A new system to rate business

Sprint scored an A-plus. AT&T Wireless and Verizon Wireless both got B-pluses. T-Mobile got an F.

Those aren't nicknames on some weird high-school report card. They're a new kind of rating system from the Better Business Bureau, which this month scrapped its traditional system of ranking companies simply as "satisfactory" or "unsatisfactory" in favor of academic-style grades.

BBB officials say the new system, based on a 90-point formula, aims to give consumers a more nuanced assessment of how well a company meets the organization's standards, especially in handling customer complaints.

"It represents our opinion of the risk associated with doing business with one company versus another company," said Edward Johnson, chief executive officer of the Better Business Bureau of Metro Washington, and Eastern Pennsylvania.

The new system was developed by a California BBB, and was adopted in October at the annual meeting of the 125 bureaus in the United States and Canada. It has already drawn criticism, and is likely to generate more as companies learn of their less-than-dean's-list grades.

For example, while Verizon Wireless gets a handsome grade, its land-line cousin, Verizon of Pennsylvania, received an F, according to the BBB Web site yesterday. The BBB blamed the grade chiefly on the volume of complaints against the company and its failure in some cases to respond to BBB efforts to resolve them.

The BBB said that it had received 464 complaints about Verizon of Pennsylvania during the last three years, and that the company had resolved 415 of them. But it said Verizon did not respond to 21 of the complaints.

Verizon spokeswoman Sharon Shaffer said she was not familiar with the new BBB system, but questioned the failing grade.

"I can tell you that the BBB's results fly in the face of several other customer satisfaction surveys from leading consumer and industry organizations that show we've bested our competition," Shaffer said via e-mail.

T-Mobile did not respond to requests for comment.

One vocal opponent of the new system is Richard Berman, president of Berman & Co., a Washington public affairs and communications firm. Berman has criticized the BBB's new approach in online columns and has contacted journalists to voice his concerns.

"I reject the idea that the BBB should be picking winners and losers in an industry when they've got some subjective criteria that don't really make sense," Berman said yesterday. "I would expect that more from some activist groups on the political left, but not from a business-supported organization."

Berman said he was speaking personally, not on behalf of his clients, who include restaurant owners and a payday lender - a category of company the new system downgrades because of "the inherent nature" of its business model.

"I represent companies that should have an interest in this. But I'm not getting paid to do this," he said.

Among Berman's objections were the formula's preference for companies with long track records. "A new high-end restaurant could get a lower grade than a 10-year-old hole in the wall," he said.

Berman also complained about the four points awarded to companies that belong to the BBB, which he called "pay for play."

Steve Cox, vice president of the Council of Better Business Bureaus, an umbrella organization for the nation's BBBs, said that feature was debated at the October assembly and approved by "a better than two-thirds majority" of bureaus.

Cox said the points were worth no more than half a grade, and that a non-member could earn an A without them. He said the extra credit was justified because companies that seek bureau membership must agree to meet the organization's standards and cooperate with its dispute-resolution efforts.

"If a business is willing to contractually agree to our set of marketplace standards, we feel that it should count for something," Cox said.

Andrew Goode, who heads the BBB's Philadelphia office, said the regional group offered reports on about 150,000 companies, including 10,500 BBB members.

Goode said that as of last week, 38 percent of the region's businesses received some form of A, 40 percent earned B's, and 5 percent earned C's - still considered a satisfactory grade. About 1 in 10 companies received an F - similar to the fraction that received "unsatisfactory" under the old system, he said.

Goode said consumers typically check the BBB when deciding whether to deal with unfamiliar companies.

In 2007, BBB Web sites generated more than 52 million reports on companies. The most common inquiries centered on roofers, mortgage brokers, movers, and general contractors.

The BBB said it helped settle about three-fourths of 804,000 complaints it handled in 2007. The most common complaints involved cell-phone service and equipment companies, auto dealers, Internet retailers and banks.