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Verizon Loses Phone Win-Back Challenge

In a victory for cable, an appeals court has denied the latest attempt by Verizon Communications Inc. (NYSE: VZ) to overturn an Federal Communications Commission (FCC) order that prevents the telco from engaging in some controversial phone service retention tactics.

Verizon filed its petition with the U.S. Court of Appeals for the District of Columbia, seeking to stay an FCC decision finding that the telco was using illegal methods to keep phone subs who were trying to switch to a competing cable service provider. The FCC handed down its ruling (former chairman Kevin Martin was the lone dissenter) only after the Commission's Enforcement Bureau had made an earlier recommendation that the agency deny the original complaint by cable operators about Verizon's win-back tactics. (See Verizon Claims First Amendment Foul, FCC Orders Verizon to Dial Back Win Back Tactics, and FCC Sides With Verizon .)

The original complaint, filed last February by Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks , argued that Verizon was using proprietary info unfairly to lure phone customers back with new service packages and pricing, and plying them with other "incentives," including gift cards, while number ports were still pending. (See MSOs Sue Verizon.)

Verizon argued in part that the FCC order violated the telco's First Amendment rights, pointing out that cable operators were allowed to use "equivalent" retention marketing when a customer cancels video service. The cable operators said Verizon's argument didn't hold up because the telco doesn’t depend on a porting handshake with the incumbent MSO when customers defect to FiOS TV. (See Apples & Oranges and Verizon Asks FCC for FiOS Help.)

Predictably, Verizon and the cable guys had completely opposite responses about how today's ruling today would (or wouldn't ) protect consumers.

National Cable & Telecommunications Association (NCTA) president and CEO Kyle McSlarrow said the ruling would protect consumer rights when they switch to a new phone provider, claiming it "permits even greater numbers of consumers to seamlessly join the millions of other Americans who now enjoy the significant savings and benefits provided by our industry's competitive digital voice services."

"This looks like a loss for consumers, who now have less information available when choosing between different competitors," countered David Fish of Verizon. "By denying consumers information, the FCC's order denies them choice." Verizon, he added, is reviewing the order.

— Jeff Baumgartner, Site Editor, Cable Digital News

fgoldstein 12/5/2012 | 4:12:02 PM
re: Verizon Loses Phone Win-Back Challenge FbyF, you must have missed the details of the case. This isn't about a "market". It's about a technical detail in a multi-vendor market.

In order to change telephone carriers, the winning carrier must notify the losing one several days before the line can actually be moved. This is the way the number-portability process is set up. When the port actually takes effect, the entry in the Neustar LNP database is changed by the new carrier. The losing carrier needs to put a 10-digit screen on the number ahead of time so that it knows to dip calls to that number. If it didn't, then calls from within the ported-out switch would continue to route to the former line, not the new carrier.

There is no equivalent to this in cable or Internet. You can say goodbye to a provider without telling them ahead of time. Verizon was taking advantage of the technical difference to do retention marketing. The court agreed with the FCC majority that this was close to a previously-banned practice involving long distance slamming.

Letting people "pummel each other" is not a civilized marketplace. By your standards, competing shopkeepers have a right to smash each others' stores to smithereens -- after all, protecting property is government intervention in the "market". But guess what -- Ayn Rand really is dead.
FbytF 12/5/2012 | 4:12:02 PM
re: Verizon Loses Phone Win-Back Challenge Both MSO's and wireline carriers suck at customer retention. Call either and tell them you want to cancel the service and there's no reaction at all just another transaction. Apparently they try to win you back after you actually leave which is highly unlikely unless they're offerring a really sweet deal. The FCC should let the market play out by letting the MSO's and Wireline Carriers pummel each other. The FCC should only be involved in those areas where there is still no viable competiton.
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