Clearwire is in legal hot water for reportedly offering service to customers outside its coverage areas. A lawsuit was filed in in the US District Court for the Western District of Washington on March 31st that accuses the company of deliberately extending coverage limits to entice customers to sign up for the WiMAX service and collecting early termination fees when customers canceled in these poor coverage areas.
The crux of the case is based on an email sent from Gabe Suarez, Clearwire’s Director of Engineering which informed employees that sector limits (coverage map limits) were changed so the company could increase its potential PQ (prequalification) opportunities. Suarez confirmed these changes increased coverage in some regions by a one mile. Suarez then asked employees to track capacity at these towers and note any increases in service cancellation by customers in these areas. This was reportedly a “topic that was discussed at length and the risks were understood.”
Clearwire regional manager named Donald Hammond also told the law firm representing the plaintiffs in the case that Clearwire deliberately increased the coverage area around each tower by 280% and that the company tweaked the prequalification tool to include more customers in areas where coverage was sparse or nonexistent. The company supposedly saw an increase in revenue due to early termination fees from customers in these fringe areas.
If these allegations prove to be true, Clearwire will be in a difficult spot. It is already struggling for cash and previously stated it would run out of money to build its network in mid-2011. The wireless provider has sold off debt and raised funds to cover itself past this point, but there is little doubt that it is struggling for cash. This lawsuit casts a shadow over the company and may make it difficulty for the company to secure much-needed funding in the future. A huge payout for a lawsuit could also be the straw that breaks the camel’s back and forces Clearwire into bankruptcy.
This is not the only lawsuit Clearwire is facing over its WiMAX service. In another earlier lawsuit, The wireless provider is accused of false advertising and throttling its 4G service.
[Via Ars Technica]