In the Red? Sprint Says Gouge the Customers

47 Comments

Sprint isn’t just losing millions of customers and billions of dollars, it’s in the midst of pioneering a new management philosophy. We’ll call it the Three-Megabit Monte. Similar to the venerable street con, this is where Sprint leads a customer down a confusing line of lies and inflated charges in the hopes of making a buck. [digg=http://digg.com/business_finance/Sprint_Losing_Money_says_Gouge_the_Customers]

As detailed by Allen Harkleroad (who is one wrathful Southerner) on his web site, Sprint has been charging him almost four times the price of the amount it pays the local telephone company for two T-1 access lines. That’s about a 75 percent gross margin. But what really drove Harkleroad around the bend was being lied to by a Sprint salesman, who claimed that the company was charged $1,998 for the T-1s (the phone company, on the other hand, said it charges some $500). Harkleroad has since switched providers and pays about $1,500 less per month.

But he’s not done with Sprint yet. He figures the company owes him about $56,000 (for charging him so much), and he wants to get paid. Harkleroad also wants to encourage the rest of Sprint’s customer base on the access side to take a close look at their bills. And the icing on this cake? He alleges that Sprint charged him for providing 3 mbps download speed, but only provided 2.5 mbps, saying that the difference was lost to overhead. And that’s where the the Three-Megabit Monte philosophy gets it name.

For more examples of Sprint’s philosophy in action, check out this story, this story and this one.

47 Comments

Hong Kong Fuey

@ casey.

Is it really price gouging when someone pays what they are quoted? If I sell you a widget for $20 and the guy next door sells it for $40. Is that gouging? $200 vs $400, $2,000 vs $4,000. You can’t set a finite dollar amount on what is gouging. The store with the better price and customer service wins. It’s called capitalism, look it up.

Hong Kong Fuey

If a company gouges someone then shame on that company. If someone doesn’t check whether or not they are being gouged (price comparisons) shame on them. A sales rep lying to make a sale is something that shouldn’t happen but it does. You can’t take their word on anything unless you see it in print and are able to compare it with similar offers. Where I live the area is serviced by Qwest and they make Sprint look like angels. Qworst, I mean Qwest, for my company quoted one thing, installed another, and refuses to give any credit on the whole situation that they screwed up in the first place. Long story short if the consumer doesn’t provide a check and balance to these companies then situations like this happen. It’s unfortunate but they do. The last thing we need is more government regulation. If you really want something messed up really good, get the government involved.

Rick

So this is how Gigaom is proving itself a serious journalistic vehicle? By just regurgitating the ranting of one of the many XYZ-Sucks.com websites?

At least commenter Kevin took the time to look up the tariffs and post an intelligent reply. Stacy, were you too pressed to get something out the door, and couldn’t take the time to do any kind of research on your own?

I expect this kind of knee-jerk pseudo-fact-puking in the comment section of Digg, not under the byline of a ‘serious’ blog.

With that off my chest, I’ve dealt with many telecom companies in the last 40 years. These tariffs get published and sit on the books for years. They might have been competitive when published, or there might not have been any competition and a 75% profit margin was perfectly acceptable. There are companies out there who do nothing but audit telecom bills looking for tariffed charges that no longer make sense. I’ve walked into shops and cut the telecom bills by 70%, but I’ve never expected to get past payments refunded.

Mr. Harkleroad needs to get on with his life, and accept the fact that he screwed up by not keeping an eye on his costs.

tony

I allowed Sprint to rape me for years with my wireless bill. I finally had enough when my last bill was $600. They sent my account to collections to tune of $1500+ and now I just laugh as I go and pay $50 a month for MetroPCS. :)

Jeff

Sprint is no worse then any other company. They have always responded quickly to any problems I’ve had, and they always give me a good deal. Granted they never call me and say oh yeah we charged you too much, but if I contact them and explain the situation and why the price should be less they always respond positively.

If the guy cared that much he would have researched prices earlier and not complained about it 3 years later. This is a horrible example and is really a bad story. He has no right to go after damages either.

The 2.5 vs 3 Mbs is a different story, if he paid for 3 he should have gotten 3, but just because he signed up for an expensive service doesnt make him a victim.

John

The only one more ignorant than the sprint rep is Allen.

And I thought the mortgage cry babies were bad. A little personal responsibility goes a long way.

