Lawmakers Consider Consumer Protections on Cell Phone Billing

Consumer groups, consumers and lawmakers urged members of the Joint Committee on Telecommunications, Utilities and Energy to support consumer protections for cell phone customers at a public hearing Tuesday at the Massachusetts State House. The bill -- The Cell Phone Users’ Bill of Rights (SB 1982, HB 3389) -- was filed jointly by Representative Steve Walsh (Lynn) and Senator Karen Spilka (Ashland).

Consumer complaints about cell phone companies’ unfair billing practices and poor quality are leading to calls for change from frustrated customers. Complaints to the Federal Communications Commission (FCC), which oversees the wireless industry, continues to receive over 25,000 consumer complaints a year for the last 3 years. In a 2006 survey, Consumer Reports found that cell service still leaves a lot to be desired. As a group, cellular carriers scored only 66 on a scale of 0-100 for overall satisfaction (100 being the best), worse than most other services they survey – in line with cable TV and computer tech support.

“They [cell companies] act like they can charge customers whatever they want, whenever they want, even improperly, and not be held accountable,” complained Michelle Chisholm, of Norfolk, a former Nextel customer who switched to Sprint before the two companies merged, who complained about her service to MASSPIRG, the District Attorney, and the Attorney General.

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“What I went through is clearly bad business practice and should be illegal,” said Chisholm, “First, without notice, my 2 year cell phone contract was extended without permission; I was continuously charged erroneous fees which after agreeing it was an error could not stop it, and resulted in my account being turned over to a collection agency – for money I did not owe.”

“I've never met anyone who hasn't had a problem with their cell phone,” stated Senator Karen Spilka, Senate sponsor of the Cell Phone Users’ Bill of Rights.  “From bad customer service to billing issues, consumers continue to complain about their wireless service.”

“This bill would create a very basic consumer bill of rights,” Spilka continued.  “Nothing in it in any way hampers competition.  In fact, the practices the cell phone companies use currently are actually anti-competitive.  By allowing consumers to have shorter contracts and extended trial periods, the Cell Phone Users’ Bill of Rights gives them more power to force companies to respond to their complaints.  Otherwise, consumers can just switch.”

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“The home phone has been replaced by the cell phone for many Massachusetts households as their only means of communication. Can you imagine how annoyed you would be if your home phone continuously disconnected while talking to family and friends, some on long distance?” asked Representative Steven Walsh, House sponsor of the bill, “We have the responsibility of regulating the cell phone industry, like we do for many other consumer products and services, to guarantee that Massachusetts residents are being treated fairly.”

MASSPIRG presented the committee with 60 stories of Massachusetts consumers who’ve experienced problems with their cell phone companies.

Nearly half (47%) of all cell phone customers would switch or consider switching cell phone service carriers to get a lower rate and better service if they didn’t have to pay an average penalty of $170 to cancel their service contract, according to a MASSPIRG report, “Locked in a Cell: How Cell Phone Early Termination Fees Hurt Consumers.”

Overall dissatisfaction was earlier confirmed in a March 2005, MASSPIRG report: “Can You Hear Us Now”. The survey of 874 Massachusetts cell phone customers found that 42% of consumers reported having a billing problem with their provider and 68% reported dropped calls and other quality problems.

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Among the industry shortcomings reported by consumers were the widespread use of vague and misleading marketing, poor billing practices, a lack of customer service and the aggressive use of extended contract periods and high termination fees designed to tie consumers down and make it difficult to drop or change providers.

Adding fuel to the fire is the consolidation of the cellular phone industry. Just three years ago, consumers could choose among six major cell phone companies. Today, four cell companies control 80% of the US market.

“While there is fierce competition among the carriers that do exist, it is not having a meaningful impact on consumer satisfaction. Consumer Reports, the Better Business Bureau, the FCC and our surveys find that a significant number of consumers are not satisfied with their cell phone service. A major factor contributing to such poor performance are the punitive fees (termination fees) designed to prevent consumers from exercising their clout in the market place and switching providers when they are not satisfied, ” said Deirdre Cummings, Legislative Director for MASSPIRG.

“A 30 day window to decide to stick with a cell phone contract would be a great benefit for consumers and a maximum of a 12 month contract would be a significant improvement. Consumers' communication needs and habits change so a shorter locked-in period is a positive benefit to consumers,” testified Paul Schlaver, Chair of the Massachusetts Consumers' Coalition.

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The Act to Establish a Cell Phone Users’ Bill Of Rights was heard today at a public hearing before the Telecom, Energy and Utilities Committee at the State House.

The bill includes the following consumer protections:

Better disclosure:

• All wireless contracts and marketing materials must clearly spell out the terms of the contract in an easy-to-read, standardized format so consumers can compare costs. The disclosures must be made available and accessible to consumers comparing prices and services.
• All providers must provide consumers with coverage maps that are as accurate as current technology would allow. These maps must be available on the provider's Internet site as well.

Billing:

• Cell phone bills must be clearly organized. All mandated government taxes, surcharges and fees required to be collected from consumers and to be remitted to federal, state, or local governments would be listed in a separate section of the bill and clearly itemized. This section of the bill may not include any charges for which the carrier is not required to remit to the government.
• Roaming calls must be itemized on the bill within 60 days of the call, and identify the date and location of the call.
• Charges from theft that arise after reported to the carrier may not be charged to the consumer as long as the consumer promptly reported the theft to the service provider.
• Consumers will be able to file billing disputes with the state utility commission and providers should not treat the disputed portion of the bill as late or terminate the contract or service for non-payment if the billing dispute complaint is pending with the state.

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Service Quality:

• The DTE (Department of Telecommunications and Energy) would monitor service quality. Data should be collected and made publicly available so consumers can compare signal strength, dropped call counts and dead zones across carriers.

Service Contracts:

• Consumers would have a trial period during which a customer can cancel any new service contract without having to pay the hefty contract termination fee ($175-300). This gives consumer time to see whether the phone works where and how it was promised. Consumers would have 30 days to cancel after having received their first bill.
• Carriers can not extend a customer's contract without obtaining a customer's written permission. Currently, many consumers do not realize that they are extending their contracts by upgrading their phones or by increasing or decreasing the minutes in their plans.
• No contract for wireless telephone service can be longer than twelve months.
• Any material changes that the carrier makes to the contract must be provided to customers in advance, and customers would have a 30 day opportunity to terminate the contract without penalty and to receive a pro-rated refund of the charges they paid for purchasing a phone for the carrier's network.

Consumer Privacy:

• Carriers must obtain customers express permission prior to making cell phone numbers public. They may not charge a fee for keeping the number private.