FCC chair takes on cell phone 'bill shock' and early termination fees
The chairman of the Federal Communications Commission on Wednesday pledged his agency would work to prevent cell phone "bill shock" and try to make practices such as early cancellation penalties more transparent and easy to understand.
In a speech at the Center for American Progress, FCC Chairman Julius Genachowski didn’t offer many details on how he would step up consumer protection of cell phone early termination fees (ETF). He said ETFs are reasonable in some cases to offset the costs of phone subsidies. But he said those fees --which consumer advocates say prevent competition by locking consumers into long-term contracts -- are too confusing.
"There’s no reason we shouldn’t have clear and simple disclosure around ETFs," Genachowski said. "We’re looking at this issue with the same basic view of harnessing technology to empower consumers with information in order to make the market work."
Genachowski also said that rules to prevent bill shock would also spur business.
“Fighting for consumers is not only the right thing to do, it’s also the smart thing to do for our economy,” Genachowski said in the speech. “The more consumers know, the more likely it is that the company offering the best product, or service, or price will come out on top – driving competition, which drives innovation, resulting in better and more useful products for the American people. The FCC’s Consumer Empowerment Agenda is all about driving dynamic, free markets.”
Genachowski has tried to strike a difficult balance as regulator and business advocate.
Public interest groups said they support the FCC’s proposed “bill shock” policy that would require cell phone carriers to warn users through text and voice alerts when a subscriber is getting close to voice, data and text limits. The idea is to avoid overage charges and roaming fees that amount to surprisingly high monthly bills. But they said the bigger question is whether the FCC will enforce similar protection for broadband subscribers.
“This is important but not the most important issue out there,” said Matt Wood, a policy advisor at The Media Access Project. “Until the question about authority is resolved, those bigger questions won’t be resolved.”
In a detailed analysis of its own study on bill shock, the FCC found that two-thirds of complaints the agency received are for disputes between subscribers and carriers for amounts of hundreds of dollars and more. Genachowski said 20 percent of those complaints involve bills for thousands of dollars or more. The FCC said 30 million U.S. cell phone users have experienced bill shock -- about one in every six subscriber.
“That’s a big hit for budget-conscious consumers, especially in this time of economic distress,” Genachowski said. “And even smaller unexpected charges can pose real problems for consumers on fixed incomes.”
CTIA, the trade group representing the wireless industry, has lobbied against bill shock rules. The group says all wireless providers offer ways for users to check on how many minutes they have used and how much data they’ve consumed. And they say the growth in mobile subscribers and the FCC’s only surveys show increased satisfaction among subscribers.
"We agree with the FCC that the goal is to keep all customers happy, but we are concerned that prescriptive and costly rules that limit the creative offerings and competitive nature of the industry may threaten to offset these positive trends,” said Chris Guttman-McCabe, vice president of regulatory affairs for CTIA.
Last week, Verizon Wireless revealed 15 million of its customers were inaccurately billed small amounts of between $2 to $6 for false data charges. Those small amounts totaled about $50 million in erroneous data charges.
The FCC has said it is investigating Verizon and other mobile carriers for such complaints.
“While I can’t comment on the specifics of an ongoing investigation, I can say that our staff is working overtime to get to the bottom of this matter and investigate other complaints as well,” Genachowski said in his speech.
| October 13, 2010; 1:55 PM ET
Categories: Early Termination Fees
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