Investor class action suits filed against AT&T last year over alleged sales fraud surrounding virtual MVPD AT&T TV Now (formerly DirecTV Now) continue to wind their way through the federal court system.
But Forbes this week published a pretty compelling deep-dive into the scandal’s seedy core, examining how top-down corporate pressure on low-ranking AT&T retail store sales employees ended up ripping off consumers and shareholders, and undermining AT&T’s broader video strategy following its $50 billion purchase of satellite TV operation DirecTV in 2015.
The article details how AT&T retail employees, under pressure from management at AT&T’s nearly 16,000 company-owned and authorized franchise locations, created thousands of bogus DirecTV Now accounts.
“It was sell at all cost—that was how it was presented to us. It was a threat,” Justin Keller, a former San Francisco AT&T store manager, told Forbes. He said he was encouraged by his regional manager to offer unofficial discounts and other inappropriate enticements to goose DirecTV Now signups.
First, a Little Background
Prior to its subsequent $85 billion purchase of Time Warner Inc., AT&T launched virtual MVPD DirecTV Now in November 2016. The service rocketed to more than 1.8 million signups by the summer of 2018, and was poised to take over leadership of the nascent vMVPD category from DirecTV rival Dish Network and its Sling TV service.
It was around that time that AT&T revealed that most of the erstwhile DirecTV Now users base was paying very little—or nothing at all—for the service. AT&T announced that it was cutting back on the service’s promotional fuel.
AT&T revealed in October 2018 that third-quarter DirecTV Now customer additions were off 86%, shocking its shareholder community. The subsequent 8% stock cratering represented the telecom’s worst Wall Street dive since the 2008 Great Recession.
DirecTV Now was rebranded last year as AT&T TV Now. Its user base has whittled to around 788,000 customers as of the end of the first quarter of 2020. The vMVPD is now a niche component of AT&T’s larger video strategy, a discounted OTT service for consumers who don’t want the trappings of the more traditionally oriented AT&T TV pay TV service.
As Forbes notes, back in the days following the DirecTV purchase, AT&T was determined to show shareholders that it had a viable video strategy tied to paying top dollar for an El Segundo, Calif. company tied to what was perceived to be an entirely mature business, satellite TV distribution.
Under pressure to execute that strategy, retail employees engaged in all kinds of improper techniques to goose DirecTV signups. Bogus accounts were often created—employees fabricated customer emails, with AT&T systems not set up at the time to authenticate them.
Customers were sometimes given discounts and other enticements to sign up for a DirecTV Now service they never had any intention of using or paying for—they were simply instructed to cancel before the 30-day free promo period ended, or were told AT&T would do that for them.
In many cases, employees signed up AT&T customers for DirecTV Now without the customer ever even knowing about it. The scam required sales employees to cancel these subscriptions before the promotional period ended and the customer noticed the related charges on their credit card. But in some cases, that step was missed.
“I barely even watch TV anymore,” said a Burlingame, California AT&T customer, who described her surprise in 2018 when she found 11 months of DirecTV Now charges on her credit card totaling around $330.
When customer complaints started to roll in, and numerous AT&T retail outlets started reporting more DirecTV Now cancellations than signups, the Dallas-based telecom got suspicious in 2017 and launched an internal probe. Customer charges were reversed. Employees were disciplined and fired.
AT&T’s reputation and video strategy were harmed. Shareholder lawsuits ensued.
“Our investigation confirmed that the activity did not have a material impact on our publicly reported results,” AT&T rep Jim Greer told Forbes.
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