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Class action: Clearwire 'akin to a bandwidth Ponzi scheme'
By NICK EATON
SEATTLEPI.COM STAFF

A class-action lawsuit alleges Kirkland-based Clearwire falsely advertises its broadband Internet as high-speed and intentionally "throttles down" the service to 1990s dial-up levels -- likening the practice to "a bandwidth Ponzi scheme."

Clearwire customers from across the country, including four plaintiffs in Washington state, allege the technology firm -- founded by local cellular mogul Craig McCaw -- violated a slew of unfair-business state laws and misleads potential customers.

"Clearwire continually advertises 'High Speed Internet' or 'faster Internet' service (or substantially identical phrases) to induce prospective customers to subscribe to the service," the lawsuit alleges. "In reality, Clearwire throttles down the speed of its Internet service to speeds similar to dial-up telephone modem speeds. These speeds make it difficult or impossible to use the Internet in many ways that now are considered routine.

"Customers soon realize they are not receiving the service that was advertised and they were promised. If they seek to terminate the service, Clearwire adds insult to injury by collecting or trying to collect certain early termination fees.

"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.

"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 15 named plaintiffs are asking that Clearwire be ordered to end its "wrongful practices," return subscription fees to all affected customers, and pay the maximum monetary damages after a jury trial. They also claim Clearwire breached its contracts with customers, broke good-faith business laws and unjustly profited from offering sub-par and misrepresented services.

Clifford Cantor, the lead attorney for the plaintiffs, said there is widespread frustration among Clearwire customers nationwide -- much which can be found on online discussion boards and on Facebook.

"I receive so many phone calls that you wouldn't believe it. There are thousands of people who are furious Clearwire customers," said Cantor, who is based in Sammamish. "There are some days when I do nothing but talk to people on the phone about this case."

While Clearwire's law office did not reply to a seattlepi.com request for comment, a company spokesperson released the following statement:

Our network-management practices comply with applicable law and are consistent with our acceptable-use policy. The lawsuit grossly mischaracterizes how we operate our network and we plan a vigorous defense against the allegations.

Trouble in Kirkland

Meanwhile, Clearwire's business is in dire straits.

Almost assuredly unconnected to the lawsuit, Clearwire CEO Bill Morrow resigned on Thursday amid financial hardship at the company. John Stanton, who became the company's chairman after McCaw stepped down from the post on Dec. 31, is now CEO until Clearwire finds a new chief executive.

The company's chief commercial officer, Mike Sievert, and chief information officer, Kevin Hart, also on Thursday announced plans to leave the company.

In November, Clearwire reported a quarterly loss of $139.4 million and said it planned to lay off 15 percent of its workforce. Three months later, on Feb. 17, it recorded another net loss -- this time of $126 million.

Clearwire has abandoned plans to release branded mobile phones, has suspended work on expanding its "Clear" wireless Internet service to additional markets, and has slowed infrastructure improvements such as adding more wireless towers.

"But they haven't stopped taking subscriptions," Cantor said. "They're still advertising everywhere."

Sprint Nextel, which owns a majority stake in Clearwire, has been promoting Clearwire's Clear "WiMax" wireless technology for its smart phones. The first phone branded as 4G, the Sprint HTC Evo, uses Clear -- though industry experts don't consider any services currently marketed as 4G to use true fourth-generation wireless.

In building out the Clear service, Clearwire also has investors in Intel, Comcast, Sprint, Google, Time Warner Cable and Bright House Networks.

On Wednesday, before Morrow announced his resignation, Sprint CEO Dan Hesse said his company is looking at further options to build out its wireless network but will continue its partnership with Clearwire.

"In every option we're looking at, every one includes WiMax and Clearwire," Hesse told Reuters. However, he was unsure "how heavily we're with Clearwire versus the other alternatives."

Bloomberg News and The Wall Street Journal also reported that Sprint is in merger talks with Bellevue-based T-Mobile USA, which is a subsidiary of Germany's Deutsche Telekom.

Lawsuit complicates things

The class-action lawsuit, filed Nov. 15 in U.S. District Court in Seattle and amended March 3 to add 14 plaintiffs, complicates things even more for Clearwire, Sprint, their partners and the entire mobile industry.

Sprint bet big on Clearwire to reinvigorate its business, which is lagging behind AT&T and Verizon Wireless as they build momentum with the Apple iPhone and the most popular Google Android smart phones. Clearwire, meanwhile, has made it a priority to expand its reach, adding 1.5 million subscribers between from November through January.

"Despite this strong growth, our current plans and funding dictate that we remain prudent with our spending," Morrow said last month, when he was still CEO. "Significant network expansion in the near term, however, remains contingent upon additional funding."

