WASHINGTON-In a ruling both beneficial and potentially devastating for industry, the Federal Communications Commission ruled wireless carriers are not exempt from all state contractual and consumer fraud laws.
The Nov. 24 ruling was prompted by a 1997 petition for declaratory ruling from Southwestern Bell Mobile Systems Inc.
Wireless carriers, faced with class-action lawsuits around the country, have argued with mixed success that 1993 legislation precludes legal challenges to billing and advertising practices and pre-empts state courts from awarding monetary damages against service providers.
“The FCC got it right-wireless carriers cannot run roughshod over state consumer protection laws,” said Carl Hilliard, president of the Wireless Consumers Alliance.
The FCC left for another day the question of damage awards. The agency plans to rule next year on a request by WCA to declare that states are not barred from a 1993 law from levying monetary damages against wireless carriers for violating state contract and fraud laws.
The outcome of next year’s ruling and the November decision could tip the balance in scores of pending class-action lawsuits against carriers.
The 1993 law forbids states from regulating rates and entry of commercial wireless carriers but does not prohibit them from regulating other terms and conditions of mobile-phone operators, paging companies, dispatch and other wireless service providers.
The industry claims monetary awards would have the effect of forcing carriers to adjust rates, which are not under state purview.
The FCC agreed states cannot set wireless rates per se or even interfere with the common practice of rounding calls to whole minute, but nevertheless concluded wireless carriers can be held liable for unreasonable practices that flow from the implementation of billing, marketing and advertising.
“We do not agree … that state contract or consumer fraud laws relating to the disclosure of rates and rate practices have generally been pre-empted with respect to CMRS (commercial mobile radio service). Such pre-emption by Section 332(c)(3)(A) is not supported by its language or legislative history,” the FCC stated in the 13-page ruling.
The FCC declined to rule on what constitutes “call initiation,” saying it has no technical or policy expertise to shed light on the question.
As such, industry put the best face possible on the FCC ruling.
“On balance, we’re pleased the FCC confirmed pre-emption of state action regarding rates and entry regulation and that the FCC recognized the important principle the U.S. Supreme Court enunciated last session that rates do not exist in isolation,” said Michael Altschul, vice president and general counsel for the Cellular Telecommunications Industry Association.
Altschul predicted the ruling will have immediate benefit for some wireless carriers because the FCC was silent on the call-initiation issue and didn’t have a problem with rounding practices.
