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Verizon CEO responds to New York Times’ scathing criticism of carriers

New York Times

Verizon Wireless disputes The New York Times' take on carriers

Verizon Wireless has taken umbrage to the New York Times' less-than-flattering coverage of wireless carriers, and its CEO has sent a letter to the newspaper's chairman and publisher in response.

In an article published on July 22 titled "The Irksome Cell Phone Industry," David Pogue enumerated a litany of gripes he has with the wireless industry, including rising text-messaging fees, double billing, astronomical charges for international calling and long instructions for leaving a voice-mail that rack up minutes. The article reached the top-10 most-emailed on the New York Times' Web site.

"Right now, the cell carriers spend about $6 billion a year on advertising," Mr. Pogue said in his article. "Why doesn't it occur to them that they'd attract a heck of a lot more customers by making them happy instead of miserable? By being less greedy and obnoxious? By doing what every other industry does: try to please customers instead of entrap and bill them?

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"But no," he said. "Apparently, persuading cell carriers to treat their customers decently would take an act of Congress."

Mr. Pogue wonders why all the carriers raised their SMS fees around the same time, and why textmessaging costs so much more than email, when SMS transmits far less data.

Wireless industry execs embrace openness, shun reg

Lowell C. McAdam is president and chief operating officer of Verizon Communications

One blogger (http://bit.ly/gHkES) calculated that the data in a text-message costs you about 61 million times as much as the same message sent by email.

Mr. Pogue also takes issue with the carriers' practice of billing customers for both incoming and outgoing calls.

"In Europe, you're billed only when you place a cell phone call -- not when you answer one," Mr. Pogue said. "And you're billed only when you send a text message -- not when you get one.

Verizon CEO responds to New York Times’ scathing c

Arthur Sulzberger Jr. is the chairman and publisher of the New York Times Co.

"In this country, that's how it's always been for landlines, too," he said. "Somehow, though, we've let the cell phone industry get into the habit of billing both of us."

Mr. Pogue also claims that the subsidies carriers offer -- the difference between the price of a phone with a contract and without one -- are actually paid out by customers gradually over the course of their contract.

The reporter rails against the 15-second pre-recorded instructions for leaving a voice mail, paging the person you're calling and for checking voice mail messages.

While 15 seconds doesn't sound significant, it translates into hundreds of millions of dollars in revenue for the carriers, according to Mr. Pogue.

In addition, he compares free computer-to-computer international calls via Skype, iChat or Google Voice and low-cost phone-to-phone international calls via Google Voice or Skype Out to carriers' international rates, which he claims range from $1.50 to $5 per minute.

"Surely the zero-cost technology that's available to Skype and Google is also available to the world's cell carriers," Mr. Pogue writes. "In other words, there's no practical reason that cell carriers (ours and the overseas ones) should charge so much -- only a greedy reason."

Verizon Wireless strikes back
That article, arguably a public relations nightmare, led to an open letter to Arthur Sulzberger Jr., chairman and publisher of the New York Times Co., from Lowell C. McAdam, president/CEO of Verizon Wireless:

Dear Mr. Sulzberger:

The wireless sector of the high-tech industry shines as one of the few bright spots in the nation's economy. Competition has driven massive investment, continueous innovation by wireless companies and our many corporate and entrepreneurial partners, and lower consumers prices.

Despite this amazing American success story, a few vocal critics, including your paper, have leveled highly misleading charges at wireless companies.

The 85,000 U.S.-based employees of Verizon Wireless -- an employee-base growing even today -- encourage our elected and appointed officials, as well as the media, to rely on facts, not myths.

Myth #1: Americans pay more for wireless service.
Fact: Americans pay ten cents per minutes less than Europeans.

Among the 26 countries in the Organization for Economic Cooperation and Development, Americans use the most wireless minutes per month, about four times more minutes than the average European consumer. Americans get the lowest cost per minute…an average of 10 cents lower per minute than Europeans pay.

Myth #2: The Wireless sector of the technology industry is not competitive.
Fact: Former Vice President Al Gore has proclaimed U.S. wireless companies the most competitive on the globe.