To connect their computers to the Internet via wireless USB receivers and modems, Clearwire broadband customers use the same Clear service as Sprint 4G users. Wireless Internet services from Comcast, Time Warner and Bright House also use Clearwire's infrastructure.

"Clearwire's strategy for cramming as many subscribers as possible onto its network," the class action alleges, "relies on a policy pursuant to which, if a subscriber uses what Clearwire considers to be too much Internet bandwidth, Clearwire's systems automatically trigger a throttle on the speed of that subscriber's Internet connection."

"This practice," the lawsuit continues, "renders all Clearwire Internet service plans a bad choice for any application, and especially bad for gaming, streaming videos, downloading large files, anything else requiring high-speed access. Even if a customer's Internet service is unlimited and fast when the customer's service is activated, as promised, it is only a matter of time before it is throttled down to a rate that makes routine Internet use excruciatingly slow."

The class action so far

In January, when the class action included just one named plaintiff from Texas, Clearwire's attorneys attempted to have the case dismissed. Clearwire also tried to move the case into out-of-court arbitration, as stipulated by the company's terms of service for its products. The terms also attempt to exempt Clearwire from class-action lawsuits from customers.

Both requests were withdrawn to allow for the amended complaint. Cantor said the court is likely to view the terms-of-service exceptions as unenforceable based on legal precedent.

"For the most part, users don't see the terms of service until after they've already signed up," Cantor said. "You pay for the equipment, you pay for the services, you go home and set it up ... and the first time you ever see the terms of service, you're already hooked up."

The first complaint, filed in November, alleged that Clearwire violated the federal Computer Fraud and Abuse Act. Clearwire's attorneys vehemently argued against that claim, mainly focusing on the CFAA in its January motion to dismiss the lawsuit.

Last week's amended complaint includes no mention of the CFAA. Cantor said it was a "strategic decision." However, the amended suit adds claims that Clearwire breached certain state laws where the 15 plaintiffs live.

Additional Clearwire customers may be able to join the class action. The company's website states it has more than 4.4 million customers in 29 states.

Clearwire has until March 31 to respond to the amended complaint in court.

My ATT DSL went flaky in June and instead of fighting a serious CO issue for three months like I did in 2007, I cancelled and got Clear.

It was awesome. Massive download speeds and incredible performance across the board.

Near the end of July it dropped off to worse than DSL speeds and has stayed terrible. It's not just the speed test sites (say what you will about them), but Netflix and YouTube are almost unusable. File downloads also take forever now and webpages load very slowly.

I am not sure if the issue is backhaul, congestion on twtelecom, routing issues, the new 4G phones, people constantly streaming media, or what.

My modem consistently has 5 bars and an RSSI of -61, CINR of 27 or thereabouts.

Available networks:
<br />
(*) -62 24 0x00000240e84b 26 0x4b 0x02 2640500 10000 01/01/2007 07:00 AM <br />


The modem has been moved everywhere in the house to test different locations. Direct connection does not help either. Do not even consider suggesting clearing internet cache or spyware or "something else on your pc". I've been in IT for 25 years and know how to do basic troubleshooting. Twice a week all caches, etc are cleared and boxes are rebooted before full backups of my machines are done.

Upload speeds remain steady at around 0.9Mbps, but downloads are all over the place usually below 1Mbps hovering around 0.5Mbps on speed test or file downloads. This confirms my suspicion that there is not enough bandwidth feeding the towers or that they are over-subscribed.

My latest effort was to adjust the router MTU to 1400. While keeping the speeds more consistent, it has not helped otherwise.

Having called support and doing online chats with them proved fruitless in the past and I don't have time to "reset modem, move around, stand on left foot, reboot your pc" etc.

Setup is Modem -> Router -> Wired GigE switch -> PC. No wireless involved.

