Bell faces $100M class action lawsuit over expiring prepaid balances

[howard]

Just noticed this over at TheStar. When you pre-pay for airtime cards on prepaid there's always an expiry date. Smaller amounts expiry dates. The idea is to get you to spend more.

Prepaid airtime cards are similar to gift/store cards in that you're pre-paying for something. However, it's against the law for gift-cards to have expiry dates in Ontario. That's the idea behind the lawsuit.

The lawsuit would cover everyone who bought a Bell, Virgin Mobile or Solo card since May 4th, 2010.

What do you think? If the plaintiff's are successful you don't need to worry about expiry dates anymore. It could also open the door to people getting phone lines with a $10 card, never using them and keeping them for life.

[HC - NO "i"]

Fellow HC,

I hate to see when the extra-low usage prepaid subscribers are literally snowballing the balance month after month... only it will not likely to be used up anytime soon. But for the sake of keeping it current - and more importantly, for the sake of not losing the big fat balance they have already paid for, they have to keep on topping up.

I think this case may set a precedence in the industry. The 7-Eleven SpeakOut wireless has been bragging about its 365-day expiry date with any denomination of top up... if regulatory changes come to this, it may take away this significant selling point. My prediction, it will blur the line between prepaid and postpaid rate plans. Reactive business models like with the Newer-3 unlimited calls for a fixed monthly rate may become more dominant. You can still top up manually or pre-authorized with your credit card.

[turbogeek]

Maybe you'd have to read the word of law, but I don't see the similarity. Unlike unused gift cards, prepaid account balances (usually, anyway) retain their phone number, get Call ID notifications, still have voicemail, and are readily available if you need it - i.e. the client is still receiving a service in exchange their money. The direct analog to gift cards is UNUSED top up cards still maintaining their value (which, AFAIK, they do).

[HC - NO "i"]

turbogeek,

Cadillac Fairview deducts a monthly fee to maintain the gift card once activated. Same with some carriers charging a small fee for 911. They can jack it up for prepaid subscribers if they want to justify or offset this opportunity.

Even if I am neutral on the prepaid balance expiry date, I still find it a tax grab because they have the infrastructure built years ago and operated not entirely for the prepaid subscribers. The return of investment may not be high but the Big-3 should able to justify the virtual interest-free loan with all the nickels and dimes collected from the prepaid subscribers over time. Resources have never been wasted at all. Especially for the extra low usage subscribers with minimum top up, they are not fully utilizing the network service available, let alone with the excessive behaviour that is claimed to become a burden to the network.

As a compromise, I would recommend a minimum expiry date of 90 days instead of 30 days usually for the minimum top up.

[WorldIRC]

As part of the compromise, there should be a "period" where if the customer is late refilling, they won't lose their credit OR there won't be a hassle to get it back.

For example, my Skype credit expires after 6 months...but even after 6 months, I can "re activate" the credit.

[Fortissimo]

This is certainly interesting, but turbogeek has a point, there is certain some services rendered, unlike a gift card which sits there doing nothing much except looking pretty in your drawer / wallet. There is Caller ID and voice mail (only it charges if you listen to it via the cell thus the money grab, as this call is only a half way route, i.e. to its backend, and not a PSTN circuit complete call), so you can somewhat use it like a pager (which charges about $10. a month anyway).

Before there was any longer expiration than 30 days in Canada, friend told me that in Europe, their prepaid expires in 6 months instead. Only much later Rogers was the first one to have $100. for 365 days, and then later many other providers followed including Telus. For people who come to Canada only a short time in a year, but want to keep a local cellphone service and number, it was both cumbersome and not cheap, to keep topping up and getting little use. But no choice.

However, these are all business decisions, little we can do. What I am not too happy about is after you accumulate a lot of prepaid credits, the providers change the rate plan, rates, feature rates, and or reduce features, or remove features, with no way of compensation, or refund! For example, you like to coming back to Canada in the summer, and then will activate the unlimited incoming for $30 / month (which is not a cheap rate by any means!) on Telus prepaid, as you have deposited $100. every year (I do that for my mom's line), only to find out that when you arrive back in the summer, the unlimited incoming feature is now gone, no longer available, and the next step up is bundled with evenings and weekends which you don't prefer as it's more expensive. So you were sold onto certain features when you prepaid for 1 year, and were told that you could select features and remove features at any time, but you weren't told that if they remove features for good, or change rates, you would get no grandfathering.

T-Mobile in the US has 365 expiration for as minimum of a $10. refill, for Gold Rewards members (not hard to get, only accumulate $100. of deposit, not necessarily at one time), no providers in Canada can compare with that.

Not a cellular provider, but VOIP, there is this provider in Ontario called vBuzzer, that increased rates and not grandfathered old customers' accounts. Can you say bait and switch out loud? As it's prepaid (the only way they do business), you have to deposit money first. But then they changed policies, rates, conditions, you name it, over time.

My mom has Telus prepaid (no choice as she likes the Krzr k1m phone!), and every year I put in $100. for her, as that is already the cheapest they take to remain active. Not until lately there was this trick published on Telus forum here, I would have to deposit another $100. this summer. She rarely uses the phone, mostly for emergency. So Speakout Wireless or Petro Can would be cheaper for her.

I don't think the class action suit will go anywhere, as they can show that a prepaid cellular phone service is not the same as a gift card. But this news brought up this whole prepaid deposit thing. What I think should be allowed, however, will be very complicated, is that if a deposit is good for 1 year, then all the plans, features, rates, should be frozen at the time of the deposit, and also good for the whole year. They are not doing that.

