April 3, 2011

AT&T cuts off revenue for Jawa

A local company in the crosshairs of two lawsuits over how it charges for premium text-messaging services has had its revenue cut off by two of the nation's largest wireless networks.

AT&T Inc., the second-largest wireless carrier in the U.S., said Tuesday that it will investigate Scottsdale-based Jawa for cyberfraud and that it has temporarily suspended the codes that allow the company to earn revenue from the sale of its text-messaging services.

Verizon Wireless, the No. 1 carrier in the U.S., filed suit against Jawa earlier this month and already terminated codes associated with the company. The lawsuit targets Jawa Chief Executive Jason Hope, five other people and 20 limited-liability companies Verizon Wireless says are controlled by Jawa.

Without citing Jawa specifically, Sprint Nextel, which ranks third in size, said it "suspended a series of premium short codes earlier this month to provide an opportunity for obtaining additional information in light of questions that have emerged."

In a statement, AT&T said it is aware of the suspected text-messaging scheme outlined in the lawsuit filed by Verizon.

"Because we want to determine as quickly and effectively as possible whether or not the allegations are accurate, we have retained a nationally recognized cyberfraud-expert team to investigate," AT&T said.

The carrier said Jawa has agreed to cooperate by allowing the independent investigators full access to data and records.

"In the interim, we have suspended the short codes identified in the complaint and have identified and suspended additional related short codes," the statement said.

AT&T this month said it will buy T-Mobile USA from Deutsche Telekom AG in a deal valued at $39 billion that would make it the largest cellphone company in the U.S.

Lawsuits filed by Verizon and the Texas attorney general allege that Jawa, a cellphone-applications developer, used shell corporations, false business addresses, websites that did not comply with industry standards and diversionary software to deceive customers to buy its services.

The lawsuits demand that Jawa halt its alleged fraudulent practices. The lawsuits also seek punitive damages and customer restitution.

A spokesman for AT&T had no information on the amount of revenue the company makes from Jawa customers. But he said that the company maintains a liberal refund policy and that customers with unauthorized charges should request one.

Jawa said Tuesday that it has been regularly communicating with AT&T regarding what it called false and disparaging statements made by Verizon.

"The evidence in the lawsuit will show that Verizon's vicious attacks on Jawa are premised upon Verizon's reckless reliance upon inaccurate information provided to Verizon by a disgruntled former Jawa employee," the statement reads.

In a complaint filed March 7 in U.S. District Court in Phoenix, attorneys for Verizon detailed allegations of how customers conducting Internet searches could be duped into providing their cellphone numbers, which triggered monthly charges. Verizon Wireless claims Jawa used sophisticated techniques so that its auditors couldn't discover the deceptive marketing.

The case centers on premium text-messaging services, which include ringtones, news and other content delivered for a fee to a customer's wireless phone. Once customers sign up, the costs are added to their monthly wireless bill.

Hope denies the allegations. Verizon simply wants the revenue brought in by Jawa and similar companies for itself, he has argued. Jawa has filed a counterclaim to stop a preliminary injunction sought by Verizon. The hearing is set for April 13.

Because the company is confident in the products and services, and in order to allay any concerns, Jawa said it voluntarily agreed to AT&T's independent audit.

AT&T said it has put safeguards in place to protect its customers when they are considering purchasing third-party content. They aim to help customers understand the product and possible charges before they agree to buy it, the company said.

"If third parties do not abide by our customer-protection policies, we can (and have) terminated their ability to sell content to our customers," AT&T said.

by John Yantis The Arizona Republic Mar. 30, 2011 12:00 AM

AT&T cuts off revenue for Jawa

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