WASHINGTON-Missouri Attorney General Jay Nixon late last week reached a settlement with Nextel Communications Inc. and Sprint PCS that ends a wireless consumer lawsuit that was to have gone to trial in early October. The agreement requires both carriers to use clearer and more explanatory language in mobile-phone plan advertising and in billing statements sent to cell-phone consumers in the state.
The two companies also will pay $50,000 each to the Missouri Merchandising Practices Revolving Fund as part of the agreements. As a result of the settlement with Nextel and Sprint PCS, Nixon dismissed the lawsuit.
Nixon filed a lawsuit against Nextel and Sprint last December, alleging they listed charges on consumers’ cell-phone bills in a misleading and deceptive manner. The companies, the lawsuit alleged, itemized rate increases on the bills in such a way to make the increase appear to be a tax or other government-mandated fee when that was not the case.
“This is a significant victory for cell-phone consumers, because price comparison is paramount to many consumers when they shop for cell-phone plans,” said Nixon. “Other cell-phone companies have included these types of charges in their basic rate, without tacking them on as separate items and possibly misleading customers. These agreements with Nextel and Sprint will help clarify the bottom line for consumers when comparing plans.”
Nextel listed the charges under the heading “Unit Taxes, Fees and Assessments” as a line item labeled “Federal Programs Cost Recovery,” while Sprint termed the charges “USA Regulatory Obligations and Fees” under the heading “Other Surcharges and Fees.”
While not admitting liability in the agreements, Nixon said Nextel and Sprint agreed to clearly and conspicuously disclose that any amounts they billed to Missouri consumers to comply with federal mandates and initiatives-such as local number portability or E911 capabilities-were being imposed by the companies and not by federal or state governments.
Nixon said Nextel and Sprint PCS also will disclose in their advertising in Missouri that the fees are not a tax or government charge.
“Missouri cell-phone consumers now will have a better explanation of what these charges are, and who has placed them on there,” Nixon said.
Nextel and Sprint PCS tried to put the best possible face on the outcome.
“We are glad to have worked with the Missouri AG and we are moving forward,” said Leigh Horner, a spokeswoman for Nextel.
Horner previously insisted Nextel was not in settlement talks with the Missouri attorney general, saying the carrier saw no need to capitulate because Nextel believed nothing was inappropriate or misleading about the firm’s advertising, billing and customer service.
“Though Sprint is convinced that it fully and fairly discloses all surcharges to its customers, and the agreement expressly acknowledges that Sprint has not been found to have violated any law or regulation, this settlement will allow Sprint to avoid expensive litigation and to focus on providing exceptional service to its customers,” said Sprint Corp.
But just as one lawsuit disappears, another has emerged.
A class-action lawsuit was filed on Wednesday against Sprint PCS, claiming its line item for USA Regulatory Obligations & Fees was a breach of contract.
These charges “were not referred to by Sprint at the time of purchase of its service plans and are imposed unilaterally by Sprint at its discretion,” said Kathy Flaherty on whose behalf the lawsuit was filed in the Circuit Court of Palm Beach County, Fla.
Sprint PCS declined to comment.
The Sprint lawsuit follows on a similar case against Nextel was filed by the same attorney in May.
Both Sprint and Nextel (as well as Cingular Wireless L.L.C. and AT&T Wireless Services Inc.) impose a regulatory fee charge on their customers to implement wireless enhanced 911 and wireless local number portability among other mandates.
Discontent among wireless subscribers is not limited to Missouri and Florida.
A consumer backlash against the mobile-phone industry is playing out across the country in other courts, other state attorneys general offices, in state regulatory commissions and even here in the Congress.