More than 94 percent of Americans can choose between at least four wireless companies. Four national and hundreds of rural and regional wireless companies offer great consumer choices: pricing plans, post- and pre-pay options, and more than 600 handsets for sale…more than anywhere in the world.

Myth #3: Wireless customers are treated badly.
Fact: 84 percent of American wireless customers are satisfied with their service.

According to a June, 2009 U.S. Government Accountability Office study, 84 percent of American adults are very or somewhat satisfied with their wireless service. One popular report published for consumers says there has been a "surge" in wireless customer satisfaction.

Myth #4: The big wireless companies don't pay attention to rural America's needs.
Fact: The company with the most rural wireless customers? Verizon Wireless.

Verizon Wireless has invested $60 billion to build America's most reliable network -- important whether you are in the city or the country. And our recent merger with Alltel is an even larger investment in providing even better rural service.

Verizon Wireless stands with consumers by:
- aggressively closing down telemarketers and text spammers;
- supporting hands-free driving laws, and alone among wireless companies, supporting bans on texting and emailing while driving; and
- protecting privacy by chasing down identity theft and killing efforts to create a wireless phone directory.

Already we're investing in the benefits of fourth generation wireless broadband networks that will give Americans access to even more information, multimedia and services, including bandwidth and speeds capable of delivering high-definition video.

But 4G is about much more than entertainment: Our new network will play a major role in improving healthcare by carrying medical records securely, mitigating climate change by facilitating mobile telecommuting, advancing energy efficiency with smart grid technologies, fostering education by providing students immense computing capability in their handheld devices, and leading the economy to new prosperity.

Wireless is, indeed, a success story…an amazing American success story that even our critics can be proud of. In global technology leadership, service delivery, contribution to the national economy, solid employment opportunities, and improving productivity, Verizon Wireless is committed to delivering great wireless services and opening the doors of opportunity for our nation.

Sincerely,
Lowell

A marketer's take
One marketer can relate to where the carrier is coming from. As is often pointed out, wireless networks cost a lot to run and the carriers need to monetize their ongoing infrastructure investment.

"Mr. David Pogue's ‘gripes' in the New York Times and Verizon's response both seem to be talking at cross-purposes," said Gary Schwartz, president/CEO of Impact Mobile Inc., New York.

"Mr. Pogue's diatribe on the cost of his cell phone bill and Verizon's investment in their rural network are good subjects to discuss, but the central issue of facing the Senate Commerce Committee are by and large skirted in both the article and Verizon's response," he said.

"As my colleague commented to me, ‘If Mr. Pogue is upset over the items he mentioned in his article, he must be going to counseling to deal with his cable bill.'"

 
Related content: Carrier networks, New York Times, Arthur Sulzberger Jr., David Pogue, Verizon Wireless, Lowell McAdam, Skype, Skype Out, iChat, Google Voice, wireless operators, carriesr, mobile marketing, mobile

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Comments on "Verizon CEO responds to New York Times’ scathing criticism of carriers"

  1. Brent Saxon says:

    July 28, 2009 at 5:01pm

    It is a shame that the word "Profit" has become such a negative term in todya's world. Everyone that owns a business depends on the consumer to purchase goods and services from them in order to stay in business. On the other hand, consumers also depend on the business owners to provide them with the goods and services they demand. Both the business owner and the consumer depend on the market to set the competitive rate at which the owner can sell the product or service. The product or service is only worth what the consumer is willing to pay. If the consumer is willing to pay the price, the business owner makes a profit and the more the consumer is willing to pay, the more the business owner can provide other products and services to his or her customers. Capitalism RULES - If you don't like the product or service from a specific business - move on down the road if you think the grass is greener. Leave business alone and we will turn this economy around!
  2. Shan the man says:

    July 27, 2009 at 3:24pm

    Paying too much? Clearly no one remembers the days when a simple clunker of a cell phone cost over $1000 and a basic high user plan was 300 minutes for $129. Yep, those wireless carriers are just taking advantage of us poor consumers these days. Get real!

    What we need is less whining from the liberal, socialistic, narcissistic critics out there who want something for nothing. It's funny how any company's attempt to make a profit is now viewed as being greedy. Would you prefer to nationalize your wireless service? See how good of service you get then.

