WASHINGTON-Mobile-phone carriers last week stepped up their campaign to have the Federal Communications Commission make early-termination fees off limits to states, a huge issue that has taken on greater significance in light of industry’s failure to secure expanded federal pre-emption in telecom reform legislation and legal setbacks in court.
On behalf of industry, former FCC commissioner Harold Furchtgott-Roth submitted an economic analysis to the FCC warning that consumers would be harmed by government restrictions on early-termination fees. ETFs are fees-typically $150 to $200-charged to consumers who break one- or two-year service contracts with mobile-phone operators.
“Consumers have benefited from the absence of price regulation of wireless services. Restrictions on the rate structure of wireless services, including ETFs, have few if any identifiable consumer benefits, but would impose substantial costs on consumers,” said Furchtgott-Roth.
CTIA last year asked the FCC to declare early-termination fees part of mobile-phone carriers’ rate structures, an interpretation that effectively could pre-empt states from regulating ETFs and preclude plaintiffs from filing ETF lawsuits against service providers.
Congress in 1993 pre-empted states from regulating wireless rates and market entry, but left to states oversight of “other terms and conditions” of commercial wireless service.
The FCC did not return calls on the status of the proceeding. However, it appears the agency is not ready to rule on the issue.
“Without considering any legal reasons for the commission to adopt a specific position in this docket, there are no compelling economic or consumer reasons to reinforce or expand government limitations on the rate structure of ETFs for wireless services. Indeed, the opposite holds: Limitations on the rate structure of wireless service contracts, including ETFs, clearly harm consumers,” Furchtgott-Roth stated.
The question of ETF jurisdiction is a replay of sorts of the pre-emption fight at the FCC between cellular carriers and the Wireless Consumers Alliance six years ago. At that time, WCA had sought a declaratory ruling in connection with a lawsuit against a California mobile-phone carrier. In a 2000 decision, the FCC ruled the 1993 law does not generally pre-empt the award in monetary damages by state courts based on state consumer, tort or contract claims.
It is the mobile-phone industry’s turn now, as carriers try to get relief from the FCC on a major wireless consumer issue that’s not going industry’s way in the states or in the courts.
The Superior Court of California in Alameda recently granted initial class-action status in an ETF lawsuit against Verizon Wireless and Sprint Nextel Corp. A case management conference is set for June 12 to discuss whether class notice should be required; the content and distribution of class notice; the scope of the classes; payment of the cost of the class notice; whether additional discovery is necessary to prepare for trial; and other matters.
Last week, the U.S. Supreme Court turned down Cingular Wireless L.L.C.’s petition to review a California Supreme Court decision limiting the enforcement of arbitration agreements and thereby allowing class-actions lawsuits-including those challenging ETFs-to move forward in court.
“We regret that the Supreme Court has decided not to hear our appeal, which involves certain legal issues concerning the use of arbitration provisions by businesses that serve California consumers. We would note, however, that this is not a decision on the merits of the case,” said a Cingular representative.
“Arbitration is typically a fast, cost-effective, and pro-consumer way to address disputes,” added the spokesman. “Moreover, Cingular’s arbitration agreement is among the most consumer-friendly in the nation. For example, Cingular will pay the entire cost of arbitration. The arbitration occurs in the consumer’s city and the consumer is entitled to attorneys’ fees if awarded the amount of the claim. Consumers nonetheless also have the option of going to small claims court, if they like. In short, we are confident that our approach is both fair and in the best interest of our customers.”
Meantime, the Wireless Consumers Alliance told the FCC its 2000 ruling is still relevant.
“The commission must resist efforts by CTIA and its member carriers to lure it across the Rubicon,” WCA told the FCC in late April. “To cross that river, the FCC would have to abruptly reverse its own well-reasoned opinions in [the 2000 WCA decision] and other cases, flout the overwhelming authority of federal and state courts throughout the country and interfere with contract and consumer-protection principles that have been enshrined in the laws of the 50 states for centuries.”
A truth-in-billing case awaiting a ruling by the 11th U.S. Circuit Court of Appeals challenges an FCC decision that state regulations either requiring or prohibiting the use of line items on mobile-phone bills constitute rate regulation and therefore are pre-empted.
States also are grappling with ETFs, with a New York State Assembly committee last week passing a consumer-protection bill allowing subscribers to cancel their contracts without penalty after receiving their first bill. AARP, a leading supporter of the measure, said the bill would be the strongest of its kind in the nation if passed by the legislature.
