oops factor

[Dan Scanlan <dscanlan@xxxxxxx>]

Checking Your Bill for a New Charge Called 'Oops'

 By David Pogue

(SF Chronicle, Dec. 4, 2003) -- Every few years, economists identify
another mutant variation of inflation to keep them awake at night. In
the 1980s, it was stagflation. Three years ago, it was deflation. And
now, meet the economic specter of the new millennium: stealth
inflation.

       That's when phone companies and just about anybody else who
sends you a bill manages to extract more money from you without
actually raising their rates.

       Phase 1 of this program was the proliferation of
miscellaneous fees -- for "regulatory assessment," "handling,"
"restocking," and so on. According to Business Week, newly concocted
fees will generate $100 million for hotels this year, $2 billion for
banks, $11 billion for credit-card companies -- and an average of 20
percent extra on every phone bill.

       Recently I may have stumbled upon Phase 2.

       Attracted by the superior coverage of Verizon's wireless
network, I signed up for a new cellphone. The $60 package included
unlimited night and weekend calling and 800 anytime minutes. A few
days later, a welcome letter congratulated me on my new 700-minute
plan.

       I called customer service. It was supposed to be 800 minutes,
yes? The phone representative explained that what I signed up for was
the 700-minute plan, with a 100-minute bonus. The welcome letter
didn't reflect the bonus, but I would see it on my monthly statements.

       All right, no problem. All I'd lost was the 25 minutes on the
phone with Verizon. Yet when the first statement arrived, Verizon had
charged me 25 cents for every minute over 700. I called the 800
number again; the representative apologetically credited me the 100
minutes. Cost to me: another 25 minutes.

       When the same error cropped up on the next month's statement,
my wife mentioned that she had gone through precisely the same ritual
with MCI long-distance a few months earlier. In fact, after reviewing
our records, we discovered at least seven cases in the last few years
when a service company (including at least three phone companies)
overbilled us and didn't correct the mistake until we turned
ourselves into human pit bulls.

       All right, mistakes happen. But over and over and over again?

       Now, I'm not much on conspiracy theories. But in the weekly
Circuits e-mail newsletter (nytimes.com/circuits) I floated a theory
that all this might be part of a pattern of passive-aggressive
robbery perpetrated on the premise that a certain percentage of
customers won't notice, or won't bother to protest. A tidal wave of
responses poured in -- over 1,200 in the first four days.

       Because the comments were made by e-mail or as online
postings, many of the correspondents did not respond to requests for
elaboration or fuller identification. But the volume of the responses
made it clear that I had struck a chord.

       "My experience with cellphone companies, airlines, and
Internet providers has been so overwhelmingly dominated by 'mistakes'
that I can't believe that it amounts to anything less than an
insidious new business model developed to prey upon busy lives," said
Jeremy Cohen, a 25-year-old music student in Cambridge, Mass.

       A posting on nytimes.com offered a similar lament: "They've
cut to the bone to increase their bottom line. They train their
frontlines to blow people off, and give them no authority to make
amends for problems. In previous eras, this was known as thievery.
Now it's just the way things are done."

       Not surprisingly, the companies in question deny that there's
anything fishy going on. "We're not in business to part people from
their money for a service that they don't get," said Mark Siegel, an
AT&T Wireless spokesman. "Are there mistakes from time to time? Yes.
But is it the conscious act of some cabal, a secret group of people
sitting in a smoke-filled room? No way."

       On the other hand, would P.R. people even know about such a
program? The people who would really know what's going on are the
actual phone representatives -- and I heard from them, too.

       "I can't speak for all the cellphone companies,'' wrote a
two-year customer-service veteran at one of the big carriers, "but
the idea that we would intentionally overcharge customers is just
plain wrong. Any time someone calls an 800 number, the company is
charged, staff has to be paid and call-centers have to be maintained.
Where I work, we try to find ways to prevent customers from calling
in. It would not make financial sense to do things that would
purposely cause customers to call in."

       That's a convincing argument; in fact, a Cingular spokeswoman
told me that the industry-average cost per customer-service call is
about $7. Yet the whole idea behind stealth inflation is that
customers don't call in, that the overbilling will go unnoticed,
perhaps masked by the dizzying complexity of the modern monthly
statement. Verizon Wireless, for example, doesn't even provide an
itemized list of calls with your statement (unless you pay -- what
else? -- an additional monthly fee).

       Verizon's spokeswoman brought up another point, which I call
the Theory of Statistical Inevitability. She pointed out that Verizon
Wireless has 40 million customers. "Even though we strive to get it
right the first time, all the time, there are, unfortunately, times
when we fall short," she said.

       But there is a hole in that defense, as one reader wrote: "If
these were truly random errors, one would expect that some of them
would work in our favor. I know of no one who ever got extra minutes,
extra money, or extra anything else."

       And sure enough, in 1,200 tales of billing errors, only two
people described ever being underbilled. (Of course, most customers
who find errors made in their favor are smart enough to keep their
mouths shut. Only Abe Lincoln would spend 25 minutes on the phone
trying to give his cellphone company its $1.75 back.)

       In the end, the idea of a scheme to bilk millions of people
by tiny amounts sounds preposterous, even silly. After all, wasn't
that the villain's master plan in "Superman III"?

       If you ask people on the receiving end of the complaints,
you'll hear other theories to explain the explosion of customer
accusations. Sprint executives, for example, assign part of the blame
to the consumers themselves. "Consumers, the press, and others get
caught up in the perception of overbilling," a spokeswoman said, but
"if a customer changes her wireless calling plan and she doesn't read
the terms and conditions of the contract, she might perceive a larger
bill to be the result of overbilling, when in fact she never
understood the terms of the contract."

       Several carriers seconded Sprint's additional contention that
"so many government taxes and federally mandated programs are being
tacked on to phone bills in recent years. Consumers do benefit from
these relatively recent government regulations, but at a cost that's
not easily understood or explained."

       Meanwhile, a number of call-center employees suggested that
what's really going on may have more to do with dim-witted corporate
officers than evil ones.

       "I see dozens of accounts every month where we have made a
mistake," wrote an 800-number agent for retail-store credit cards.
"But because the way our jobs are structured, we are basically
encouraged to ignore the mistakes and make the customer go away. When
it takes several minutes to unravel a mess but we are only given 156
seconds to handle the call, most customer service reps look for the
quickest way to dispense with the call. Extra minutes are very costly
to the CSR. With the millions of dollars we are getting from those
who are not catching us, it more than makes up for the lost business."

       In any case, there is some cause for optimism. In the
cellphone arena, at least, the new era of number portability means
that companies have an enhanced incentive to improve. For example,
Verizon Wireless says it is adding a number of
satisfaction-improvement programs, including customer-service
software that has been redesigned to prevent errors -- "using
drop-down menus to choose items rather than relying on a rep's
ability to remember some of our changing promotions/procedures."

       A customer backlash is taking shape, too. Verizon agreed this
year to a $20 million settlement in a class-action lawsuit that
accused it of having overcharged hundreds of thousands of California
customers on their long-distance bills. (The plaintiff's law firm is
now pursuing the matter on a nationwide basis.) Sprint, Qwest, SBC,
AT&T and MCI have also recently settled class-action lawsuits related
to fees and overbilling.

       The more customers catch the errors and push back, the more
it will cost the service companies to handle them -- and the more
likely such problems will be prevented. At that point, Americans will
encounter a form of inflation that will be worth celebrating: reverse
stealth inflation.