   |   (0) comments


Ali Kafel from Stratus Technologies addresses high-availability concerns within the telco industry with a solution that enables telcos to provide high-availability and stateful fault-tolerance using a software-based approach.
LRTV Documentaries
The Six Million Dollar Business Man

7|20|15   |   01:52   |   (0) comments


Steve Saunders, publisher. A man barely alive after an acquisition malfunction imploded the company he founded. Gentlemen, we can rebuild Light Reading. Better, faster, stronger.
Between the CEOs
CEO Chat With Anukool Lakhina, Guavus

7|20|15   |   38:51   |   (1) comment


Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
LRTV Custom TV
IBM's Flash Storage With Intel QuickAssist

7|20|15   |   03:18   |   (0) comments


Intel's Bev Crair and IBM's Eric Herzog discuss how IBM's V9000 Flash Storage System has helped customers around the world. Featuring real-time compression powered by Intel QuickAssist Technology, the V9000 is a next-gen flash storage solution.
LRTV Huawei Video Resource Center
Thailand's AIS: Transforming to an FMC Operator

7|17|15   |   4:53   |   (0) comments


Saran Phaloprakarn, Senior VP of Fixed Broadband Business Management of Thailand's AIS, was a keynote speaker at the first Asia-Pacific Ultra Broadband Summit in Bangkok. In this video, he talks to Heavy Reading about transforming into an FMC (FBB+MBB+Content) operator.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
December 1, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Network operators start seeing savings from NFV in the first year, according to a study by Affirmed Networks and ACG.
Hot Topics
AT&T U-verse TV Hits the Skids
Alan Breznick, Cable/Video Practice Leader, 7/24/2015
Robbins Succeeds Chambers as Cisco Changes CEOs
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/27/2015
RJio to Launch Its Own 4G Devices Brand
Gagandeep Kaur, Contributing Editor, 7/27/2015
Qualcomm Wants FCC to Stay Out of LTE-U Fray
Sarah Thomas, Editorial Operations Director, 7/27/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
Cats with Phones
Distract-a-Cat Click Here
The vibrate function makes for a useful cat distraction.