Telecom Contracts: Know What You’re Paying For

 Over the past few years, the Federal Trade Commission (FTC) has been cracking down on unethical billing practices at major telecom carriers like Verizon and AT&T. This past October, Verizon paid as much as $64.2M in cash and phone credits to settle a class-action lawsuit for over-charging subscribers of their Family Plan[i].

The case against Verizon accused the telecommunications giant of charging Family Plan subscribers for “in-network” minutes that were supposed to be free, or charging customers with additional phones on the plan $0.45 per minute going over the allotted minute allowance (instead of the $0.25 that was charged to the primary phone on the plan).

The FTC also filed suit against AT&T for throttling data for unlimited data plan subscribers when they used over a specific amount of data during a billing cycle. They explained that AT&T failed to adequately inform customers who had signed up for the unlimited data plan that their speeds would be slowed if they used more than a certain amount of data. Even worse, “When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars,” the FTC said in a statement.[ii]

Telecom contracts aren’t designed to be easy to read and understand. As a result, customers frequently end up paying more than they should for their carrier’s services. While the cases of Verizon and AT&T are the result of dishonest billing practices, customers often fall victim to subpar contract terms and conditions, including overpaying or even paying for services they don’t actually need.

Before signing your name on the dotted line, it is important to understand the actual plans being proposed in terms of any requirements on the account or the actual user the plan is being added to, limitations on devices (3G vs. 4G), and if all users are eligible. Understanding your contact terms and conditions is critical for managing your organization’s telecom costs.

First and foremost, make sure you read the fine print. You may think you are getting a great custom plan or bundle that will cover your usage profile and travel requirements, when in fact the plan is only a good fit for a few users. Sometimes the carrier will require a minimum commitment of active lines on the account in order for the plan to be available for all users. It is important to ensure this commitment is realistic based on your current and future needs. Always leave yourself a buffer for a usage downturn or a bump in growth.

Carriers will also add custom plans to the contract, but they are only valid on certain devices or generations. For example, the plan may be eligible for 3G devices and if you are already in process of upgrading to 4G this plan will soon be irrelevant. Also, if you upgrade the device and are not aware of this, the carrier may automatically choose a replacement plan for you that can cause significant overage charges on the account or a jump in monthly costs. Make sure the plan you are asking for meets all of your requirements and will be available to the majority of lines if not the entire account.

If you are adding a custom or grandfathered plan to the contract, make sure it is compatible with other plans on the account. You do not want to add a pool plan where only a few users can share in the benefit while the majority of other users are on a newer share plan. It is critical to understand your usage profile before developing any custom requests to ensure your usage is covered and to assist in minimizing monthly costs and any potential unforeseen overages.

Managing your wireless costs doesn’t end once you’ve signed the contract for a new plan. Be sure to review your invoices each month to monitor the charges. Make sure you understand the products and services you’re signing up for - and that includes reading your contract and promotional material (yes, even the fine print). Keeping a record of the services you have authorized can also be helpful when billing descriptions are muddled or unclear. If you’re unsure about your telecom invoices, dig a little deeper and start by asking a few simple questions:

• What services were provided by the listed companies?
• Did I authorize the listed charges?
• Are the rates and line items consistent with the rates and terms that were originally quoted?

Remember: you do not have to accept the initial proposal presented. Do some research and leverage other carrier plans or grandfathered plans that may not be public anymore. Also, understand what is being offered. Sometimes your account rep will not be aware of any limitations but you will want them to get in writing from the pricing team what the offer is actually providing.

[i] Hunter Stuart, “If You Had A Verizon Family Plan In The 2000s, There's Some Cash Coming Your Way,” Huffington Post, October 30, 2014.

[ii] Timothy Stenovek, “AT&T Sued For Reducing Speed Of 'Unlimited' Data Plans,” Huffington Post, October 28, 2014.