WASHINGTON-Harsh political and industry criticism of the California Public Utilities Commission’s bill of rights for telecom consumers likely signals the controversy will carry over into 2005, when pro-business GOP Gov. Arnold Schwarzenegger replaces two exiting Democratic commissioners with his own appointments.
“I am disappointed in the action taken today by the California Public Utilities Commission,” said Schwarzenegger, following a landmark decision that other states may well emulate and that reverses the trend of state deregulation spurred by 1993 federal legislation.
“The PUC has overreached its regulatory responsibilities. This measure will impede growth in the highly competitive wireless industry and could result in companies shifting investments and jobs outside of California,” warned Schwarzenegger, who after taking office late last year ordered a moratorium on new regulations until their economic impact could be assessed. The PUC, an independent agency, was not bound by the directive but took public comment on the economic implications of a bill of rights.
Since the early 1990s, the mobile-phone industry has grown by leaps and bounds to a current 165 million subscribers. Now industry is feeling growing pains manifested in consumer lawsuits, expensive federal mandates and renewed scrutiny by states.
Last week, a California judge approved a settlement of a class-action billing lawsuit against No. 1 Verizon Wireless. A Missouri federal judge recently signed off on a settlement of a class-action billing suit against Nextel Communications Inc. Other national carriers have been dragged into court as well, sometimes by state attorneys general.
The mobile-phone industry vowed to challenge the CPUC ruling.
“These rules simply represent a leap to judgment that is fundamentally inconsistent with a vigorous and competitive marketplace,” said Steven Largent, president of the Cellular Telecommunications & Internet Association. Largent said consumer complaints have decreased significantly in recent years.
Consumer advocates welcomed the decision, but said the PUC did not go far enough.
“Although the commission could have done much more, the decision today is nonetheless a victory for 19 million cell-phone customers in California who are often in a ‘cell hell’ of poor service and billing nightmares,” said Janee Briesemeister, of Consumers Union’s EscapeCellHell.org campaign. “We commend the PUC for taking a significant step forward in improving market conditions for cell-phone customers.”
After four years of voluminous filings, public hearings and non-stop rancor, the PUC voted 3-to-2 for a compromise bill of rights crafted by Commissioner Geoffrey Brown. At the same time, state regulators resoundingly rejected Commissioner Susan Kennedy’s alternate proposal, which was highly deregulatory and largely favorable to the mobile-phone industry.
In the end, possibly by design, the PUC did not vote on a third telecom consumer plan pushed by Commissioner Carl Wood, the bill of rights author. By having commissioners vote first on the Kennedy alternate and then on the Brown proposal-holding the Wood plan for last-PUC President Michael Peevey effectively canceled out an already marginalized Wood.
The last-minute procedural maneuver forced Wood and Commissioner Loretta Lynch to change their votes and back the Brown plan rather than risk going away empty handed. Indeed, there was another scenario that could have materialized as a result of Peevey’s sequencing of votes: lack of majority support for any of the three bill-of-rights plans.
“He [Peevey] wanted to kill it [the bill of rights],” said Brown.
Brown worked closely with Wood in recent months before going his own way. In doing so, though, Brown salvaged Wood’s pet project.
“I’m very pleased we got this thing out,” said Wood. It’s not everything I wanted, but it’s the bulk of it.” The terms of Commissioners Wood and Loretta Lynch expire at the end of the year.
The Brown bill of rights fits in between Kennedy’s deregulatory plan-which closely tracked industry’s voluntary code of conduct-and Wood’s pro-consumer plan.
Brown’s plan allows consumers to trial cell-phone service for 30 days and return phones without having to pay penalty fees, while stripping out advertising regulation and controversial privacy provisions. Carriers will be required to provide clearer, up-front disclosure of rates, terms and conditions to consumers. In addition, wireless service providers will be prohibited from listing regulatory recovery charges together with taxes and fees assessed by local, state and federal agencies.
