Ruling upheld against Verizon customer-retention tactics

A federal appeals court on Tuesday upheld a ruling by the Federal Communications Commission to prohibit some of Verizon's tactics to retain customers.

Verizon had been contacting customers upon learning they were switching phone services to make one last appeal for their business. After three cable providers offering voice over IP services objected to the marketing tactic, the FCC ruled that the practice violated the Telecommunications Act. Verizon attempted to petition the decision, but the U.S. District Court of Appeals for the District of Columbia on Tuesday agreed with the FCC ruling and denied Verizon's petition.

Bright House Networks, Comcast, and Time Warner Cable filed a complaint with the FCC in February 2008 in objection to Verizon's "retention marketing." Once Verizon was notified it needed to hand over a customer's phone number to another provider, the company attempted to retain the customers by providing incentives for them to keep Verizon as a carrier.

This action, the three cable companies argued, violated the Telecommunications Act's restrictions on carriers' use of other carriers' proprietary information for marketing purposes. The FCC sided with the cable companies in a June 2008 decision.

"Of course the receiving carrier already knows its own customer's name and phone number," the court ruling (PDF) issued Tuesday said, "but the information that a competitor has just won the customer over, which is vital to the timing of Verizon's retention marketing, is proprietary information that the competitor discloses only because it must do so in order" for the customer to keep the same phone number.

The cable industry lauded the decision.

"Today's ruling promotes competition by protecting the rights of consumers when they make the switch to a new local telephone provider," Kyle McSlarrow, president of the National Cable and Telecommunications Association, said in a statement. "We are pleased that the court upheld the FCC's decision which permits even greater numbers of consumers to seamlessly join the millions of other Americans who now enjoy the significant savings and benefits provided by our industry's competitive digital voice services."

Verizon said it is reviewing the order.

"This looks like a loss for consumers, who now will have less information available when choosing between different competitors," said Verizon spokesperson David Fish. "By denying consumers information, the FCC's order denies them choice."