John

What a bunch of baloney. I don’t believe that Sprint is more evil than any other company trying to make a buck in this here capitalist country. This sounds like an example of a combination of 1) a misunderstanding, and 2) victim mentality.

You can try to sell your sob story to Sprint to try to get your money back, but don’t try selling it to the whole world. We all get screwed by bad deals when we don’t do our homework. Survival of the fittest.

Kevin

I went to the link that Allen Harkleroad posted in his website for the Sprint pricing tool and put in the same NPA-NXX endpoints that he indicated and came up with a different answer for local loops for T-1 service between Atlanta and his town in Georgia. The online tool provided a local loop cost in Atlanta of $145 and a local loop cost of $774 (the tool indicates that the Sprint POP in that area is 48 miles from the destination CO).

On his website he stated that when he started service Sprint was the only provider that offered data service to his location. It sounds like he ordered 2 T-1 circuits from Atlanta to Statesboro, GA with a two year term. Sprint’s tool for their current wholesale pricing seems to indicate that their current pricing for the local loops would be 2x($145 + $774) = $1838. I assume that Sprint will also charge for the transport between Atlanta and Statesboro (223 miles) and internet access. He states that his contract rate was $2411 monthly. He does not state when he had his conversation with Sprint sales, but the difference between $1838 and the $1998 that the sales person quoted is not very big.

I suspect that the sales people quoted him rates based on their tool at the time and his installed configuration. It is entirely possible that the pricing that Sprint provides to its salespeople went up for rural locations such as Stateboro, GA during the timeframe he states. While the decision to get internet service by leasing two T-1 lines over 200 miles may have made sense in 2002, I would guess that even in 2004 when his contract term concluded there were likely less costly alternatives.

He now compares getting local internet access from AT&T (ex Bell South?) at a much better rate. Gee, what a surprise!?

From what he presents in his web page I just don’t see that he was intentionally misled. If, as it appears, that Sprint’s closest POP is 48 miles from this guy’s location then any solution that they quote would not be that cheap in my experience.

I looked up the local Carrier for 912-489 to see if I could get the local LEC tariff for T-1 Service in Statesboro, GA. The LEC in that area is Frontier Communications of Georgia, LLC, an ILEC. I poked around their tariff site a while, but found no tariff at all for T-1 service. I assume they have one, but I could not find it. Generally, the local access tariffs, including T-1 access are much more expensive in ILEC territories.

It looks to me like this guy is unhappy because he stayed with a network solution long past when it was cost effective. He is unhappy with his carrier because he thinks that they charged too much and that they lied about their costs. Sales people at carriers almost never know their costs, they only know the prices that they can offer, particularly for somewhat complex services like dedicated Long Distance circuits. I don’t know if the arrangement that he has is the least expensive alternative that Sprint can offer for his needs or not. It seems like it might be, but I did not read that he asked that question.

Not a baby like Harkleroad

Stacey,

Can you help me I signed a 2 year contract with VZ for the all inclusive wirless plan for $100 only to find out that data is $40 extra, and Sprint offers everything for (broadband data included)for a flat fee of $99.
Can you help me by writing a horrible story and setting up a website so i can show everyone what an idiot i am?
Oh yeah I also want to sue for $140 X 24 months= $3360

Thanks
Get a grip.

B-Mac

You bought service for an agreed to price and then you found out they were making a good profit on you and its their fault? You think they should work to reduce your cost and their profit? I’m sorry, but that’s not how capitalism works.

I bought a $2,600 mattress last year for $2,000 and that was “the best price they could do.” Four weeks later they ran a promotion where the price for that mattress was $1,800 without any haggling. I was pissed, but what can I do, I bought it at the higher price. I wasn’t forced to buy it. I could have walked away or got a different mattress elsewhere, but I didn’t.

Suck it up and take this as a lesson learned to continually evaluate your monthly costs while looking for alternatives that could yield lower costs. It’s part of running a business.

Chris

To Allen:

Due diligence always falls onto the consumer. If you were buying car insurance and the first place you called quoted $1500/month would you say “cool, sign me up” or would you call a second company to find out that the going rate is $100/month.

If you are not preforming that kind of due diligence in all your purchases you will not be in business for long.

As far as the download speed is concerned, the quoted speed is always the “ideal conditions” speed. It is similar to the gas mileage on the sticker of your new car: “Your actual mileage may vary”.

