- Steve Miller

Telecom carrier Verizon Communications can no longer continue its practice of calling customers who are switching their telephone service and offering them incentives to stay, the Federal Communications Commission ruled late on Friday, siding with cable providers.

The five-member FCC Commission acted on a complaint filed earlier this year by privately held Bright House Networks, Comcast and Time Warner Cable, which alleged Verizon uses private customer information to inform their incentive pitches. The complaint claimed that Verizon is using the days between a request for service transfer to get departing customers back by offering them rate cuts and special promotions.

"While some customers rebuffed Verizon's inducements to stay while the port requests were pending, thousands of customers accepted Verizon's offers, after which Verizon cancelled their orders for [cable phone service]," the complaint said. It also alleged that Verizon broke the rules because its knowledge of a customer's intention to switch came from the cable company's number portability request, rather than from information directly derived from the consumer.

The FCC's enforcement bureau, with the backing of chairman Kevin Martin, had recommended that the complaint be dismissed. The decision was confirmed via a statement from Martin, which read, "I am concerned that today's decision promotes regulatory arbitrage and is outcome driven; it could thwart competition, harm rural America, and frustrate regulatory parity. Therefore, I must dissent from today's decision."

The vote was conducted in what is called a restricted proceeding, meaning it is not public and the commissioners can cast their vote without gathering. A source in Washington told Brandweek that the vote was expected to be 3-2 in favor of Verizon. However, the FCC did not release the vote numbers.

Verizon, which calls the practice "win back" marketing, contends it is providing its customers with more choices. On Verizon's company policy blog, evp Tom Tauke on Friday defended Verizon's practices, and wrote, "Information—the much-touted concept of transparency—is both the consumer's and competition's best friend. How can consumers know if they're getting the best deal if one of the service providers can't give them information before they've made the purchase?"

The FCC in 1998 issued a ruling that prohibited long-distance carriers from using customers' information when trying to get them to retain service.

Verizon and other mainstream phone service providers are engaged in a battle with cable providers, who are now offering telephone services.