Frontier Communications Hit With Overcharge Class Action Lawsuit

“Bill shock” is not only a subject of legislation regarding 4G wireless, or attempts by the mobile industry to self-regulate regarding consumer complaints of overage charges. Back on October 11 it became a wireline concern as the billing practices of wireline broadband services of Frontier Communications were called into question via a class action lawsuit.

What’s it all about?

The Minneapolis offices of Nichols Kaster, PLLP, representing plaintiffs Clint Rasschaert, Ed Risch, Pam Schiller and Verna Schuna, filed the class action suit United States District Court for the District of Minnesota. It has been assigned to the Hon. Donovan W. Frank.

The press release from the firm states the particulars alleging that:

“… Frontier Communications of America, Inc. (“Frontier”) imposed illegal taxes and fees on them and thousands of other customers in violation of the Internet Tax Freedom Act. Under the Act, the sale of Internet service is not subject to state and local taxes.

The lawsuit also alleges that Frontier imposed a fraudulent ‘HSI Surcharge.’ According to the lawsuit, Frontier represented to its customers that this surcharge was governmentally imposed, when in fact, the surcharge was actually just a junk fee that Frontier invented and imposed on its customers in order to inflate the price of its service. According to the lawsuit, the prices Frontier advertised to its customers did not include this surcharge, even though Frontier always intended to charge it.”

It also quotes lead attorney E. Michelle Drake as saying, “Customers should not have to check the sales tax calculations on their bills to make sure they are right, and they shouldn’t have to be legal experts to figure out whether charges that are represented as being government charges are actually government charges. We shouldn’t need to sue just to get big corporations to truthfully bill their customers.”

A Computerworld posting on the subject highlighted the current response from Frontier: "We take all litigation claims and customer complaints seriously and will carefully evaluate and respond to the lawsuit at the appropriate time…Frontier values its customers and we believe our charges and practices are consistent with applicable state and federal law."

Frontier provides broadband services in 27 states serving 3.3 million residential customers, 333,000 business customers and of this total has 1.7 million broadband customers according to its latest financials. In other words, if the suit is successful this could run into serious money for the company.

Opening of a Pandora’s (News - Alert) box?

The reason to pay close attention to this case — Rasschaert, et al. v. Frontier Communications Corporation of America, et al., No. 11-cv-2963 (October 11, 2011 D. Minn) for you legal buffs — is to see if this is the opening of a Pandora’s box. It is no secret that billing complaints have been the bane of telecommunications companies since they started sending bills. In fact, the vast majority of complaints of all types filed with the Federal Communications Commission (FCC (News - Alert)) having to do with billing issues.

The issue in this case is about possible deceptive billing practices, e.g., mis-characterizing a High Speed Internet (HIS) Surcharge as a government mandated one. In fact, links from the Computerworld item to disgruntled customers posted on DSLreports.com and Stopthecap.com are instructive as to what has Frontier customers upset. Obviously, it will be up to the court to determine if what is being alleged is in fact a violation of law and if these is even a viable class action.

However, the case also goes to a larger question. With airlines, banks, hotels and other industries using all types of fees to raise revenues while not seemingly raising prices for their underlying services, “fee creep” (deceptive or not) has become a fact of modern life. Whether putting such practices in the spotlight will deter the telecommunications industry from loading up is problematic. That said, the outcome of this case is likely to give consumer groups and the industry for than a little food for thought.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia, HP, Siemens (News - Alert), Nortel, France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.