Can You Hear Us Now? A Report on How the Cell

03/01/2005

Executive Summary

Consumers increasingly rely on cell phone service to meet their basic communication needs. The use of wireless communications has skyrocketed over the past few years, jumping from approximately 24 million subscribers in 1994 to an estimated 170 million today. Along with the growth in the industry has
come an increase in consumer complaints. In fact, complaints to the Federal Communications Commission (FCC), the agency charged with overseeing competition in the wireless industry,
increased almost 40 percent between 2002 and 2003, significantly outpacing the 13 percent growth in subscribers during that time period.

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.

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.

In the summer of 2004, MASSPIRG surveyed 874 of its members to gauge Bay State consumers’ satisfaction with their
cell phone service. This survey reveals that cell phone companies are not providing Massachusetts customers with the level of service quality that subscribers expect. Specifically:

• Only 57 percent of respondents were
mostly or very satisfied with their
cell phone service, with fewer than
15 percent rating themselves as very
satisfied;
• More than 42 percent said they had
experienced a billing problem with
their provider during their contract;
and
• More than 68 percent of respondents
reported having problems with the
quality of cell phone service, including
dropped calls, lack of coverage,
and poor sound quality.
To make matters worse, recent mergers
within the industry threaten to reduce
competitive pressures on carriers to offer
better deals and service. Fewer carriers
competing for consumers’ business
will likely translate into higher prices and
lower quality service for cell phone subscribers.
The rising swell of customer dissatisfaction
with the cell phone industry demonstrates
a need for additional consumer
protections. While the FCC has taken a
“hands-off” approach to wireless regulation,
states can play an important role in
establishing a set of basic service quality
and customer service standards. States
should provide cell phone users with a bill
of rights that includes the following provisions:
• All wireless contracts and marketing
materials should clearly spell out the
terms of the contract in an easy-toread,
standardized format. The
disclosures should be made available
and accessible to consumers comparing
prices and services among competing
carriers.
• Cell phone bills should be clearly
organized. Consumers should be able
to dispute billing errors through the
state utility commission. Providers
should not treat the disputed portion
of the bill as late or terminate the
contract for non-payment if a complaint
is pending with the state.
• The state utility commission should
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.
• Consumers should have a risk-free
trial period during which they can
cancel any new service contract
without penalty. This trial period
would give consumers time to
evaluate whether the cell phone
service works where and how it was
promised. Consumers should have
30 days to cancel a contract after
receiving the first bill so that they
may verify representations regarding
the cost of service.
• Contracts should be for no longer
than one year, with an option for
renewal.
• Carriers should obtain customers’
express permission prior to making
cell phone numbers public. They
should not charge a fee for keeping
the number private.