    Wireless carriers make $millions? Well I hope so because the capital and infrastructure costs are astronomical. It's like saying Wal-Mart makes billions of dollars. But let's put this in perspective. There's a thing called profit margin. Can any of you tell the world what the average profit margin is in these industries? I have been on the inside of both and the over all percentage is miniscule when it all averages out. Accessories may be 50-60% but we lose money in other areas. It's a balancing game of losing money in one area and making it up in another. You are lucky to get 10% and then you need to reinvest for fixtures, electronics and hardware which is constantly becoming obsolete.

    Are there opportunities to get better? Absolutely. Sprint paid the piper when they put sales above customer satisfaction. They were losing nearly one million customers a quarter because of contract renewals and features add practices which were viewed as unethical.

    The community benefit of Wireless carriers to provide service including broadband data to rural area's that wouldn't have any service at all is tremendous. How many e-911 phone calls are now being made from cell phones as compared to landlines? How many people have replaced their home landline with a cell phone? How many people were on their cell phones when 911 was occurring or Hurricane Katrina? Did you see your wireless pricing go up after those disasters unlike the insurance industry? Nope. Big bad wireless carriers are they?

    So to you critics who really don't like what you get, then there is always the landline at your home and MAYBE a pay phone down the street. You can even use a tin can & string. But then you would complain about the high cost of the can and string.
  3. Giovanni Vannucci says:

    July 27, 2009 at 1:25pm

    I travel frequently to Europe. I have a Verizon Wireless phone for use in the US (Note: the US is larger than Europe with a comparable population). I have a European phone that gives me tolerable rates in only one European country; the roaming rates outside that country are astronomical. I have many friends and relatives in Europe, and we frequently compare cellphone costs. Even if you only use your cellphone in one European country, it is MUCH more expensive than cellphone use in the US.

    Also, when I call Europe from my Verizon cellphone, I pay $0.07/min. My European friends never call me from their cellphone because they can't afford it. Indeed, calling a European cellphone is a major expense for the caller, no matter where the call originates from, even if it comes from next door. When people call me in the US, they pay the same as for a landline call, if they are in the same town, it's a free local call.

    The phone that I get as part of my contract is paid for as part of my contract (it's writtent in the contract). It's like the antenna for satellite TV and the alarm panel for the security system.
  4. Leighton Carroll says:

    July 27, 2009 at 1:01pm

    I have plenty of friends who buy into the "Big Wireless Companies are Evil" garbage. Why is it garbage?

    *Point #1 - US vs EU Model
    It is entirely true that the US has the lowest costs and highest usage in the developed world. Moreover the Calling Party Pays model was recently question by European regulators as a way the EU phone companies were artificially keeping pricing high, pointing to the success of the US model. Every call leg is paid for in Europe. It just means that the person making the call – whether they did form a landline or cell phone - is paying the full rate. Moreover due to not know where the person is you’re calling, charging can fluctuate with limited transparency. Why has the EU Telecomm Commissioner been trying to add regulation in Europe? It is not because that system is better.

    *Point 2 - SMS & wondering why prices were raised near each other in timing
    Last time I checked when one major airline (Delta, American, United, etc) drops prices or raises prices, or adds a bag handling fee, etc - most of their competition follows suit. It happens in every industry. Pricing is public information and every company watches their competition's pricing. Verizon and AT&T in particular hate (this is not strong enough) each other. Insinuations of collusion are ridiculous. This is normal behavior for companies in ANY industry.

    Point #3 - Price of SMS
    Yes, if you send a short message it may cost more than an email particularly if it's lengthy. If you have free SMS like I do on my daughter's phone (since she since seemingly sends a million a day to her friends) then text messaging is cheap. My teenager isn't going to send emails from her handset. Moreover the cost is easily sub one cent. It's a different product. If you pay $.10 per SMS you probably don't use it much or haven't been paying attention.

    Point #4 - High Costs Overseas
    Most people don't realize the high prices are due primarily to the wholesale costs the foreign companies typically charge US companies for the privilege of roaming on their network. And lord, does anyone who travels overseas not realize there are alternatives?

