Verizon has been slapped with a $7.4 million fine by the U.S. Federal Communications Commission for failing to give 2 million customers the choice of opting out of the company's marketing campaigns. It is the largest fine the FCC has ever imposed for a privacy violation of phone customers' personal information.
In addition to paying the fine, Verizon must also include opt-out notices on every bill it sends to customers over the next three years, and must put monitoring and testing systems in place to ensure customers are receiving proper notices of their privacy rights.
"In today's increasingly connected world, it is critical that every phone company honor its duty to inform customers of their privacy choices and then to respect those choices," said Travis LeBlanc, acting chief of the FCC's Enforcement Bureau. "It is plainly unacceptable for any phone company to use its customers' personal information for thousands of marketing campaigns without even giving them the choice to opt out."
2 Million Customers Affected
Under the Communications Act, phone companies are allowed to access or use customers' personal information only under certain limited circumstances. Those circumstances can include company marketing campaigns, but only for customers who have previously agreed through an opt-in/opt-out process to receive marketing messages.
Verizon had typically sent an opt-out notice to new customers either in a welcome letter or in a message on their first bill. However, the FCC investigation concluded the company had failed to provide such a notice to many customers between 2006 and 2012.
According to the FCC's findings, Verizon failed to generate such opt-out notices for around 2 million customers starting in 2006 and did not discover the lapse until September 2012. Under FCC rules, the company should have notified the agency of the problem within five days of discovering it. However, Verizon did not notify the FCC until Jan. 18, 2013, 126 days after the problem was identified.
No Data Breach or 'Unauthorized Disclosure'
A Verizon statement issued in response to the FCC fine said: "The issue here was that a notice required by FCC rules inadvertently was not provided to certain of Verizon's wireline customers before they received marketing materials from Verizon for other Verizon services that might be of interest to them. It did not involve a data breach or an unauthorized disclosure of customer information to third parties."
The statement added, "Verizon takes seriously its obligation to comply with all FCC rules, and once we discovered the issue with the notices we informed the FCC, fixed the problem and implemented a number of measures to ensure it does not recur."
Verizon also found itself facing criticism from federal regulators earlier this summer when FCC Chairman Tom Wheeler sent Verizon President and CEO Daniel S. Mead a letter stating that he was "deeply troubled" by the company's announced plan to slow down data speeds for some customers starting in October. Verizon's revised "Network Optimization" policy was aimed at the top 5 percent of data users among customers with unlimited data plans, and was to apply at times when the network was experiencing high demand.
"'Reasonable network management' concerns the technical management of your network; it is not a loophole designed to enhance your revenue streams," Wheeler said in the letter. "It is disturbing to me that Verizon Wireless would base its 'network management' on distinctions among its customers' data plans, rather than on network architecture or technology."