WASHINGTON-Minnesota Attorney General Mike Hatch has petitioned the U.S. Supreme Court to review a federal appeals court decision striking down a state law that would have required cell-phone carriers to notify subscribers of-and sometimes get permission for-changes to wireless contracts.
In December, the 8th U.S. Circuit Court of Appeals in St. Louis overturned a lower court ruling upholding Minnesota’s wireless consumer-protection law. The 8th Circuit sided with the mobile-phone industry in concluding the state statute amounted to rate regulation and therefore was pre-empted by federal law.
“The 8th Circuit’s decision leaves citizens at the mercy of cell-phone companies, which are now allowed to change the terms of a customer’s contract, including the rates they charge, without the customer’s knowledge or consent,” said Hatch, a Democrat who is running for governor. “By requiring notification and permission from cell-phone customers, our law provides basic fairness that is currently missing in the relationship between cell-phone companies and their customers.”
The wireless industry is expected to file a response with the Supreme Court early next month.
The Minnesota legislature passed the wireless consumer-protection law in May 2004 after lawmakers, according to Hatch, heard from cell-phone customers that companies routinely changed the terms of their contracts-including the price-without their knowledge or consent. Customers testified that when they learned of the changes, they tried to terminate their contracts and were forced to decide whether to pay a termination fee of $150 or more.
The state measure at issue would require carriers to provide customers with a copy of their contracts; give customers advance notice of contract changes that could increase the cost or extend the length of the contract; and get their consent before making such changes. In addition, if a customer proposed a change in their service, such as adding night and weekend minutes, the cell-phone company would be required to notify the customer if the change would increase the cost or extend the length of the contract.
Hatch said the attorney general’s office in 2004 received more complaints about cell-phone companies than against all local telephone companies and energy utilities combined.
The Federal Communications Commission last month said the number of wireless billing and rate complaints it receives are dropping.
The cellular industry has been on a legal roll as of late.
In addition to the victory in the 8th Circuit last year, cell-phone carriers were successful in persuading the California Public Utilities Commission to overhaul a bill of rights for cell-phone consumers. The new California rule attempts to dissuade abuses in the wireless marketplace and safeguard consumers through beefed-up enforcement and education.
Industry now faces a similar battle in another state highly populated with cell-phone users: New York.
AARP rallied to support a wireless consumer-protection bill in advance of a hearing in the state Assembly last Monday.
“New York consumers who find themselves roped into long-term cell-phone contracts, filled with hidden fees and bad service, clearly need a law on their side,” said Lois Aronstein, AARP New York state director. “AARP commends Assemblyman [Daniel] O’Donnell (D) and Assemblyman Richard Brodsky (D) for their efforts to ensure that people have the consumer protections they need and deserve when purchasing a cell phone.”
AARP said New Yorkers strongly supported safeguards for cell-phone subscribers in a 2004 survey.
AARP said the Assembly bill would require cell-phone companies to disclose fees, surcharges and taxes to consumers before they buy cell service and provide an estimate of their total monthly bill; allow consumers to cancel their contracts 15 days after receiving the first bill without penalty; require cell-phone companies to provide more detailed coverage maps of where the phones will work; and disclose to customers the phone’s enhanced 911 capabilities.
“The only real opposition to this bill is the cell-phone industry, which is working to keep New Yorkers from a much-needed law,” Aronstein said. “This law simply requires the industry to abide by many of the components of its own voluntary code-it’s the right thing to do.”
The Better Business Bureau, according to AARP, reports nationally more complaints were made about cell phones than any other business during the past two years. According to the New York State Consumer Protection Board, the cell-phone industry generated the second most complaints in the state.
A similar consumer-protection bill has been introduced in the New York State Senate by Sen. James Wright, chairman of the Energy and Telecommunications Committee. Wright describes himself as a conservative independent.
AARP said it supports this legislation as well.
“There is no evidence that consumers want government to get more involved in the delivery of high-tech services by enacting additional rules and regulations that will inevitably lead to larger monthly bills,” said Steve Largent, president of CTIA. “I believe an objective review of the data shows that wireless consumers are in fact satisfied with their service. Is this to say that the industry will now rest on these results? Absolutely not. We have every incentive to further increase the level of wireless consumer satisfaction, and that is exactly what we are committed to doing for our customers.”
Meantime, cell-phone consumer bill-of-rights legislation is pending in the Massachusetts legislature. In total, according to CTIA, three dozen bills that would impose new rules on wireless carriers are pending in 14 states.
Another key battlefield is the 11th U.S. Circuit Court of Appeals. Consumer advocates and Vermont regulators are challenging last year’s FCC truth-in-billing ruling. The decision, among other things, clarified that state regulation of line items-such as wireless regulatory recovery fees-are pre-empted by a federal law prohibiting state rate regulation. Oral argument is set for May 17 in Atlanta.
A federal lawsuit filed by wireless carriers against Kentucky has been put on hold pending the outcome of the 11th Circuit appeal. Carriers filed suit to block enforcement of a new state law that would prohibit operators from passing to subscribers a 1.3-percent gross-receipts telecom tax.
State regulators and consumer advocates are also fighting at the FCC over a follow-up truth-in-billing proposal and a request by the cellular industry that state regulation of early termination fees be deemed rate regulation and therefore off limits to states.
