FCC Sidesteps Regulation on Wireless Bill Shock

CTIA announced a phased-in launch of the notification. Carriers have agreed to offer customers at least two of four possible notifications for data, voice, messaging and international roaming overages by Oct. 17, 2012, and all four by April 17, 2013. Some carriers are already offering alerts on a voluntary basis.

"Moving forward, the FCC will take a trust but verify approach,” Genachowski said. “Because the wireless industry has taken these steps to help consumers avoid bill shock, we will put our pending rulemaking on hold. We will however be closely monitoring industry practices to make sure that all carriers provide this necessary information to consumers as promised, and if we see noncompliance we'll take action.” Genachowski reiterated in a brief news conference after the event: “We expect compliance. If there is no compliance we'll take appropriate action.”

The FCC, along with CU, will establish a Web portal providing information on the types of alerts provided by each carrier. “This portal will allow the FCC and the public to track whether carriers have complied with their obligations,” Genachowski said. “Let’s see carriers competing to see who can provide the best alerts, information, notification to consumers."

CTIA President Steve Largent said members already compete against each other on all aspects of service, from coverage and speed to customer service. “There are some things we agree on as an industry, not many, but some things,” he said. “There is a baseline framework for serving consumers that we think should be part of every provider’s wireless offering. That is why we adopted our CTIA consumer code and that is the reason we are here today.” CTIA members agreed to participate in the alerting program at a meeting last week in San Diego, Largent said.

Carriers need some time to make changes to their systems, so the time frame in the agreement is appropriate, Largent said. “Let’s just say it’s not easy to do,” he said. “It’s not simple to notify your customers in four different areas. … There are systems that have to be changed.” The FCC approved a bill shock notice of proposed rulemaking last year over the strong objections of Commissioner Robert McDowell and then-Commissioner Meredith Baker (CD Oct 15/10 p1). Carriers weighed in in strong opposition, but some consumer groups said the proposed rules didn’t go far enough (CD July 8/10 p1).

Genachowski’s embrace of voluntary guidelines was in keeping with an Obama administration directive against unnecessary regulation (CD Feb 7 p1). Questions have also emerged about whether the FCC’s authority to impose bill shock rules would face the same legal challenges pending against net neutrality and data roaming rules (CD July 5 p1). “Recognizing the directive from President [Barack] Obama to avoid unnecessary and costly regulation, the chairman and his team worked with the industry on these guidelines,” said Largent, a former Republican member of the House from Oklahoma.

CU’s magazine Consumer Reports has “consistently found in its surveys that consumers are experiencing bill shock,” said CU Policy Counsel Parul Desai. “We have long been pushing for reforms to crack down on this problem,” she said. “So today, we are encouraged that the wireless industry is offering to provide free alerts to help consumers with bill shock.” Desai encouraged carriers to start offering alerts “as soon as possible” and not wait for the 12-month deadline.

The FCC must remain “vigilant” that the agreement protects consumers, said Commissioner Michael Copps. “It does represent good progress,” he said. “Consumers have a right to know -- ahead of the monthly bill’s arrival -- if they risk high overage fees. So I credit CTIA for taking this important step to acknowledge the very real impact bill shock has on mobile consumers, and doing something about it. Industry efforts to address consumer issues are always welcome and I think these guidelines can help."

Sen. Amy Klobuchar, D-Minn., said she was pleased with the agreement. “Wireless consumers shouldn’t have to open their bills every month to find an endless array of complicated charges they never knew they were accruing,” she said. Free State Foundation President Randolph May said that the “voluntary plan by industry to offer free consumer alerts is preferable to the FCC going ahead with its rulemaking proceeding.” Reps. Greg Walden, R-Ore., and Lee Terry, R-Neb., the chairman and vice chairman of the House Communications Subcommittee, also applauded the agreement saying it would mean less regulation.

But other observers said voluntary guidelines don’t offer consumers the same protections as FCC rules. “In the wireless industry, where just a small handful of companies have their customers locked into years-long contracts with severe penalties for early termination, there is no incentive to ensure subscribers don’t receive monthly bills that exceed the monthly charges the customer expects and has contracted for,” said Free Press Political Adviser Joel Kelsey. “This is precisely why the FCC should establish rules, and not just adopt industry platitudes, that will protect consumers from excessive bills.” The European Union mandates that carriers alert their customers when they approach their voice, text and data limits, he said. “The FCC is charged by Congress to protect consumers and it should fulfill this mandate to write a rule that puts an end to outrageous monthly cellphone bills that rival the price of a new car.”

Over the past 20 years, “experiments in alternative regulation” have been a mixed bag, and the FCC must be ready to step in if a voluntary approach doesn’t work, said Mark Cooper, director of research at the Consumer Federation of America. “The danger is that the industry will see self-regulation as a way to avoid regulation -- drawing up weak rules behind closed doors."

Consumers are better off with the guidelines than without, said Public Knowledge Legal Director Harold Feld. “It is hard to escape the feeling that the FCC has retreated from its rulemaking proposal because, once again, its failure to classify either wireless broadband or text messaging as Title II services leaves it vulnerable to legal challenges,” he said. “While it is perhaps better for the FCC to settle for voluntary guidelines rather than risk litigation with uncertain authority under Title I, it would be better still to clarify the commission’s authority by properly classifying wireless broadband and text messaging as Title II.”