[HC - NO "i"]

Fortissimo,

1. The difference between gift cards and prepaid mobile services is the telecos are handling everything vs most merchants are outsourcing to the banks or clearing houses.

2. Do you realize all regular top up denominations including $25 at 7-ELEVEN SpeakOut Wireless last 365 days and would also be carried forward whenever a top up is performed like other prepaid services?

[markf_2]

I think the solution for all providers is to have a small monthly "fee" for keeping the account active (for things like call ID, etc.).

As it stands, if someone rarely uses their phone, they could be paying $80+ per year for those services while someone who uses it a little bit more might lose only $10 at the end of the year. I think that is a problem, and at least if the providers charged a few bucks up front for "active" service there would be no issue with length of expiry, since eventually all untopped up funds would expire.

[DennyCrane]

Wirelessly posted (BlackBerry Bold 9900: Mozilla/5.0 (BlackBerry; U; BlackBerry 9900; en) AppleWebKit/534.11+ (KHTML, like Gecko) Version/7.1.0.391 Mobile Safari/534.11+)

I'm with turbogeek 100% on this one. There is a service being provided, regardless of whether or not the customer takes full advantage of all services available. I still have to pay my full monthly post-paid bill, regardless of whether or not I choose to use the service. Why should prepaid be any different? The last thing I want is to pay for a price increase on my monthly bill to make up for a class action payout to a bunch of low ARPU customers.

I think the solution for all providers is to have a small monthly "fee" for keeping the account active (for things like call ID, etc.)

And that's exactly what would happen if these guys won in court (which I don't think will happen).

[sable]

Whoever initiated the lawsuit really thinks that it is fair to the carriers to maintain an account active indefinitely for an initial fee of $10? Prepaid cell service is different from prepaid gift card. Carriers have to set aside network capacity for prepaid customers while prepaid gift card is simply an interest free loan.

This lawsuit, no matter successful or not, will make the carriers to reconsider the prepaid pricing and come up with new plans such ase $10 for 50 prepaid minutes per month with no carry forward for unused minutes. In the end, consumers lose.

[Snickerdoodles]

Network capacity? You mean capacity that is used when someone uses the phone, which drains the balance on the account?

I'm sure one could argue that maintaining an account in a database has some sort of minimum cost, as does the occasional time a powered-on phone and cell network would need to sync to each other when powered on and registered - though I'd argue most people who keep stale balances probably have the phone turned off, negating the whole 'network capacity' issue, but I digress. The simple fact of the matter is that cell phone companies due this to make money, not because it's costing them money. Prepaid services - that being the minutes, the text messages, etc - already cost more than post-paid, and one could argue that this is the trade-off one has to accept for not having an invoiced account with a guaranteed revenue stream for the provider. Beyond that, the expiring minute buckets are a kick in the teeth. Charging a fee to maintain a stale account after no top-up after six months to a year I could understand, but this voiding out the bucket after as little as 30 day crap? No way.

[HC - NO "i"]

Snickerdoodles,

Greetings.

I think some of us here believe by providing system access to prepaid subscribers, carriers should treat them the same like postpaid subscribers. After all, many postpaid subscribers may not fully utilize their monthly included airtime and features. Nobody loves to pay for something we have not used and a business is not a charity either.

However, you and I understand the infrastructure is there whether seving only a few hundreds or several millions. It is part of operating requirement. As I stand, no matter how slow or low the return of investment is, the Big-3 has been around with solid subscriber base for healthy profit these days. Charging higher rates are already enough to justify the operating cost and enough to offset a more reasonable expiry date for prepaid subscribers.

[AahH]

Let me chime in here and point out that TELUS prepaid airtime does NOT expire as long as you have an auto-renew feature on it...

for example, if you take the $5 200 text message add-on, every month $5 (and the $1.15 911 fee) is deducted from your account and your exp date is bumped up by 31 days.

This guarantees that users will not have prepaid accounts hoarding credits...
I like this system especially if you use the features..

[Snickerdoodles]

$5/month is still $60 a year for what is essentially a prepaid account that is grossly overpriced compared to post-paid. Considering that the per minute airtime rates are so high for prepaid in comparison to post-paid accounts, the whole idea of expiring minute buckets is a money grab and nothing more. Now, having said that, I don't expect people to get a free ride. If there is a cost to maintain an account in the billing system and an active SIM on the network even without usage (remember, when they use the phone they already paying for their usage, and at a much higher price than post-paid users do) then it's only fair to pass that on to the subscriber. Thing is, I wouldn't be the least surprised if it's a few bucks at the very most, and that the providers would still be making money if they deducted $5-$10 from a prepaid account every six months to a year that it doesn't receive a top-up but still has a valid balance on the account. Of course, I see no issue deactivating accounts that remain empty for whatever the current policy is now (60 days or something, no?) but so long as you have money in the account it should remain in the account. It'll be interesting to see how this lawsuit ends up.

[turbogeek]

$5/month is still $60 a year for what is essentially a prepaid account that is grossly overpriced compared to post-paid. Considering that the per minute airtime rates are so high for prepaid in comparison to post-paid accounts,(snip)

I'd just like to point out that a post-paid local overage minute is an obscene 45¢ these days, and postpaid plans generally don't include both Call ID & voicemail. Factoring that in (and the fact that the prepaid phone bundles are often significantly cheaper than their postpaid bundled counterparts), prepaid isn't definitively more expensive. In fact, there are many usage scenarios where prepaid is a far cheaper option.