Bill

Mr. Harkleroad, though I do agree with you that lying is just plain wrong in any context, some review should have been done after your contract expired and you started going month to month. I know at first you didn’t have many options, but that doesn’t take the responsibility out of your hands for researching other options, or looking into why your costs were so high. The fact that they charged you so much for the access fee that they said the telephone company was charging doesn’t matter, their total monthly fee is the cost of doing business with them, and you can choose to pay it or not. Would it have made it better if they said the fee to the telephone company was 500 dollars and the remaining 1900 was the service fee?

Other industries do the same thing…have you bought a car recently? Do you think that if you bought a car, and then realized a year later (heck it could be a day later) that the car dealer made off like bandits and you got a really shoddy deal, do you think that you can go back to them and ask for your money back? I don’t think so. Have you seen the fees with buying a car? Do you think it really costs 400 dollars to type up some paperwork (called the Document Fee). No they pad those numbers to make a profit. When buying a car if you comparison shop with the other local dealers, you would be able to tell if a dealer was trying to rip you off, and you could find the best deal available. To go along with this and compare it with your utility example, do you think if you went in a bought a car, and the next person came in and bought the same model car that you’d get the same exact deal down to the penny? No, you might do a lot better or a lot worse than them. A utility it typically regulated, and that is why you are guaranteed to pay the same as your neighbor. Telecom is not regulated, at least when it comes to pricing.

As for not getting the 3Mb speed of the line, welcome to the real world, where no one ever gets the speed they were promised. My cable connection at home is supposed to be 3Mb, but I’d be happy with 1Mb on a good day. Does that mean I can get my money refunded? No, that means I can cancel my lousy service and try to get better service with another company…

Like I said earlier lying is wrong, and Sprint deserves the bad press for things like that. Those sales people you dealt with deserve to be reprimanded or even fired, but for every person that says “yeah you deserve all your money back” you are going to have just as many people telling you “Sorry, buyer beware”

allenhark

Mike Masnick,

I like to use an electric company analogy. When I pay my electric bill I don’t have to worry about it as I am paying the current rate, and so is every customer that uses the same electric company. We don’t discover down the road that we are paying more per kilowatt than our neighbors. What the problem is they (SPRINT) has gotten away with it for so long that it has become standard operating procedure to stick it the customer and leave it up the to the customer. Perhaps there needs to be even further regulation of the industry to ensure that gouging doesn’t happen.

The reason why the electric company (local cable, local phone companies, etc.) don’t charge one customer and another customer something different is because all the customers are local (regional, etc.) and can talk to each other and compare notes if you will. Dedicated access companies such as Sprint has customers that are spread out and I am guessing that Sprint is taking advantage of the fact that these customers aren’t close enough to discuss services, therefor their is less scrutiny of it’s pricing. Well I aim to keep the cat out of the bag and perhaps help other current and potential customers from getting the bad end of the stick like I did with Sprint.

As an earlier commenter put it, due diligence shouldn’t fall on the customer, but on the company itself. Sprints sales reps lied to me 4 or 5 times about the cost when I asked about it, and actually told me the price would go up if I signed another agreement (thank God I didn’t ever sign another and went month to month). Agreed, I should have followed up on this a lot earlier, the fact of the matter I didn’t, however that doesn’t give Sprint the right to screw me long and hard.

Julie

It doesn’t matter if every company is doing it, that argument is down right absurd. It’s wrong to cheat people. It’s wrong to lie, especially to a customer, and should be illegal if it isn’t already. I really don’t know much about sprint, but I’ve had troubles with AT&T charging me for bandwidth they didn’t deliver until I screamed and screamed about it.

Imagine walking into a bakery and paying for a loaf of bread and getting half a loaf– that would never fly at a bakery. Somehow, in the tech world, it’s ok. It’s “par for the course.”

Aaron Glenn

This is by far the most amateur article ever posted on GigaOM. As someone who has dealt in telecommunications for the past five years, not only is this not specific to Sprint or this customer, but it’s actually very, very par for the course.

Are you guys shorting Sprint stock or what? /tongue in cheek

Preston Lewis

What are these commentors all Sprint employees or something? So it’s OK for Sprint to stretch the truth, lie, and charge you too much for something because you expect people to do “due diligence” to figure out Sprint is ripping them off?

