The broadband industry has always been a little vague in its promises and sometimes less than straightforward in the methods it uses to entice customers to buy more expensive services.
Verizon (NYSE:VZ), however, has taken things to new heights, as it made the mistake of trying to convince one customer that he needed a more powerful, more expensive broadband connection to improve his Netflix (NASDAQ:NFLX) viewing experience. That may have worked on an unsuspecting subscriber with no background in technology. But in this case, the Verizon sales rep was talking to Dan Rayburn, an analyst with Frost & Sullivan and executive vice president of StreamingMedia.com.
Rayburn, as you might imagine, knows exactly the download speeds he needs to optimally view Netflix videos. He was not pleased at Verizon's attempt to sell him service he doesn't think he needs.
What did Verizon do?
Rayburn contacted Verizon recently to discuss renewing a two-year FiOS Triple Play contract, which he said in a blog post "already gives me 50Mbps up/down." Though the analyst was content with his current level of service and didn't want to upgrade, his broadband provider wasn't willing to take no for an answer. He detailed what happened in a blog post headlined "Verizon Falsely Promising Better Quality Netflix Streaming With Faster, More Expensive Internet Tier":
Three different sales reps via the phone and one via an online chat all tried to convince me to upgrade to 75Mbps, with the false promise that it would give me better quality Netflix streaming, among other OTT streaming services. I was told that with 75Mbps I would get "smoother video viewing" and "better quality" with a higher tier service. Of course, this claim by Verizon is 100% false and they know it.
Rayburn explained on his blog that Verizon's argument might be reasonable for someone going from DSL to FiOS. "But when the average Netflix bitrate delivered via Verizon last month was 3.5Mbps, going from 50Mbps to 75Mbps has no impact on quality," he said. The analyst attempted to make the point to the various sales reps and was told that "with multiple people in the household, the higher-tiered service would be needed. Again, that's not true," he wrote.
Proving a point
To prove his point, after the Verizon discussion, Rayburn posted photos to Twitter of him running 10 separate streams over his home connection. He found that even running that many connections to a variety of different streaming services, he still reached only 29Mbps of his 50Mbps connection, and he reported that "all ten streams had perfect quality."
He detailed his results on the blog:
Amongst the ten streams, they averaged 2.9Mbps per second. So even if I had a household of ten people, all streaming at the same time, going from 50Mbps to 75Mbps would not have given me any better video streaming quality over what I already have. Verizon is simply using the average consumer's lack of knowledge of bitrates and streaming technology to scare them into thinking they need a higher tiered package than they really do.
As an industry professional, Rayburn saw how the customer-service reps -- who probably believe they're speaking the truth -- could easily sell less knowledgeable consumers on paying for enhanced services they don't need.
Rayburn also made a case that this is a deep-rooted problem for Verizon and not an isolated case:
While some might want to chalk this up to an isolated incident, or an over zealous sales rep, that's not the case at all. I called in three times and spoke to three different reps, plus one online and got the same pitch. Clearly this sales tactic is being driven by those higher up in the company and isn't something a sales rep made up on their own.
If that's true -- and it would not be out of line with how many broadband companies operate -- then it shows a deeper problem where consumer confusion, both intentional and unintended, can be used as a tool to pad people's bills.
Being trustworthy matters (in the long run)
This type of sales tactic may work and add to Verizon's bottom line in the short term, but it's bound to backfire in any markets where alternative providers exist. If a consumer learns that he or she was paying for unnecessary service -- and the broadband provider had convinced that customer that he or she needed it -- that customer is likely to jump ship at the first opportunity.
We've seen a movement toward more honest pricing in the wireless-phone industry led by T-Mobile, which has made a practice of being open and honest with its customers. Products such as Google's Fiber are starting to force that type of honesty in the broadband business, and having experts like Rayburn call foul can only help consumers.
Verizon -- and any other broadband players using deceptive tactics to upsell -- need to stop now, or it will come back to bite them when customers flee for providers that follow straightforward practices.
Daniel Kline owns shares of Apple. He has no idea what speed his home Internet connection operates at but it works just fine for streaming video. The Motley Fool recommends Apple, Google (A shares), Google (C shares), Netflix, Twitter, and Verizon Communications. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Netflix, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.