My
name is Deirdre Cummings and I am the consumer program director with
the Massachusetts Public Interest Research Group. MASSPIRG is a
non-profit, non-partisan consumer and environmental advocacy
organization with over 50,000 members across the state. I am here today
to testify in favor of the Cell Phone Users’ Bill of Rights (HB 3331
and SB 1790) filed by Representative Steven Walsh and Senator Jarrett
Barrios among others.
Consumer
complaints about cell phone companies’ unfair billing practices are
skyrocketing, leading to calls for change from frustrated customers.
Complaints to the Federal Communications Commission (FCC), which
oversees the wireless industry, increased 92 percent –over the last two
years, far outpacing the 29% growth in subscribership during that same
period. Earlier this month, J.D.Power and Associates, a business
consulting firm, reported a 10% decline in overall consumer
satisfaction with wireless service providers, the biggest year to year
change since 1995.
The
problems consumers experience with wireless service have taken on
increasing importance as more consumers begin to use their cell phones
as substitutes for traditional landline phones. Unlike traditional
phone service, wireless service is largely unregulated. The FCC has
failed to enact even the most basic consumer protection regulations,
instead relying almost exclusively on competition and market forces to
protect wireless subscribers. Unfortunately, competitive pressures
alone are inadequate for ensuring that consumers are treated fairly in
the wireless marketplace.
Adding
fuel to the fire is the massive consolidation in the wireless industry.
In the beginning of 2004, the industry giants included AT&T,
Nextel, Sprint, Cingular, Verizon and T-Mobile. In October 2004,
Cingular acquired AT&T, leaving five companies controlling roughly
80% of U.S. cell phone industry revenues. The most recent merger
between Nextel and Sprint, approved in August, 2005 leaves only four
companies controlling more than four-fifths of the market for cell
phones in this country.
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.
Recently,
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, which is applied to more than nine out of
every ten cell phones, is commonly known as “early termination fees.”
For a detailed analysis of the consumer impact of the ETF fee I have
attached our August 2005 report, Locked In A Cell: How Cell Phone Early
Termination Fees Hurt Consumers.”
In survey after survey,
cell phone subscribers reveal chronic dissatisfaction with the wireless
industry. Consumers report difficulty comparing cell phone plans
because information on terms, pricing and service is not presented in a
uniform manner. Carriers often fail to clearly disclose the true cost
of their plans, adding on various surcharges to consumers' bills.
Consumers also cannot adequately judge the quality of the cellular
service in their area before choosing a plan. Moreover, consumers who
are fed up with their carriers' billing errors and poor coverage are
often locked into long-term contracts with hefty early termination
fees.
The dissatisfaction is outlined in our March 2005 report: “Can You Hear
Us Now” http://masspirg.org/MA.asp?id2=16135. The report included a
survey of 874 Massachusetts cell phone customers and found that 42% of
consumers reported having a billing problem with their provider and 68%
reported dropped calls and other quality problems.
Among
the industry shortcomings highlighted in our report and reported to us
by consumers include the widespread use of vague, misleading and
confusing rate plans and contract terms, 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.
The
rising swell of customer dissatisfaction with the cell phone industry
demonstrates a need for basic, common-sense consumer protections. While
the FCC has 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 Jarrett Barrios (Cambridge) and Representative
Steven Walsh (Lynn) have filed the Cell Phone Users’ Bill of Rights (SB
1790 and HD 3331). The cell phone users’ bill of rights 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.
Over
100 consumers have sent us their complaints and problems with their
cell phone providers. I am enclosing a number of them with my testimony
today to help give you a better understanding of need for these basic
reforms.
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.
