Testimony in Favor of Cell Phone Users’ Bill of Rights (SB 1692)

Cell Phone Users’ Bill of Rights (SB 1692)
Chairmen Benjamin Downing and John Keenan and members of the Joint Committee on Telecommunications, Energy and Utilities

My name is Deirdre Cummings and I am the legislative director with the Massachusetts Public Interest Research Group.  MASSPIRG is a non-profit, non-partisan member supported consumer advocacy organization.  Please accept this testimony today in favor of the Cell Phone Users’ Bill of Rights (SB 1692) filed by Senator Karen Spilka among others.

In a report released in March by the Federal Trade Commission (FTC), consumer complaints about “telephone and mobil services” ranked number 9, generating 37,000 complaints to the FTC in 2010.

A 2010 Federal Communications Commission (FCC) survey  found that 30 million Americans – or one in six wireless phone users – have experienced a sharp and sudden increase in their monthly bill not caused by a change in their service plan. The survey found 83 percent of adults have a cell phone and that 80 percent have a personal cell phone—one for which their employer does not pay the bill.

While it also found that 58 percent of cell phone users are very satisfied with the number of places they can get a good wireless signal, this means that about a third of cell phone users were not very satisfied with their signals. Among the other findings on bill shock:

• 84 percent said their mobile carrier did not contact them when they were about to exceed their allowed minutes, text messages, or data downloads.

• 88 percent said their carrier did not contact them after their bill suddenly increased.

The amount of bill shock varies widely but is often sizeable. In the survey, more than a third of people who experienced bill shock said their bills jumped by at least $50, and 23 percent said the increase was $100 or more.

Among the other finding on early termination fees (ETFs):

• 54 percent said they would have to pay an ETF should they terminate their contracts before the expiration date, and 18 percent didn’t know whether they would have to pay or not.

• Of those who are subject to an ETF, 43 percent said it was $150 or more, but 47 percent didn’t know how much it was.

• Only 36 percent of cell phone customers who are familiar with their bills said that they include “very clear” information on ETFs.

Adding fuel to the fire is the massive consolidation in the wireless industry with just four and soon maybe 3 companies (AT&T Wireless, Verizon Wireless, Sprint Nextel and T-Mobile) carrying over 80% of all US cell phones. 

History teaches us that such a high level of concentration in a major industry can be accompanied by excessive market power, which in turn can reduce competition to the detriment of consumers and overall efficiency in the U.S. economy. The cell phone industry is no exception. Cell phone companies have engaged in numerous highly questionable practices designed to reduce the level of competition in the industry and undermine consumers’ ability to choose.

Historically for example, they fought, and fortunately lost the battle, to prevent cell phone number portability, which would allow consumers to keep their old cell phone numbers when they transfer to a new company. They also “lock down” consumers’ handsets with special software, which forces customers to buy a new phone, rather than simply change “SIMM” chips, if they want to switch carriers.

Another anti-competitive practice is known as “early termination fees” (ETF).  High fees for terminating contracts prevents consumers from shopping around and using the “market” to indicate consumer acceptance or failure of the product/service.  For a detailed analysis of the consumer impact of the ETF fee see our August 2005 report, Locked In A Cell: How Cell Phone Early Termination Fees Hurt Consumers” on our website, www.masspirg.org.

Customer dissatisfaction with the cell phone industry demonstrates a need for basic, common-sense consumer protections. While the FCC has generally taken a “hands-off” approach to wireless regulation, states, including Massachusetts, can play an important role in establishing a set of basic service quality and customer service standards.  Senator Karen Spilka (Ashland) has filed the Cell Phone Users’ Bill of Rights (SB 1692), which includes the following consumer provisions:

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.

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.

In addition, MASSPIRG would support including a provision now being considered by the FCC to requiring wireless providers to notify customers before and when they reach their monthly limits for voice, text, and data services. Customers would get a notice, such as a voice or text message, when they approach their limits.

For too long, consumers have been getting blindsided by surprise charges on their cellphone bills. Wireless companies are not providing adequate, uniform tools for people to keep up with their accounts. Notifying customers before they exceed their limits is a simple, effective way to prevent ‘bill shock.’”

I hope you will pass this bill favorably from your committee. Thank you for your time and consideration, and as always, look forward to working with you on these important issues.