FCC bill shock proposal exposes carriers to greater legal woes, analyst says
The biggest risk facing wireless carriers on the Federal Communications Commission's bill shock proposal is not so much the proposal itself but that it could open the companies up to consumer lawsuits, according to investment analyst Jeffrey Silva of Medley Global Advisors.
As seen with previous episodes when lawmakers or the FCC focus on consumer issues, the FCC's bill shock push could awaken "a new business opportunity in the wireless litigation space," Silva wrote in a research note.
A good example of this: In September 2008, Sen. Herb Kohl (D-Wis.), chairman of Senate Judiciary's antitrust subcommittee, held hearings on text message price increases. The greater attention to text message increases led to dozens of class action suits filed against the four national wireless carriers, costing the industry for legal fees and damaged reputations.
Silva estimates the wireless industry has spent more than $100 million on lobbying, legal fees and court settlement related to consumer policies. Verizon in 2008 reached a $21 million settlement for a class action suit against its use of early termination fees. In January 2010, AT&T reached an $18 million class action settlement on early termination fees and Sprint Nextel also settled an ETF class action suit about the same time.
The wireless industry has warned the Federal Communications Commission to proceed carefully with new rules that would help consumers avoid bill shock, but it says it is willing to work with the agency.
| October 14, 2010; 1:47 PM ET
Categories: AT&T, Apple, Consumers, FCC, Sprint Nextel, T-Mobile, Verizon
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