TWO KEY SENATE MEMBERS last week unveiled a sweeping wireless consumer protection bill, setting the stage for a fierce battle between lawmakers and the mobile-phone industry that’s likely to play out well into the 2008 election season.
The legislation goes further than setting federal standards governing contracts, billing-service quality and other wireless industry practices, a provision that coincides with the mounting campaign to inject open access and wholesale requirements into the wireless space. It also directs the Federal Communications Commission to submit to Congress a study on handset locking and its effect on consumer behavior and competition. The FCC would become a tough enforcer of wireless protection guidelines under the measure, introduced Friday.
“The rules governing our wireless industry are a relic of the 1980s, when cellphones were a luxury item that fit into a briefcase instead of a pocket,” said Sen. Amy Klobuchar (D-Minn.), lead sponsor of the bill. “Early-termination fees are a family budget-buster; families should be able to terminate service without outrageous fees; know if their cellphone will work on their drives and in their home and office; and understand what to expect in their monthly bills once you pile on charges and fees. It’s a simple matter of fairness.”
The cellular industry, which is pushing for a national regulatory framework that would pre-empt limited state oversight of wireless operators, suddenly has been put on the defensive and now confronts a dramatic shift in the politics surrounding its top legislative priority. Indeed, the new “Cellphone Consumer Empowerment Act of 2007” could deliver far more power to the states-a situation that industry has long argued against.
The 11th U.S. Circuit Court of Appeals in 2006 overturned an FCC decision pre-empting states from regulating line items on monthly mobile-phone bills, a ruling industry wants the Supreme Court to review. The wireless consumer bill co-sponsored by Sens. Klobuchar and Jay Rockefeller (D-W.Va.), among other things, would prohibit cellular carriers from even listing fees other than those for wireless service and charges explicitly authorized by federal, state or local governments. As such, the long-held, widespread industry practice of breaking out “regulatory recovery fees” on subscribers’ bills could be outlawed-potentially throwing a highly disruptive wrench into national pricing.
“Anyone who looks at a cellphone bill knows it’s a hodge-podge of fees and surcharges that supposedly covers regulatory or administrative costs. The reality is, often these are nothing more than operating costs that companies are passing on to the consumer disguised as fees and taxes,” said Rockefeller. “It’s high time to protect cellphone users from these deceptive billing practices.”
Facts challenged
Rockefeller and Klobuchar, members of the Senate Commerce Committee, have asked panel Chairman Daniel Inouye (D-Hawaii) to hold a hearing on the bill.
The two lawmakers highlighted the fact that wireless consumer complaints doubled at the FCC between 2003 and 2005, but industry argues that trend has reversed.
“It is disappointing and unfortunate that Sens. Klobuchar and Rockefeller intend to introduce legislation based on incomplete and misleading data. The truth is that complaints about wireless service to the FCC are infrequent and declining,” said Steve Largent, president of cellphone association CTIA. “The most recently published FCC data, which was absent from the senators’ announcement, clearly shows that contractrelated complaints, as well as overall wireless complaints, are falling.”
The trend, playing out at a time U.S. cellular subscribership is increasing, undercuts the case for more cellular industry regulation, Largent asserted.
The cellular industry’s top lobbyist also pointed out that Better Business Bureau data cited by the lawmakers is misleading because all categories of wireless complaints are lumped into a single category, in contrast to automobile consumer complaints. In the latter, complaints are broken out in 50 different auto-related categories. As a consequence, according to Largent, it is not accurate to state there are more cellphone complaints than auto complaints. Rather, he said, the auto industry has twice the number of complaints as the mobile-phone sector.
“Wireless consumers in America enjoy the most affordable service in the free world, enabling Americans of all walks of life to enjoy and take advantage of innovative, competitive mobile services. The Klobuchar- Rockefeller bill is unnecessary and, if enacted, threatens to increase the cost of wireless service and reduce the number of choices available to American consumers,” Largent stated.
Support for regulation
The National Association of Regulatory Utility Commissioners said the legislation is right on the mark.
“Both senators should be commended for recognizing the clear consumer benefits of having multiple cops on the beat and, importantly, a state consumer complaint option regarding their wireless service,” said NARUC Telecommunications Committee Chairman Tony Clark of North Dakota. “Leveraging state and federal enforcement efforts can only expedite resolution of constituent complaints and enhance industry compliance with any federal standards.”
Clark added: “The legislation also assures that states do not have to wait for completion of drawn-out federal rulemaking procedures before assisting consumers with new abuses. NARUC genuinely appreciates the effort the senators took to reach out to all stakeholders during the drafting process, and we look forward to continuing to work with them as this legislation moves forward.”
