AT&T is facing an amended class-action lawsuit in New York over claims that the company fabricated "thousands of customer accounts" and used abusive sales tactics for its DirecTV Now product as part of an effort to hide "serious technical problems due to the premature roll-out" of the OTT-TV service.
The amended suit (PDF) against AT&T and specific "executive defendants," including CEO Randall Stephenson and Senior EVP and CTO John Stephens, was filed Friday, September 13 with the US District Court Southern District of New York by a group that includes individual investors as well as a several union fund pension stockholders, including the Iron Workers and the Local 449 Pension Plan.
"We plan to fight these baseless claims in court," AT&T said in an emailed statement.
The complaint alleges that AT&T sales teams dropped DirecTV subscriptions into customer accounts without their knowledge using short-term promotions, but that many of those accounts were still included in public statements touting the "dramatic" growth of DirecTV even after they were discontinued after those short-term promotions ended. The lawsuit contends that some sales employees were pressured to create fake accounts and bulk up those numbers as AT&T moved ahead with its then-proposed acquisition of Time Warner Inc. (AT&T wrapped up that deal in June 2018.)
The suit further claims that AT&T's claims of impressive demand and growth of the OTT-delivered DirecTV Now service (recently rebranded as AT&T TV Now) was a "mirage" and that many accounts may have been bogus.
The suit also alleges that certain AT&T salespeople were told to bundle up to three DirecTV Now accounts with a single mobile phone activation, sometimes creating false email addresses and running a customer's credit cards three separate times.
AT&T, which acquired DirecTV in July 2015, launched DirecTV Now on November 30, 2016, with four-channel packages. DirecTV Now got off to a fast start with its combination of discounted pricing and no-contract policies.
However, AT&T has been losing both satellite TV and OTT subscribers in recent quarters as customers rolled off of promotions and discounted pricing. The company lost 946,000 video subs in Q2 2019, including 778,000 legacy "premium" TV customers (from DirecTV satellite and U-verse TV) and 168,000 DirecTV Now customers.
AT&T has been shifting its video strategy to focus on profitability and higher-value customers that will reduce the company's exposure to churn. Tied in, the company recently began to roll out AT&T TV, a new OTT-delivered, contract-based pay-TV service that features larger channel bundles than the slimmer "Now" offering and uses inexpensive Android TV devices to help facilitate self-installs and to cut down customer acquisition costs and other operational costs.
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— Jeff Baumgartner, Senior Editor, Light Reading