Example traceroute today:
<br />
traceroute to google.com (173.194.33.104), 64 hops max, 52 byte packets <br />
1 drd (192.168.0.1) 0.483 ms 0.178 ms 0.165 ms <br />
2 192.168.1.1 (192.168.1.1) 3.299 ms 1.626 ms 1.556 ms <br />
3 71-23-64-2.clt.clearwire-wmx.net (71.23.64.2) 81.578 ms 48.979 ms 90.830 ms <br />
4 71-22-7-161.clt.clearwire-wmx.net (71.22.7.161) 89.873 ms 64.474 ms 84.938 ms <br />
5 66-192-62-1.static.twtelecom.net (66.192.62.1) 90.370 ms 94.127 ms 230.372 ms <br />
6 atl2-pr2-xe-0-0-0-0.us.twtelecom.net (66.192.243.146) 90.129 ms 99.020 ms 95.047 ms <br />
7 64.233.174.2 (64.233.174.2) 79.886 ms 94.914 ms 169.969 ms <br />
8 209.85.251.8 (209.85.251.8) 154.728 ms 114.543 ms 114.981 ms <br />
9 216.239.48.24 (216.239.48.24) 90.020 ms 75.453 ms 104.504 ms <br />
^C <br /><br />
traceroute: Warning: yahoo.com has multiple addresses; using 98.137.149.56 <br />
traceroute to yahoo.com (98.137.149.56), 64 hops max, 52 byte packets <br />
1 drd (192.168.0.1) 0.525 ms 0.184 ms 0.171 ms <br />
2 192.168.1.1 (192.168.1.1) 1.527 ms 1.350 ms 1.410 ms <br />
3 71-23-64-2.clt.clearwire-wmx.net (71.23.64.2) 78.180 ms 89.741 ms 89.894 ms <br />
4 71-22-7-161.clt.clearwire-wmx.net (71.22.7.161) 94.393 ms 54.738 ms 90.059 ms <br />
5 66-192-62-1.static.twtelecom.net (66.192.62.1) 89.628 ms 89.516 ms 89.772 ms <br />
6 ash1-pr1-ge-2-0-0-1.us.twtelecom.net (66.192.240.18) 110.002 ms <br />
ash1-pr1-ge-6-0-0-0.us.twtelecom.net (66.192.243.130) 105.145 ms 99.279 ms <br />
7 ae-6.pat2.dce.yahoo.com (216.115.102.176) 100.397 ms 104.864 ms 104.824 ms <br />
8 ae-4.pat1.che.yahoo.com (216.115.101.153) 125.284 ms 124.764 ms 119.995 ms <br />
9 ae-5.pat1.dnx.yahoo.com (216.115.96.34) 165.123 ms <br />
ae-6.pat1.dnx.yahoo.com (216.115.96.207) 179.821 ms <br />
as-1.pat2.pao.yahoo.com (216.115.101.130) 180.127 ms <br />
10 ae-7.pat2.sjc.yahoo.com (216.115.96.112) 164.669 ms <br />
ae-0-d151.msr2.sp1.yahoo.com (216.115.107.75) 199.913 ms <br />
ae-7.pat1.sjc.yahoo.com (216.115.101.149) 164.631 ms <br />


Example pings:
<br />
ping -c 10 yahoo.com <br />
PING yahoo.com (98.137.149.56): 56 data bytes <br />
64 bytes from 98.137.149.56: icmp_seq=0 ttl=56 time=153.457 ms <br />
64 bytes from 98.137.149.56: icmp_seq=1 ttl=56 time=158.244 ms <br />
64 bytes from 98.137.149.56: icmp_seq=2 ttl=56 time=148.447 ms <br />
64 bytes from 98.137.149.56: icmp_seq=3 ttl=56 time=158.210 ms <br />
64 bytes from 98.137.149.56: icmp_seq=4 ttl=56 time=142.955 ms <br />
64 bytes from 98.137.149.56: icmp_seq=5 ttl=56 time=192.712 ms <br />
64 bytes from 98.137.149.56: icmp_seq=6 ttl=56 time=132.801 ms <br />
64 bytes from 98.137.149.56: icmp_seq=7 ttl=56 time=152.636 ms <br />
64 bytes from 98.137.149.56: icmp_seq=8 ttl=56 time=162.280 ms <br />
64 bytes from 98.137.149.56: icmp_seq=9 ttl=56 time=132.002 ms <br /><br />
--- yahoo.com ping statistics --- <br />
10 packets transmitted, 10 packets received, 0.0% packet loss <br />
round-trip min/avg/max/stddev = 132.002/153.374/192.712/16.393 ms <br /><br />
ping -c 10 google.com <br />
PING google.com (173.194.33.104): 56 data bytes <br />
64 bytes from 173.194.33.104: icmp_seq=0 ttl=56 time=114.476 ms <br />
64 bytes from 173.194.33.104: icmp_seq=1 ttl=56 time=99.047 ms <br />
64 bytes from 173.194.33.104: icmp_seq=2 ttl=56 time=93.822 ms <br />
64 bytes from 173.194.33.104: icmp_seq=3 ttl=56 time=98.935 ms <br />
64 bytes from 173.194.33.104: icmp_seq=4 ttl=56 time=108.891 ms <br />
64 bytes from 173.194.33.104: icmp_seq=5 ttl=56 time=93.870 ms <br />
64 bytes from 173.194.33.104: icmp_seq=6 ttl=56 time=93.192 ms <br />
Request timeout for icmp_seq 7 <br />
64 bytes from 173.194.33.104: icmp_seq=8 ttl=56 time=92.812 ms <br />
64 bytes from 173.194.33.104: icmp_seq=9 ttl=56 time=92.784 ms <br /><br />
--- google.com ping statistics --- <br />
10 packets transmitted, 9 packets received, 10.0% packet loss <br />
round-trip min/avg/max/stddev = 92.784/98.648/114.476/7.454 ms <br />


It was interesting to note that a traceroute to hyperois.com which is the Charlotte speedtest.net server goes to Washington, Atlanta, and then back to Charlotte. My iPhone shows the distance to the server at under 7 miles.