    Point #5 - 15 seconds of instructions for voice mail.
    I hate it as much as the next person but come on. I mean does Verizon make you listen for 15 seconds for all the non-Verizon cellular calls? Yes a lot of voice mail is from a Verizon cell to a Verizon cell but a lot (maybe more than half) is not. If the author had to spend one minute in a call center listening to people who still need instructions (I'm not making this up) he would probably understand this is there to ensure people know what they're doing and not make money. And since most cell phone companies do not charge for VM retrieval at all, the argument doesn't work on that side either.

    Point #6 – The economy
    Why have Verizon, AT&T, and others done reasonably well in a bad economy? The real answer is value. If you don’t like Verizon then go with a cut-rate outfit like MetroPCS or Leap. If you don’t like AT&T go with Sprint or T-Mo. The wireless industry has real stratification in product offerings, price points, etc. Yet in markets where you have 5 or more companies competing head to head against each other it seem incredible that all these big evil companies are able to stay in business. There is only one answer – they are providing value for what they charge.

    Point #7 – Capital
    The final thing is the cost. Yes Skype is an alternative to your cell phone in many situations. Go for it if that’s what you want to use. The reality is a VOIP network like Skype is far from perfect and has limitations. For everyone I know who uses it and likes it, there is another who complains the quality is dreadful. People don’t realize that Cell Towers don’t cover a ton of territory. This means the bigger companies have to invest in thousands of towers to provide anything close to adequate coverage. Moreover they have to invest billions in the products and services. Of course the companies can use IP in their backbone but that’s not even close to all of the costs for a cell tower based network. Finally did the author think for a nanosecond that a wireless company would say “let’s stop advertising so we can drop pricing on service”? I mean get real. No consumer based business that is highly competitive operates like this. Moreover look at ANY highly competitive consumer product industry and you will see there is a pattern – they all spend a high amount on advertising. That is how the consumer business works – not just wireless.

    Look, I am not defending bad customer service (it can be awful) or high prices (in some cases they are too high). The point is with this much competition most of the arguments are really flawed and are written by someone who has obviously never had to run a business, developed a product, or sell to consumers. It’s just not that easy. The US is #1 in cell phone usage and cost for use in the developed world and it’s not because people like the author of the NY Times article are running companies.
  5. Sean M says:

    July 25, 2009 at 2:53pm

    What a worthless, evasive response from Mr. McAdam. Why is this letter addressed to the NYT's chairman and not Mr. Pogue (who is not even mentioned)?

    An absurd lack of price transparency is the reason this article has found such an audience, and Mr. McAdam simply ignores those complaints. Why are text messages expensive? Why didn't my bill drop after my phone was paid off? These are simple questions.

    Presumably, the supermarkets of America could set up a structure in which bread is shockingly expensive, eggs are free, and customers pay both a monthly fee and a per-minute charge as they wait to check out. Maybe this system would somehow be cheaper than what those Europeans pay for produce, and maybe Al Gore would approve, but who'd want to put up with such a ridiculous system?
  6. Pat B says:

    July 25, 2009 at 2:48pm

    Nice PR bullcrap from Verizon. Completely avoided answering any of the points in the NY Times article, and provided zero proof of any of their claims.

    Fact: Americans pay ten cents per minutes less than Europeans.

    Got a link to a study or chart or graph or any proof? Or are we just supposed to take the word of the company making all the money on this?


    Myth #2: The Wireless sector of the technology industry is not competitive.
    Fact: Former Vice President Al Gore has proclaimed U.S. wireless companies the most competitive on the globe.

    No less a cellular authority than Al Gore proclaimed victory for ya. Wow, I'm glad we cleared that up. Thats some serious marketing BS.


    Myth #3: Wireless customers are treated badly.
    Fact: 84 percent of American wireless customers are satisfied with their service.

    Link to the study please? You quote a study, but can't provide a link? Make up statistics much?

    "One popular report"
    Was this from a "consumer satisfaction survey" that a wireless company paid for? Was there a "surge' in customer satisfaction because you are doing a better job, or because you crafted a better survey?


    Myth #4: The big wireless companies don’t pay attention to rural America’s needs.
    Fact: The company with the most rural wireless customers? Verizon Wireless.

