Verizon ditches $2 fee after customer uproar

Verizon ditches $2 fee after customer uproar

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NEW YORK (Global Markets) - Verizon Wireless has reversed its decision to charge a $2 fee for telephone and online bill payments, bowing to a storm of criticism from consumers and the U.S. communications regulator.

The biggest U.S. wireless operator retracted its decision on Friday, just a day after it announced the fee for one-time payments, which was to have begun January 15.

The consumer victory comes after Bank of America recently decided against a new $5 monthly fee for debit card users after consumers and lawmakers protested the charge.

"There is power in numbers and in the end, the customer is always right," one person said on the Verizon Wireless online forum. "How can any corporation expect to keep business by doing that? It's pure greed just like with Bank of America."

Verizon said it listened to its customers and made the decision based on customer input after many complained and some threatened to leave the service if the fee was instituted.

A spokesman said that the company had just wanted to encourage consumers to pay their bills via different methods such as autopay, where they give Verizon permission to charge their credit card or bank account automatically each month.

Verizon Wireless is a venture of Verizon Communications Inc and Vodafone Group Plc.

The quick turn-around came after little more than a day of complaints, but not before the U.S. Federal Communications Commission said it was "concerned" about the fee and that it was looking into it.

"On behalf of American consumers, we're concerned about Verizon's actions and are looking into the matter," an official for the FCC said earlier on Friday.

The prospect of a $2 fee created a flurry of online activity and one consumer organization, Change.org, said 95,000 people joined a campaign on its website urging Verizon to drop the fee.

"The era of corporations walking roughshod over consumers without consequence is officially over," Ben Rattray, chief executive of Change.org, said in a statement.

Verizon Wireless customers told the company, often in colorful language, that they would not put up with the fee.

"If this fee goes through, I will be taking my business elsewhere!!!" one person said on the Verizon Wireless website.

Another said "Victory is ours!" after the about-face.

The turnaround comes after another high-profile reversal of course earlier this year by video rental service Netflix Inc in the face of customer disgust.

In October it canceled plans to split its DVD rental service from its online streaming service. The move would have forced customers of both streaming and DVD options to visit different websites and maintain different accounts for each subscription.

The Verizon Wireless incident served to highlight fee practices elsewhere in the communications industry. Rivals AT&T Inc and Sprint Nextel said on Friday that they charge some customers $5 for bill payments, revising their comments from the day before.

AT&T and Comcast Corp say that they charge some customers who look for personal assistance in paying their bills but that they do not charge for online payments. Sprint said it charges customers with bad credit if they refuse to enroll for auto pay.

The Sprint and AT&T fees are even higher than Verizon's proposed levy at $5 per transaction. Comcast's payment fee, which is only levied in some states, is $5.99.

The FCC did not comment on whether it would look into other companies' fee policies for bill payment.

(Reporting By Sinead Carew; Additional reporting by Lisa Richwine in Los Angeles; Editing by Tim Dobbyn)

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Netflix lowers U.S. subscriber forecast; shares fall

Netflix lowers U.S. subscriber forecast; shares fall

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(Global Markets) - Netflix Inc cut its third-quarter forecast by 1 million U.S. subscribers, sending its shares down nearly 19 percent, as the company known for rapid growth expects more fallout from a price increase on its DVD service.

On Thursday, Netflix said it would have 24 million subscribers at the end of the third quarter, down from a prior forecast of about 25 million given soon after the July announcement of the price increase.

The decision by Chief Executive Officer Reed Hastings to raise rates for customers who still want DVDs by mail took effect earlier this month.

Fewer customers than expected are opting to take Netflix's DVD-only subscription package. Netflix now expects to have 2.2 million such subscribers, down from the previous forecast of 3 million. The company also cut its forecast for streaming-only subscribers, to 21.8 million from 22 million.

Lazard Capital analyst Barton Crockett expressed concern that the changes might also hurt Netflix's fourth quarter.

"Clearly, if the third quarter is slipping, there's risk to the fourth quarter, as the year-ago period was a time when everything went right for Netflix," he said in a research note.

Crockett called the price increase a "rare, large and surprising misstep" by Hastings.

The decision to increase the monthly subscription for a joint streaming and DVD rental service by as much as 60 percent caused an uproar among customers and bloggers. For U.S. customers, the price for renting one DVD at a time plus unlimited streaming increased from about $10 a month to about $16 per month.

Netflix shares have fallen nearly 40 percent since the price hike was announced.

The Los Gatos, California, company, which is under pressure from Hollywood studios and pay-TV rivals because of its aggressive pricing, has argued that it sees the future in lower-cost streaming services.

Netflix's chief content officer, Ted Sarandos, said the pricing decision gave customers a chance to choose whether to keep DVD services or move to a cheaper streaming-only option. Previously only a combined service was offered.

"Being able to precisely forecast and predict the behavior of that many people on fairly radical change is something we'll get better at all the time," Sarandos said at the Paley Center for Media's International Council meeting on Thursday.

In a statement, Netflix said "we know our decision to split our services has upset many of our subscribers, which we don't take lightly, but we believe this split will help us make our services better for subscribers and shareholders for years to come."

UNDERMINING THE ECOSYSTEM

Hastings, who is also on the boards of Microsoft Corp and Facebook, is often seen as a visionary for building Netflix into a successful competitor first to Blockbuster and then, with the introduction of streaming, to traditional cable and satellite TV distributors.

But the cable and satellite TV companies have been pressuring Hollywood studios not to allow Netflix to undermine the $100 billion pay-TV ecosystem.

Netflix also faces growing competition in the streaming market from Amazon.com Inc, Hulu and others.

For DVDs, Coinstar Inc's Redbox kiosks offer an alternative, and Dish Network Corp's Blockbuster Inc is trying to lure disgruntled Netflix customers with a free trial offer. Coinstar shares rallied 7.2 percent to $48.49 on the Nasdaq on Thursday.

"There are other options popping up that may be attractive" to consumers, said Merriman Capital analyst Eric Wold, who has a "neutral" rating on Netflix and a "buy" on Coinstar.

Hastings now has to prepare himself for the possibility of another subscriber backlash as soon as February if Netflix loses some of its popular programing and movies.

Earlier this month, Starz ended talks to renew a deal that expires on February 28. After that, the pay-TV channel controlled by Liberty Media will stop providing its content, which includes exclusive streaming rights to first-run Sony Corp and Walt Disney Co movies such as "Toy Story 3" and "The Social Network."

Netflix "can't grow as fast as the Street thinks," said Wedbush Securities analyst Michael Pachter, who rates the company's stock at "underperform." "They can't have the perfect world where content stays cheap and people sign up at low prices."

However, Netflix maintained its third-quarter financial outlook as well as its international subscriber forecast.

The company's stock fell 19 percent to close at $169.25 on Nasdaq.

(Reporting by Yinka Adegoke in New York and Lisa Richwine in Los Angeles, additional reporting by Liana Baker in New York and Supantha Mukherjee in Bangalore; Editing by Maju Samuel, Lisa Von Ahn and Matthew Lewis)

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