<br />
traceroute to hyperois.com (74.81.166.60), 64 hops max, 52 byte packets <br />
1 drd (192.168.0.1) 0.392 ms 0.178 ms 0.172 ms <br />
2 192.168.1.1 (192.168.1.1) 1.615 ms 1.540 ms 1.369 ms <br />
3 71-23-64-2.clt.clearwire-wmx.net (71.23.64.2) 81.668 ms 89.328 ms 59.541 ms <br />
4 71-22-7-161.clt.clearwire-wmx.net (71.22.7.161) 65.317 ms 84.242 ms 90.137 ms <br />
5 66-192-62-1.static.twtelecom.net (66.192.62.1) 89.769 ms 89.218 ms 104.768 ms <br />
6 atl2-pr2-xe-0-0-0-0.us.twtelecom.net (66.192.243.146) 90.437 ms 74.492 ms 94.594 ms <br />
7 te-4-1.car1.washington3.level3.net (4.68.110.89) 105.140 ms 109.857 ms 89.779 ms <br />
8 vlan89.csw3.washington1.level3.net (4.68.17.190) 95.302 ms 104.623 ms 104.846 ms <br />
9 ae-81-81.ebr1.washington1.level3.net (4.69.134.137) 95.404 ms 94.400 ms 84.740 ms <br />
10 ae-2-2.ebr3.atlanta2.level3.net (4.69.132.85) 185.029 ms 119.266 ms 104.921 ms <br />
11 ae-71-70.ebr1.atlanta2.level3.net (4.69.138.18) 120.071 ms 103.847 ms 89.928 ms <br />
12 ae-4-4.car1.charlotte1.level3.net (4.69.132.161) 120.873 ms 84.184 ms 94.932 ms <br />
13 ae-11-11.car2.charlotte1.level3.net (4.69.132.166) 114.730 ms 94.826 ms 89.399 ms <br />
14 carolina-in.car2.charlotte1.level3.net (4.71.126.30) 175.313 ms 139.164 ms 110.136 ms <br />
15 ae-8-1.cr01.clt.carohosting.com (69.59.18.126) 80.329 ms 104.638 ms <br />
ae-7-1.cr01.clt.carohosting.com (69.59.18.122) 155.042 ms <br />
16 76.76.1.114 (76.76.1.114) 134.584 ms 99.193 ms 120.171 ms <br />
17 unknown.carohosting.net (76.76.25.110) 120.355 ms 99.455 ms 129.718 ms <br />


Speed tests to Washington DC run at 2-3Mbps. Unfortunately I do not know where other servers are on the internet, nor have any control over how they are accessed. And I shouldn't have to concern myself with that if speed is up to par on Clear.

Frustrated beyond belief with this. I'm not a heavy internet user and watch maybe 5 YouTube videos at night, and 1 or 2 Netflix shows per day. I don't use P2P, torrents, online gaming, or anything else that hogs bandwidth.

When I do use it I expect not to have 10 minutes of leisure time waiting for video to buffer, or hours waiting to download files needed for work.

My neighborhood can not get more then 2.5Mbps DSL due to the type of ONU hanging off the fibre to the house, and cable is a last resort but something I'm thinking about very seriously.

Am very glad I didn't lock into a contract and purchased the modem from a local dealer instead of leasing it.

Have also stopped recommending Clear to friends, family, and customers after this slow down started. Once of my customers told me today they tried using Clear for remote locations and had the same thing happen - great for a couple weeks, then unusable.

Sorry for the long post, but when my corporate customers call me for tech support I appreciate getting all the info up front.

Is this ever going to get better or should we expect it to worsen as the towers continue to be over-subscribed and the bandwidth gets more congested?

This reply was created from a merged topic originally titled
Speed drop in Charlotte NC with 5 bars.

this was NOT what Clear "brags" about in their ads...the speed sucks and streaming video is no better than dial-up. Clear, you lied!

I agree with this.. Its not worth it when I can switch over to my wireless DSL and actually get good speed CLEAR SPEED IT UP OR LOSE MY BUSINESS!