Saturday, December 09, 2006

Fun with math and contracts - Verizon's poor pricing

A Rate Question and Answer
This fellow has a contract with his cell phone provider which governs internet usage through his cellphone. Under his plan he pays a fixed amount each month for unlimited usage in the United States. He decides to go to Canada and is curious about what rate he'll be charged there. So he calls up Verizon.

The Verizon representative tells the fellow that he will be charged "point zero zero two cents" per kilobyte of usage. The fellow thinks that this rate is really low, so he clarifies and confirms with the rep that the rate is .002 cents/k, and he asks the rep to make a note in his file that he was quoted this rate.

A Wrong Bill
The fellow goes to Canada and uses 35,893k of Verizon's internet access. As a quick run through the Google calculator shows, 35,893 times 0.002 cents = $0.72. The fellow should be charged less than a buck for his internet access. Imagine his surprise when he gets a bill for $72. Fellow realizes that he's been charged point zero zero two dollars per kilobyte, not cents per kilobyte, and calls to complain.

A Confusing Call to Customer Service
Luckily for us, he records this second call and it's now available on the internets. YouTube has most of the call, and you can get the full audio at putfile. It's a riot. Nobody in Verizon's customer service seems to understand the difference between being charged .002 cents per k and .002 dollars per k, and this guy patiently tries several times to clarify. In fact, all of the representatives, when they quote the proper rate to the guy, say that it's .002 cents per k. Yet they've clearly billed him .002 dollars per k.

Questions for thought and contemplation
So here are my questions. First, assuming that he's got a contract somewhere which states the rate for internet usage in Canada as $.002/k, should he be on the hook for the $.002 contract rate or the $.00002 quoted rate? Second, is it relevant that the Verizon reps in his recorded call, after the fact, continue to state that the rate is .002 cents per k? Third, how could you explain the difference between .002 cents and .002 dollars to somebody who just plain doesn't get it. Fourth, why is it so much more satisfying to click on and listen to the YouTube version of the call, when it's only audio and the YouTube version is truncated?

It is important that your answers clearly disclose your analysis. If you need to make assumptions because you think the question is unclear, explain what assumptions you have made and how they affect your answer. If you feel you need to assume facts to answer a question, state your assumptions clearly. Be careful, however, not to assume away any ambiguities in the law. What's the source of the phrase "Danger to the manifold"? Please write your answers in as concise a manner as is possible for a complete examination of all issues raised by the questions. However, remember that it is critically important that you answer all of the questions, and you should budget your time accordingly.

4 comments:

Fishfrog said...

Parol Evidence Rule? Shouldn't a subsequent oral modification of an existing written K be inadmissible and not binding? Although maybe he could still get equitable relief under a theory of promissory estoppel.

As for explaining the difference, it seems pretty difficult to do. It might be easier in person. You could ask the confused person to write down what "one cent" means to them. When they write down "$0.01" you could then demonstrate that another way to write one cent is "¢1.0"; then write down for them $0.002 and ¢0.002 side by side. Ask them to say aloud what each means. Then clarify.

scarlet panda said...

I'm listening to it now, and it is fantastic. They keep agreeing that the price is "point zero zero two cents per kilobyte." And then they take out their calculators and multiply .002 X 35,893, and they get 71.79. And then they cannot understand why that number would be in cents and not in dollars! None of them! It is great.

"It's obviously a difference of opinion." Ha!

I think the caller did everything he could do without giving them a video with a math teacher writing out the calculations on a whiteboard.

I think the parol evidence rule prevents introducing oral evidence to explain the meaning of a contract at the time it was written. But if you were defrauded, I think you could still bring in the evidence.

(I think you can bring in extrinsic evidence to show subsequent modification of a contract, but he doesn't seem to be arguing that here--he's saying the rate was always .002 cents/kb.)

Leo said...

I'm trying to recall my Contracts stuff.

Fraud in the factum and fraud in the ____? Anyone remember these? One is fraud about external facts that might incline one to sign a contract (ie, your car won't work unless you sign this), the other is fraud about the contents of the K itself.

This would be analagous to the later. But it probably isn't true fraud because fraud is intentional, right?

Re parol ev: I agree with Panda. Statements in the recording aren't admissible as ev. of the meaning of the contract, but you could get them in on a fraud theory. They are pretty convincing evidence that he really was quoted the wrong price on the phone.

Really though, his best "cause of action" is doing just what he did. Making a big public stink about it and letting the market punish them.

Leo said...

Just remembered, its fraud in the inducement. This would be fraud in the factum.