Raising Cane
Rob Perez
Suit challenges Verizon
phone dialing chargesHundreds of thousands of customers of Hawaii's main phone company are needlessly paying monthly fees totaling more than $17 million annually for an "optional" service they would be getting even without making the payments.
That is the main allegation in a lawsuit two Maui residents filed late Friday afternoon against Verizon Hawaii Inc. over its touch-tone service charge.
This is heavy stuff. Tens of millions of dollars are at stake. And virtually all Verizon customers could be affected.
If Brendan Balthazar and Michael Savona win their lawsuit, which they have asked the court to convert to class-action status, Verizon could be forced to refund more than $100 million, according to Maui attorney James Krueger, one of the lead lawyers for the plaintiffs.
A Verizon spokeswoman said she could not comment on the lawsuit because the company had not seen it as of late Friday.
But Verizon previously acknowledged that it has been trying to eliminate the touch-tone charge (also called touch call) since 1993 as part of a much broader effort to restructure its phone rates.
The state Public Utilities Commission, which regulates local phone service, denied the company's last rate request in 1999. No new one has been submitted since then.
The company, under the name Hawaiian Telephone Co., began offering touch-tone service as an option to customers in 1968 when the phone system relied mainly on analog technology (with rotary dial phones) and additional equipment was needed to provide the new service, then considered a luxury.
But by 1998, when the company completed switching its customers to digital technology, touch-tone dialing was standard, and no special equipment was necessary to provide it, according to the lawsuit.
Yet Verizon failed to inform customers the touch-call service was not necessary, and continued to misrepresent that such service was needed for most additional features, the complaint said.
Even if customers did not pay the extra touch-call charge of $1.65 a month for residential service and $2.15 for businesses, they would get service identical to those who did, the lawsuit said.
The plaintiffs said they are not challenging the touch-tone rates, but maintain that the company's description of the service's benefits constitutes unfair or deceptive business practices.
"It's time that Verizon stopped receiving millions of dollars each year for nonexistent service and pay back to all Hawaiian citizens the millions of dollars they have taken in the past," Krueger said.
The complaint said Verizon has more than 750,000 customers, almost all of whom pay the touch-tone fee.
Steve Lane, a Verizon customer on Oahu, said he has been disputing his touch-tone charge for years.
"We're just getting ripped by these people -- and we're talking serious money," said Lane, who provided Krueger with some of his correspondence with Verizon.
For much of the 1990s, Verizon's predecessor, GTE Hawaiian Tel, sought to adjust its overall rates to bring them more in line with the true cost of providing service -- something the company considered crucial in the face of increasing competition.
As part of its requests to the PUC, Hawaiian Tel sought to eliminate the touch-call fee and boost the rate for basic phone service, which the company said was being subsidized by other rates, such as long-distance, that were artificially high.
But the company's requests were resisted by the state consumer advocate and the PUC for a variety of reasons, leaving the touch-tone fee in place.
Brian Blevins, a GTE Hawaiian Tel spokesman in 1998, said at the time that the touch-call charge still was in effect to recover costs of providing that service with the newer computerized switching system.
But because the cost was less with the more efficient digital system, the additional money that the company was collecting was going toward subsidizing other services whose rates were not sufficient to cover costs, according to Blevins.
The company was asking regulators to eliminate such hidden subsidies so customers paid rates that more accurately reflected the cost of services, he said.
But Lane said the company's attempt to eliminate the touch-call charge and boost the local service rate simply was a "shell game" to maintain revenue flow.
And Krueger criticized Verizon for not seeking permission to specifically eliminate the touch-call charge once the PUC rejected the company's overall rate restructuring case.
"I think that was outrageous," he said.
The lawsuit filed in Maui state court also names Verizon's predecessors, GTE Hawaiian Tel and Hawaiian Telephone, as defendants.
The plaintiffs have asked the court to order Verizon to stop billing customers for touch-tone service and to pay damages for the alleged unfair and deceptive practices.
One of their first tasks will be to convince the court that the lawsuit qualifies for class-action status, which would mean the complaint would be pursued on behalf of all customers who paid the touch-tone fee.
Krueger's Maui law firm is being assisted in the case by several California attorneys, including renowned trial lawyer Joseph Cotchett.
Cotchett gained national fame as the lead trial attorney for thousands of plaintiffs in the Lincoln Savings & Loan scandal of the early 1990s. In that case he won a $3.3 billion jury verdict, then one of the largest ever. It later was reduced to $1.75 billion.
Star-Bulletin columnist Rob Perez writes on issues
and events affecting Hawaii. Fax 529-4750, or write to
Honolulu Star-Bulletin, 500 Ala Moana Blvd., No. 7-210,
Honolulu 96813. He can also be reached
by e-mail at: rperez@starbulletin.com.