Some Revenue Sources are Hardly Worth the Effort

October 10, 2014
By: Gary Kim

Some things in life are hard to understand. How firms that worry about their brands can allow “cramming” to occur is one of those things.  

AT&T (News - Alert) Mobility has agreed to settle allegations that it charged mobile customers without their permission for third-party services like ringtones, wallpapers, and text message subscriptions for horoscopes, flirting tips, and celebrity gossip.

Current and former AT&T customers who paid for unauthorized third-party charges after January 1, 2009 may apply for refunds.

AT&T isn’t alone. T-Mobile US was fined by the FTC (News - Alert) as well. Verizon settled a cramming case as well.  

The problem has been addressed for consumers using the fixed networks  as well.

The Federal Communications Commission has estimated that consumer fraud could represent as much as $10 billion in consumer fraud over five years.

Whether the amount of fraudulent charges are hundreds of millions a year or more is less the issue than the sheer reputational harm to service providers, one might argue.

Granted, third party billed apps and services represent a desired source of potential revenue for the mobile carriers. But the amount of fraud is the downside.

As often is the case, billing is the culprit. Granted, it is a devilish business, billing. Billing records are notoriously hard to understand, under the best of circumstances, especially in the mobile realm, where shared and family accounts increase the sheer amount of detail covering multiple services, devices and users.

As one example, the  operators of an Atlanta-based company have agreed to settle Federal Trade Commission allegations that they crammed charges on consumers’ cell phone bills without their consent, causing more than $10 million in consumer injury.

The two settlements, with Wise Media and its CEO, Brian M. Buckley, and Winston J. Deloney, permanently ban them from placing any charges on consumers’ telephone bills or assisting anyone else in doing so.

The settlements also prohibit them from using any other method to charge consumers for goods or services without ensuring that they are aware of the terms of the purchase and have expressly agreed to be charged.

“This case involved a new delivery system for an old-fashioned scam,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Getting consumers’ consent before charging them is as basic a consumer protection as you’ll find, whether you’re dealing with a brick and mortar store or with a mobile payment provider.

Third-party billing is a service telcos like. But it seems to lead to fraudster activity.

The reputational damage does not seem worth it.




Edited by Stefania Viscusi