It's been a good year for Verizon's (NYSE: VZ ) shareholders, with the
stock price up a sizzling 17%. It certainly helps that the company pays a juicy
5% dividend. Consider that Verizon had to foresight to make substantial
long-term investments in its network as well as new products. For example, the
company created a smartphone franchise with its Droid offering. And of course,
Verizon is now benefiting from its distribution deal with Apple's (NASDAQ:
AAPL ) iPhone. Yet, despite all the success, some risks are rising. And they go
to the core of the company's differentiation as a solid service provider. In
December, Verizon had three outages of its wireless data service for its 4G
network (based on the so-called LTE system). The latest one came on Wednesday.
So what's the problem? Verizon has provided vague details, saying that its
having "growing pains." But one thing is clear: Customers should not expect
any compensation. The episode is reminiscent of Research-In-Motion's (NASDAQ:
RIMM ) earlier outage of its entire BlackBerry platform. Although, in that case,
it lasted a grueling three days. Let's face it, were becoming a
"connected" culture, and even a small outage can be a big deal. At the same
time, customers have many ways to buzz about their discontent, such as with
Twitter and Facebook. That means it doesnt take long for a good reputation to go
negative just ask Netflix (NASDAQ: NFLX ). This is why companies need to be
proactive with bad news. It's critical. After all, it's a good bet that more
and more people are thinking twice about paying a premium for a Verizon 4G
service. But if this weren't enough, the company appears to be setting itself
up for another PR disaster. Verizon plans to charge its customers a $2 fee for
every one-time Verizon bill payment that's done online or over the phone (it
starts on Jan. 15). To avoid this, you can either pay your bill via an autopay
program or an old-fashioned check! Verizon's Orwellian term for this? It's a
"convenience fee." Isnt Verizon paying any attention to recent disasters,
such as Bank of America's (NYSE: BAC ) ill-fated attempt to charge a monthly
$5 debit card fee? As we've seen this year, great companies can easily fall
apart when they fail to understand their customers. While Verizon doesnt appear
to be in the same kind of danger, the recent flubs are definitely a concern and
could provide a way for competitors like AT&T (NYSE: T ) to make some inroads.
Tom Taulli runs the InvestorPlace blog " IPOPlaybook ," a site dedicated to
the hottest news and rumors about initial public offerings. He is also the
author of "All About Short Selling" and "All About Commodities." Follow
him on Twitter at @ttaulli . As of this writing, he did not own a position in
any of the aforementioned stocks.
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