    So, got any proof on this one? Or are we again just supposed to trust you?

    "Verizon Wireless stands with consumers by:"
    Being unable to tell the difference between .02 cents and .02 dollars?http://verizonmath.blogspot.com/

    Having a long history of overcharging and customer service so poor you have been fined over $300 MILLION!

    Your customer service is so outrageously bad that your own employees planned to picket you.
    http://www.verizonpathetic.com/artpicket.html

    Keep spinning Verizon ...
    http://verizonpathetic.com/fines.html


  7. adsads saddsa says:

    July 25, 2009 at 1:42pm

    94% of American can choose between FOUR carriers? Is this impressive? In most EU countries we can pick between dozens of carriers...

    Also, that 10 cents per minute thing is purposely misleading. Most Americans are on contracts, while "pay as you go" is hugely popular in the EU (because it is cheaper).

    So if you used a different metric like for example cost/year or total cost/minute you would see that people in the EU got far better value for their money.

    e.g.
    Bob pays $10/month, and gets 500 minutes, he is paying 2c/minute.

    Joe, has "pay as you go" and pays a flat rate of 4c/minute.

    Now obviously Bob gets a better deal than Joe, right? ... Well no, because in order for Bob to get a cheaper rate he has to use most of his minutes each month.

    This gets more suspect because most US cell operators start their packages fairly high in terms of minutes, for example 500 minimum which they know most low end users will never consume.
  8. Gary Schwartz says:

    July 25, 2009 at 1:25am

    Would be interesting to discuss this NYT article with John Horrigan's (associate director of the Pew Internet Project). He conducted a survey in April interviewing 2,253 Americans.

    In his report he concludes that the high cost of broadband and personal computers drives some users to adopt (“more affordable”) mobile Internet instead of the traditional wire-line.

    http://bits.blogs.nytimes.com/2009/07/22/mobile-internet-use-shrinks-digital-divide/?hp

    "It might make sense to invest the money in a smartphone and a monthly plan that enables you to do so many different things, like make calls and send e-mails,” says Mr. Horrigan.

    His contention is that wireless packages are actually allowing a new group of Americans that have been digitally disenfranchised to now access the web and other services.
  9. D O says:

    July 24, 2009 at 12:33pm

    I thought I could remain silent on this one, but I cannot. I agree with Pogue, even after reading the highly scripted (as a former VP of Marketing at a telecom, I know how much effort and editing went into the response) rebuttal by Verizon's CEO. The bottom line is that wireless telecoms are making insane profits by silently corroborating with each other. Here are the things I hate: 1) Two year contracts with huge penalties for switching. 2) Expensive smart phones that are really hard to replace on an existing contract if you lose or damage your phone. So far, it has been cheaper for me to switch services to get a new phone than to purchase the same phone on my existing contract. How does that make any sense? 3) Exclusive arrangements with handset makers and carriers, limiting the choice of models to specific carriers. 4) SMS gateway and aggregation charges, coupled with MT and MO charges, coupled with charges for premium SMS for all the startup companies that want to create cool solutions for customers using text messaging. This creates a large barrier to entry for the would-be startup companies, and passes additional costs on to individual users. And the mobile telecoms make insane profits on text messaging.
    My suggestions: 1) de-couple the exclusive relationships with handset makers so any model will work with any service. People can buy whatever phone they want (at competitive prices) and connect it to any provider's service. Providers should offer month to month options with no long-term contracts, relying on superior coverage, customer service, or other features to lure and retain customers. Offer unlimited text messaging packages for consumers and allow SMS-based companies to easily connect to the SMS gateways with APIs, cutting the aggregators out of the mix and reducing the costs for the businesses who would love to innovate in this area. I realize all of my suggestions are awesome for the consumer and would make life hard for the wireless companies. However, history tells us that wherever the odds are hugely stacked in an industry's favor, a huge amount of effort will be spent by the innovators and inventors to create a disruptive technology that turns the industry on its head and destroys the large, inflexible, conglomerates. The internet and free information movement, coupled with Craigslist and free advertising are doing this to newspapers right now. If the wireless carriers don't change, they will be next.
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