WASHINGTON-The mobile-phone industry continues to find its battlefield expanding, with carriers increasingly drawn into fights with one state after another on issues ranging from billing to contracts to taxes.
Last week, Minnesota was at center stage when a federal judge temporarily blocked the state from enforcing a new law-which was to have gone into effect July 1-requiring wireless operators to notify subscribers in writing of changes to their contracts.
Verizon Wireless, Sprint PCS, AT&T Wireless Services Inc., T-Mobile USA Inc., American Cellular Corp. and others sued Minnesota Attorney General Mike Hatch two weeks ago to prevent him from implementing a new statute that cellular firms say amounts to illegal rate regulation by the state.
Last Tuesday in Minneapolis, U.S. District Judge John R. Tunheim partly granted the carriers’ motion for a temporary restraining order.
“In the court’s view, the question of whether Article 5 (the new state law) constitutes impermissible rate regulation or whether it simply codifies consumers’ rights to a balanced and fair contract is a very close issue. The parties and the people of Minnesota will benefit from the court having sufficient time to carefully review this close question,”said Tunheim.
Congress banned state regulation of wireless rates in 1993 legislation, but gave states authority over other terms and conditions of mobile-phone service. In recent years, states and plaintiffs’ lawyers have sought to leverage the terms-and-conditions provision in new lawsuits, taxes and regulations in states across the country.
The Minnesota case was atypical of a growing trend in which states attorneys general are suing carriers on behalf of consumers.
In South Dakota, Verizon Wireless is trying to persuade the state supreme court to overturn a lower court ruling upholding a 2003 law that created a gross receipts tax and requires operators to pay a fee to obtain a state license to provide service.
The 2003 state law, according to Verizon Wireless, also gives the South Dakota Department of Revenue broad authority to institute additional regulations related to tax licensing, tax return filing requirements, applications of the telecommunications tax, record-keeping guidelines and audit methods.
Verizon Wireless, as with mobile-phone operators in the Minnesota case, argued 1993 legislation passed by Congress pre-empts state regulation. In addition to prohibiting state rate regulation of mobile-phone carriers, the 1993 act bans states from barring market entry.
Verizon Wireless also makes various non-legal points to support its opposition to the 2003 state law.
“As South Dakota state officials have recognized, South Dakota’s market barriers can negatively affect commerce, quality of life and public safety for South Dakota citizens,” Verizon Wireless stated in its brief to the South Dakota Supreme Court.
The state is expected to file its brief later this month. A date for oral argument has not been set.
In Colorado, AT&T Wireless Services Inc. agreed to settle a multimillion-dollar class-action suit. The lawsuit claimed delayed roaming charges caused subscribers to be penalized for exceeding allowable minutes in their service plans.
A hearing to approve the settlement is set for Sept. 22 in U.S. District Court in Denver.
Both sides have agreed to not comment publicly on the settlement.
However, AT&T Wireless-which is seeking approval to be purchased by Cingular Wireless L.L.C. for $41 billion-denies any wrongdoing.
“When a wireless customer roams on another carrier’s network, the call may be billed in a subsequent billing cycle. This is a common industry practice caused by the time it takes for reporting between carriers. The lawsuit took issue with this practice. We firmly believe we did nothing wrong. We decided that the resources we would spend on continued litigation are better spent offering our customers a settlement,” said Rochelle Cohen, a spokeswoman for AT&T Wireless.
Despite expending substantial financial and political resources, the wireless industry failed to derail a bill of rights for telecom consumers adopted by the California Public Utilities Commission in late May. The industry remains concerned the CPUC bill of rights-which created a multitude of new rules for carriers and safeguards for consumers-will become a precedent other states will follow.
Whether the bill of rights remains intact is uncertain, but should become clearer next year when GOP Gov. Arnold Schwarzenegger replaces two outgoing commissioners. Today the CPUC is comprised of five Democrats, two pro-business and two pro-consumer.
The swing vote is Commissioner Geoffrey Brown, whose bill of rights triumphed over different versions championed by Commissioners Carl Wood (author of the original the bill of rights) and Susan Kennedy.
In a speech last Tuesday, Brown lashed out at factions that sought to kill the bill of rights.
“The opposition to the Telephone Bill of Rights was, at [its] core, led by, and financed by, the people who see nothing wrong with dishonest bills, unreadable contracts, extortionate fees, unconscionable contracts of adhesion, and unworkable telephones,” said Brown. “They are the people who tended to minimize cramming and slamming. They have given generously to the campaigns of our public officials.”
Brown said public support is needed to offset political pressure to overturn the bill of rights.
This week, the CPUC is scheduled to vote on whether to reduce or eliminate a $12 million fine against Cingular Wireless as a result of certain business practices.
After the fine was assessed last October, Cingular filed a challenge with California regulators.
