WASHINGTON-T-Mobile USA Inc., with challenges aplenty as the smallest national cell-phone carrier, has unwittingly angered the nation’s top consumer group and publisher of an influential magazine that rates mobile-phone carriers.
In doing so, the Bellevue, Wash.-based wireless carrier helped renew criticism of a carrier business practice in a Federal Communications Commission proceeding that was plodding along with-until now-little fanfare.
The spat erupted in a FCC filing in which T-Mobile USA likened the wireless industry’s practice of imposing early-termination fees for premature cancellation of service contracts to Consumers Union’s discount on its online products rating service in relation to the length of the subscription term to Consumer Reports Online.
However, T-Mobile USA said there were differences, noting that while CU requires customers to fork over the entire subscription fee up front ($26 a year or $4.95 a month), wireless carriers permit customers to spread payments over the term of the contract or pay ETFs if they choose to cease paying monthly rates.
What drew the ire of Consumers Union was T-Mobile USA’s next assertion that once CU “has already collected its customer’s money, the customer remains `locked-in’ to CU’s service even if he finds a better deal (say, from Consumers’ Checkbook) before the term has expired.” T-Mobile USA said there is nothing wrong with that CU practice since the CU subscriber voluntarily chooses the fixed-term, upfront payment plan in exchange for lower rates.
“The same is true for wireless consumers, who overwhelmingly opt for term plans with ETFs in return for significantly discounted or free phones and flat-fee airtime pricing,” T-Mobile USA told the FCC.
In a Nov. 2 filing at the FCC, Consumers Union responded.
“T-Mobile’s description of CU’s subscription offers are simply inaccurate and the suggestion of any similarity between CUC product offers and T-Mobile offers are grossly misleading,” stated Consumers Union.
CU said it does not lock in consumers to any service arrangement and offers refunds if customers decide to cancel subscriptions. “Unlike the wireless carriers, CU does not penalize customers who no longer wish to avail themselves of our services and does not apply early termination fees,” said Consumers Union.
T-Mobile USA’s press office and attorneys in its government relations office did not respond to requests for comment. But on Nov. 10, T-Mobile USA was forced to supplement the record by apologizing and telling the FCC its characterization of CU subscription policy was wrong.
“As CU points out, in a previous ex parte, the undersigned counsel incorrectly stated CU does not permit cancellation of Consumer Reports Online … I apologize for any confusion this misunderstanding may have caused,” said Sara Leibman, a T-Mobile USA attorney with the law firm of Mintz, Levin, Con, Ferris, Glovsky and Popeo. Leibman went on to defend early-termination fees and no-refund policies as common practices in subscription-based services and to outline consumer safeguards T-Mobile USA has enacted.
Morgan Jindrich, director of the Strategic Resource Center at CU, could not be reached for comment.
The mobile-phone industry, faced with increased state and local regulation and taxation of wireless service, is lobbying Congress and the FCC to further shield mobile-phone carriers from non-federal regulations. The FCC, among other issues, is considering an industry request to declare that any state action on early-termination fees is pre-empted by a federal law banning rate regulation of mobile-phone carriers.
