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Verizon Stooping to AT&T's Level?


Data caps, egregious termination fees and penalties, plus one of the slowest networks could ruin Verizon's reputation.

Show of hands.

After the iPhone 4 pre-order fiasco, the new tiered data plan, the security breaches, and blaming its customers for the embarrassing coverage, is there anyone left actively defending AT&T (T)? Who among its user base can say Apple (AAPL) is making a wise decision by limiting its choice of iPhone provider in the US with the company that considers a 30% dropped call rate "normal" and was ranked last in Consumer Reports' customer satisfaction ratings? How many of you are happy with AT&T's 3G MicroCell -- a device to "improve" its lacking 3G network that also must be tied to an existing account, counts against data caps, and costs an extra $150? And who here appreciates the decision to suddenly limit iPad 3G owners to 2GB per month at an extra cost of $25 after it debuted with an unlimited data plan for $30? (Oh, and rest assured, iPad tethering is disabled.)

C'mon. Show of hands. Raise 'em up high.

None of you? Huh.

At this point, the inefficiency, the ineptitude, and the arrogance that AT&T currently displays is almost sublime. Even more so than when I wrote it in February, defying all expectations, AT&T is truly run like it wants to lose. Who among the other main cell providers in the US could possibly achieve a network so poorly run and so despised with an extra dollop of self-satisfaction and displaced blame like AT&T?

Much to the horror of current Android (GOOG) zealots and jealous iPhone owners, Verizon (VZ) might soon be gunning for AT&T-levels of dissatisfaction.

The duplicity is already beginning to show. It seems like behind every upside to Verizon, there lies a dark blemish.

This week, Verizon announced plans to provide eligible customers its FiOS fiber-optic TV and Internet package contract-free for $99 per month. The offer will last a year and allow customers to test the service without committing to a two-year contract or paying a $20/month premium. While the offer pressures fellow cable providers including Comcast (CMCSA), Time Warner (TWC), and Cablevision (CVC) to entice customers with similar deals, Verizon risks losing more than $1,300 for any home that subscribes to the plan, has FiOS installed, and leaves after a month, according to Reuters.

Wow. Sounds like Verizon really has its customers' best interests at heart.

Hang on. Last week, David Pogue at the New York Times revealed a few new policies regarding Verizon customer payments. Speaking with an anonymous service rep, Pogue reported that any employee who proactively offers to block access to Verizon's data services can now be "reprimanded or even terminated."

"Essentially," the unnamed source wrote, "we are to upsell customers on the $9.99 25MB/month or $29.99 unlimited packages for customers." The person added, "And in cases such as data or premium SMS, where the occurrences may have gone months without the consumer noticing, only an initial credit can be issued."

The CSR also stated that the exorbitant early termination fees -- you know, the ones that sparked a federal investigation for being so high -- are no longer waived if a customer moves out of the digital calling coverage map. "This means for customers whom have lost jobs and must relocate, people with immigration status and are liable to leave, or anyone who may otherwise relocate, is now subject to the ETF of $175 or $350, depending on device."

It gets worse.

In January, when AT&T was hinting at the notion of data caps and tiered usage plans, Verizon Wireless' Chief Technical Officer Dick Lynch expressed a similar view on the eventual necessity of usage-based data billing. And it now appears that notion is gaining steam. In May, Verizon Wireless CEO Lowell McAdam admitted his aim to cease unlimited data plans once the company rolls out its 4G network.

So for all the hype surrounding Verizon's networks as well as some of the very best Android smartphones -- the HTC Droid Incredible, the Motorola Droid (MOT), and its future cousins -- customers will soon have to mentally calculate every download and email lest an overage fee gets heaped onto their monthly bill. In competing with the iPhone 4, Verizon has effectively destroyed one of its few advantages.

Even Verizon's network is showing its wear.

After it handily beat AT&T in coverage area and boasted of the fact in nationwide ads, PC Magazine found that Verizon doesn't even come close to being the fastest provider in the country. In fact, it can proudly state it came in fifth, behind T-Mobile (DT), Sprint (S), Cricket Wireless -- a barely known subsidiary of Leap Wireless International (LEAP) -- and, yes, AT&T.

Believe it or not, AT&T led the nationwide speed tests and all four tested quadrants -- even beating Sprint's new 4G network. Of course, in AT&T's favor, PC Magazine didn't account for "voice quality, dropped calls, or coverage areas."

Nevertheless, this is adding up to a very gloomy outlook for Verizon customers' future. Data caps, conniving service reps, egregious termination fees and penalties, all on one of the country's slowest data networks? Is this what iPhone users have to envy now?

It's one thing for providers to compete with one another to spur innovation and introduce affordable plans. But it's absolutely inexcusable to engage in a race to surpass one of the most despised and broken brands in the country.

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