Internet Provider Clearwire Accused of Running 'Bandwidth Ponzi Scheme'

clearwire ponzi schemeClearwire Corporation is facing a class-action lawsuit accusing the wireless Internet service provider of "throttling" access speeds to slow them to dial-up levels and demanding early termination fees from dissatisfied customers who cancel their service.

Clearwire touts itself as a leading provider of high-speed, 4G mobile broadband services that reach more 119 million people in more than 70 U.S. cities, serving 4.4 million. Throttling involves limiting a user's bandwidth, or data flow, to avoid network congestion.According to the December 2010 class-action lawsuit, refiled on March 3, Clearwire markets "high-speed Internet" and "faster Internet" service to attract subscribers.

"In reality, Clearwire throttles down the speed of its Internet service to speeds similar to dial-up telephone modem speeds," the suit alleges. "These speeds make it difficult or impossible to use the Internet in many ways that now are considered routine."

When customers realize they aren't receiving the advertised high-speed service and try to cancel, the suit adds, Clearwire tries to collect early termination fees. The suit also accuses the wireless carrier of selling something it knows it can't provide.

"Clearwire's practice is akin to a bandwidth Ponzi scheme in the sense that Clearwire advertises and sells a service, knowing in advance that there is no way it can provide such service on an ongoing basis -- i.e., Clearwire sells subscriptions prior to build-out of sufficient infrastructure to support the "High Speed Internet" it advertises," the class-action alleged.

"Someday, if Clearwire sells enough subscriptions, it may have sufficient funds to go back and create the infrastructure to support its Internet service and make good on its promises," the suit added.

The lawsuit accuses the carrier of breach of contract, and the plaintiffs, all subscribers or former subscribers of Clearwire, want the company to cease its practices and refund subscription and termination fees.

The company did not respond to Consumer Ally's request for comment on the lawsuit.

Clearwire enjoys an A+ rating with the Better Business Bureau, which has processed 1,565 complaints in the past 36 months over advertising, contract issues, billing or collection issues, sales practice issues, delivery issues, repair issues, service issues, customer service issues, guarantee or warranty issues, product issues and refund or exchange issues.

A Consumer Ally reader complained to us about Clearwire's billing practices on our Facebook page. According to Nhora Gomez, the company automatically bills credit and debit cards even when they've been told it's for one-time use. She also said the company refuses to refund charges even when the service has been canceled prior to billing.

Online consumer forums are rife with complaints about Clearwire, many of which are similar to allegations in the suit, such as slow Internet speeds or imposition of early cancellation fees. One angry Clearwire customer even created a blog called Clearwire SUCKS.

This complaint from user Saimon is similar to a number we found:
I've been trying to cancel with this company for three months because my new place didn't receive wireless service. So I faxed in a proof of address to them to get the ball rolling. This, I finally found out I needed to do after talking with three different people. While I was waiting on them to cancel my account, they charge me $35 for some reason. I call in the next day to verify what this charge is ... oh it was an early cancellation fee, but that will be reversed. Ok, so now they have charged me for a month of service I didn't use and now are randomly taking money out of my account after I was told there would not be a cancellation fee. I think this is called theft.

Another class-action suit was filed recently against AT&T Mobility for systematically overcharging its iPhone and iPad customers for data transactions.

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