This is a reason why I am no longer a Sprint customer and lots of other people have moved on to other companies leaving Sprint with some pretty bad churn issues: if you have to do “due diligence” on a major firm like Sprint to catch lies, mistatements, misrepresentations, etc. then they shouldn’t be in business which is the direction they’ve been headed in for some time now. Honest companies keep customers. So if Sprint isn’t honest, it’s the customers fault for not doing “due diligence”. Now Sprint must pay the piper since they aren’t honest and too many people have figured it out.

danap

My company had Sprint SDSL 1500/1500 Internet service and was paying almost 750.00 a month for it. The day their two year(!) commitment ended I dumped it for Covad T-1 service at $399.00 a month. For about HALF the $$, I got twice the number of IP addresses and a service level guarantee (this line would go down for days at a time and Sprint would say:”It’s DSL..too bad!”).

Too bad for YOU, Sprint!

Mike Masnick

Hi Allen,

Thanks for the kind words about Techdirt… but I still gotta disagree with you on this one. :)

Sales people are always going to push you to pay a high price. It’s not gouging if you (a) have other options but (b) choose the high price anyway. Real price gouging is when they restrict your other options (or collude to keep prices high). There’s no evidence that that happened here.

I just don’t see why this is so terrible. If it was that bad, why did you sign the deal? You made the decision at that moment that it was worth paying what you were told. Therefore, the price was a fair trade. Otherwise, why would you pay?

I just don’t see how it’s gouging.

Steve

This is a dumb reason to jump on sprint.
The guy is a moron for paying that much, you can’t blame sprint for taking his money.

MJ

to me, the big news in this story is that sprint provides t1 service at all. i assumed sprint stopped selling those services w/the embarq spinoff, but i guess they just stopped owning the pipe but continue to re-sell the service.

Stacey Higginbotham

@Mike, I agree that he made a bad purchase, but any company so out of line on pricing is in a dangerous position when its customers start realizing they can get a better deal elsewhere. Harkleroad may accelerate that process for Sprint, which is worth noting.

allenhark

Hi Mike, the point is the Sprint sales reps consistently lied to me and advised me that if I renewed a contract the cost would actually be more than what I was paying currently (2411.00). That’s dishonest and gouging. Ask yourself if you found out someone lied to you that was costing you roughly 1400 to 1500 a month, how would you feel about it. Try wearing my shoes for a bit. I still love TechDirt ;-)

Mike Masnick

He sent this story to us too, but if you look into, it’s not nearly as bad as he makes it out to be. In fact, it’s not that bad at all. Basically, they offered him a price and he took it. He didn’t check competitive pricing before signing a deal, and is complaining after-the-fact about how Sprint “owes” him money for his own failure to find out what the market rates were.

And, he confuses wholesale pricing with retail pricing, when there’s always some form of markup. Does he complain about the supermarket charging him $5 for a tub of ice cream when they pay the manufacturer $2.50? Does he demand $2.50 back?

I just don’t see how this is a story. Man makes bad purchase, discovers it’s a bad purchase. That’s not the company’s fault. It’s his own fault.

Andrew

Let’s face it, Sprint’s service sucks. On the wireless side, it just took me over 2 hours and 6 different phone reps to get my EVDO card activated. I finally just went in to a store to get someone to activate my account. They did it in about 15 minutes.

The SprintNextel web site is poorly designed. It’s difficult to set up an online account if you only have an EVDO card, since they always want to text you a pin number. That’s doesn’t work when you don’t have a their cell phone.

Just once it would be nice to call in and get my problem resolved the first time by the first person who answers the phone.

Stacey Higginbotham

I agree that he should have called around earlier on pricing and he admitted as much to me as well. I don’t think he should get his money back, but I do think such market-insensitive pricing and outright lying are part of Sprint’s woes, which is why I wrote this up.

vijay gill

This guy is not including framing and other overhead. Don’t know about the pricing, but being that he is presumably an adult, the person should be doing his own due diligence BEFORE signing a contract. This is not the level of reporting I am expecting from gigaom unfortunately, seems rather more Weekly World News than anything else.

us12or4

Although I’m sympathetic to the salesman lying about the true bandwidth throughput (and think it was unethical), why would you believe any salesperson when it comes to competitive info (i.e. pricing)? Can’t blame anyone for not doing your homework.

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