Internet and phone service provider Clearwire has been hit with a class action lawsuit alleging shoddy service and unlawful early termination fees. The suit, filed in Washington state court, alleges that the company's internet service is slow and unreliable, in contrast to ads touting it as a reliable "always-on" alternative to cable and DSL. The suit further alleges that when customers try to cancel their service they are slapped with "early termination" fees, which can run up to $220.
According to the suit, when customers sign up for the service, they are required to enter "'click through' online form contracts" that provide for a fee for early termination. The service agreement usually requires customers to commit to either a one- or two-year period of service. The suit says that the company charges termination fees "even where the customer moves to a geographical location in which [Clearwire] does not offer service, or where the consumer unexpectedly finds that the service does not function as originally anticipated and advertised."
Clearwire's website touts the service as "the Internet as it was meant to be — easy." The site promises service that is "reliable," "fast" — purportedly up to 25 times faster than dial-up — and affordable — "only the Internet speed is high, not the price."
These rosy promises stand in stark contrast to the service described in the complaint, which is described as "extremely poor, and no doubt far worse than DSL or cable internet, which are described by [Clearwire] as comparable alternatives." As the suit points out, a slow internet connection is especially problematic for Clearwire's phone service, since it is completely dependent on a reliable Internet connection.
The complaint alleges that Clearwire's advertising "deceive[d] members of the class." Indeed, the suit notes that Clearwire acknowledged in its most recent 10-K filing that "subscribers may experience lower call quality" and "higher dropped-call rates" than they would with a traditional phone service.
The suit seeks an injunction of all future termination fees and the creation of a constructive trust to reimburse consumers who have already forked over the money.
The suit includes plaintiffs from Washington state, Hawaii, Minnesota, and North Carolina, and names Chad Minnick of Washington as the lead plaintiff. The suit defines a class of all Clearwire Internet or telephone subscribers who have paid a termination fee anytime from April 21, 2005 to the present. The complaint anticipates that there are "at a minimum, tens of thousands" of such individuals. The suit is being prosecuted by Tycko — Zavareei LLP of Washington, D.C., and Peterson Young Putra of Seattle.
This is not the first time Clearwire has faced wrath from consumers. The website ClearwireSucks.com is full of postings from consumers going back as far as May 2007. Several consumers have also written to Consumer Affairs about their woes. Tracie of Robstown, TX, received horrible service and tried to cancel; she quickly found out that would be easier said than done. "We are now trying to cancel the service and are being told that there will be a cancellation fee of approximately $200 because we signed up for a 2-year contract," writes Tracie. "Not once in all of the phone calls I made to Clearwire was I ever informed that I was signing up for a 2-year contract or that there would be a cancellation fee charged."
Last year, under pressure from the FCC, AT&T;, Sprint, and Verizon all implemented less strict termination fee policies. At the time, the FCC said it wanted termination fees that more closely reflected what consumers actually paid for their phones.