WASHINGTON—A California state appeals court upheld a record $12 million fine levied by the California Public Utilities Commission against Cingular Wireless L.L.C. in 2004, rejecting the mobile phone carrier’s contention that the agency’s action was pre-empted by federal law.
“While the commission is preempted from regulating either rates or the entry of a wireless provider into the market, it is not preempted from regulating other terms and conditions of wireless telephone service. We conclude the imposition of fines and the requirement that Cingular refund early termination fees paid by its customers were neither regulation of rates nor regulation of market entry,” the court stated. “The principal purposes of the penalties imposed by the commission were to compensate Cingular’s customers and to prevent further misrepresentations by Cingular. The effect of the penalties on Cingular’s rates is indirect and incidental.”
In September 2003, following a three-year investigation, a CPUC administrative law judge proposed a $12 million fine against Cingular for allegedly charging early-termination fees and prohibiting refunds during a period when the mobile-phone carrier aggressively marketed its service without disclosing network problems to customers. The CPUC affirmed the fine the following year.
Cingular has consistently denied any wrongdoing.
“We are obviously disappointed in the decision and are strongly considering our next option in the courts. The allegations in this case are more than five years old, but Cingular still believes a full and fair consideration of the facts and the law is in order. The claims about our business practices, network, and customer service quality were completely unfounded five years ago,” Cingular said in a statement.
Cingular said it is the industry leader in customer-friendly initiatives, including a nationwide 30-day return policy—which was recently matched by Sprint Nextel Corp., a personalized, easy-to-understand disclosure document for each new customer, and a partnership with Consumer Action to distribute an educational brochure to assist customers as they select a wireless carrier.
On a related front, a new AARP survey found most cell phone users support legislation giving consumers the right to terminate their cell phone service up to 20 days after receiving their first bill. AARP said the number of reported complaints by mobile phone subscribers “is less that what it might be because many cell phone users do not know whom to contact if they are unable to resolve a problem with their cell phone service provider.”
A Senate telecom reform bill would expand federal pre-emption by repealing state oversight of “other terms and conditions” of wireless service. The cell phone industry, noting wireless complaints to the Federal Communications Commission are declining, is aggressively lobbying for national regulatory framework for mobile phone carriers.
