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
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
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
LRTV Documentaries
The Three Cs of MWC15

3|2|15   |   2:33   |   (1) comment


My visit to this year's Mobile World Congress is going to dominated by three Cs – cloud, cells and coffee.
LRTV Huawei Video Resource Center
Huawei Shares Its Vision of the Future of Mobile Networks Innovations

2|26|15   |   2:30   |   (0) comments


Mobile broadband is changing our lives. It's reshaping the Internet, industry, and society. It allows us to freely connect with one another anytime, anywhere. At this year's Mobile World Congress, Huawei will share its latest insights and newest ideas and technologies that will shape the future of MBB. They will showcase their end-to-end MBB solutions that will ...
LRTV Huawei Video Resource Center
Accelerate Digitizing, Boost Digital Business

2|26|15   |   6:14   |   (0) comments


A new digital revolution is leading us to a better connected world. Together with millions of digital partners, Huawei will help CSPs to build their digital service ecosystem and aggregate a wide variety of digital services. In this video, we find out how Huawei is going to help CSPs implement digital operations.
LRTV Huawei Video Resource Center
The Secret Recipe to Enabling Hyper-Growth Industries

2|26|15   |   3:38   |   (0) comments


With a number of successful cases on network capability exposure, Huawei is going to share the secret recipe to enabling hyper-growth markets with a step-by-step approach.
LRTV Documentaries
BTE 2015 Is Bigger & Even Better

2|25|15   |   03:13   |   (4) comments


This year's Big Telecom Event (BTE) in Chicago is going to provide more opportunities than ever for networking, getting to grips with key industry challenges and opportunities and, equally as important, having some fun.
LRTV Interviews
Light Reading ICT Leaders Roundtable at MWC 2015

2|12|15   |   1:07   |   (2) comments


On Sunday March 1, 2015, Light Reading will host an ICT Leaders Roundtable in partnership with Huawei. At this half-day event, CIOs, analysts and researchers will discuss key industry trends like virtualization in the cloud with a specific focus on new business models. Located at the luxurious Renaissance Hotel near the Fira Barcelona, space is limited so please ...
LRTV Documentaries
Going Green in 2015

2|12|15   |   02:04   |   (0) comments


Energy efficiency is set to be an incredibly hot topic in the telecom industry this year.
LRTV Custom TV
SDN & NFV: Where Are We Going From Here?

2|11|15   |   11:27   |   (0) comments


Vitesse Semiconductor CTO Martin Nuss gives his perspective on why SDN and NFV should be tightly interconnected and how he sees the industry moving forward.
LRTV Documentaries
Time for Gigabit Europe?

2|9|15   |   01:27   |   (4) comments


Gigabit broadband networks are springing up all around the US and they'll soon become more commonplace in Europe.
LRTV Interviews
Brocade Brings New IP Vision to 2020 Vision Executive Summit

2|3|15   |   4:23   |   (0) comments


In December 2014, Light Reading gathered telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Brocade's Kelly Herrell shared his company's strategy at ...
LRTV Interviews
Brocade's Kelly Herrell on the New IP

2|2|15   |   12:36   |   (0) comments


In December 2014, Steve Saunders sat down with Brocade VP of Software Networking Kelly Herrell at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Brocade's approach to the New IP, the future of the telecom industry, and more.
LRTV Huawei Video Resource Center
Dr. Dong Sun Talks About Carriers' Digital Transformation & Huawei’s Telco OS

1|29|15   |   6:28   |   (0) comments


Dr. Dong Sun, Chief Architect of Digital Transformation Solutions at Huawei, discusses how telecom operators can become digital ecosystem enablers and deliver optimal user experiences that are in real-time, on-demand, all-online, DIY and social (ROADS).
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Small Cells Enabling Location Services
Sarah Thomas, Editorial Operations Director, 2/25/2015
Verizon Takes Radio Dot to Detroit, VoLTE Overseas
Sarah Thomas, Editorial Operations Director, 2/27/2015
FCC Adopts Title II Rules
Alan Breznick, Cable/Video Practice Leader, 2/26/2015
60% of World Lacks Internet: Facebook Report
Mitch Wagner, West Coast Bureau Chief, Light Reading, 2/25/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.
G'day! And welcome to an entirely new feature on Light Reading -- our weekly "CEO-to-CEO" interview.