On Friday, the U.S. Federal Communications Commission ruled against Verizon claiming that the latter's practices of trying to persuade customers from switching from its phone service to that offered by cable companies are violating privacy laws. Awkwardly, FCC Chairman Kevin Martin was the only one who voted against the decision which passed 4-1.

Thus the regulator upheld a complaint brought by Comcast Corp., Time Warner Cable Inc. and privately owned Bright House Networks. This comes as a surprise because the FCC staff, as well as Kevin Martin, had earlier recommended that the regulator should toss the complaint against Verizon. Martin said he thinks the retention marketing practices are good for customers.

Verizon is said to have started the practice of calling up customers who want to cancel their telephone service and offering them different incentives to stay. At issue is the alleged improper use of proprietary information by Verizon in attempting to retain its customers.

However, it appears that the practice is contrary to a 1998 FCC ruling that barred long-distance carriers from using customers' switching information when trying to get them to retain a particular service. Verizon will probably appeal the decision.

Kyle McSlarrow, president and CEO of the National Cable and Telecommunications Association (NCTA), said Verizon’s actions are mainly caused by desperation.

Verizon Wireless, the no. 2 U.S. mobile service, is a venture of Verizon Communications Inc and Vodafone Group Plc. At the beginning of April, the company announced its plan to use the airwaves it won in a government auction one month before, in order to implement its next generation of high-speed wireless service. The project is expected to be launched around 2010.