Consumer watchdog: the FCC's proposed rulemaking to help consumers avoid bill shock.

• Author: Robinson, Cameron

1. INTRODUCTION II. UNEXPECTED CHARGES AND THE NEED FOR CHANGE A. Specific Examples of Bill Shock B. European Union Legislation on Wireless Billing Practices C. Industry and Consumer Response to the FCC's Notice of Inquiry III. PROPOSED RULEMAKING: EMPOWERING CONSUMERS IV. INDUSTRY RESPONSE TO THE PROPOSED RULES V. CONSUMERS SPEAK OUT VI. ARGUMENT IN FAVOR OF THE PROPOSED RULEMAKING A. Similar Systems Currently in Operation B. Lack of Tools Currently Available to Consumers C. Arguments by the Wireless Industry Attempt to Preserve a Lucrative Business Model Based on Taking Advantage of Consumers VII. CONCLUSION I. INTRODUCTION

   Kerfye Pierre, a Maryland resident, was in Haiti visiting her sister when a massive earthquake struck and caused chaos in the small Caribbean country. (1) In the aftermath of the devastating earthquake, wireless communication became an integral part of contacting emergency crews and loved ones. Pierre had suspended her cell phone service before going on the trip, but due to the disaster she contacted her mobile service provider, T-Mobile, and asked if there was a way she could use her phone at a reasonable cost in order to have contact with family back home and assure them of her safety. (2) The representative from T-Mobile told Pierre of a courtesy plan that would allow her to use her phone to communicate with her family back home; however, Pierre did not realize and was not thoroughly informed that this plan included only voice minutes, not data and texting. (3) Due to the devastation from the earthquake, the cellular voice network was unreliable, forcing Pierre to use texts, email, and Facebook to communicate with the outside world. (4) Luckily, these systems worked and she was able to contact her family and assure them of her safety. Upon returning to Maryland, the joy of being united with her family was short-lived when Pierre opened a wireless bill from T-Mobile and was shocked to find her bill had skyrocketed from a normally low amount to a huge sum: $30,000. (5) After contacting T-Mobile and pleading with them to waive the charges due to her extenuating circumstances, she was able to get a $25,000 credit added to her account; however, Pierre still owes T-Mobile $5,000 for her overage charges. (6) As one can imagine, this scenario would come as quite a shock to any consumer and could lead to severe consequences for many households. The situation involving abnormally large wireless bills has come to the attention of the Chairman of the FCC, Julius Genachowski, who stated, "[s]omething is clearly wrong with a system that makes it possible for consumers to run up big bills without knowing it." (7) Apparently, Genachowski is not the only one who feels this way, and that is why the FCC has decided to tackle the problem now known as "bill shock."

   This Note discusses the proposed regulation by the FCC and both industry and consumer reaction to the issue of bill shock. In Part II, this Note will discuss the background of bill shock and the Notice of Inquiry released by the FCC. Part II, Subsection A will discuss the background of bill shock and will highlight certain extreme examples of bill shock to show the damage it can produce. Next, a discussion of the current system in place in the European Union ("EU") will be covered in Part II, Subsection B. Part III of this Note will discuss the proposed rulemaking by the FCC titled: "Empowering Consumers to Avoid Bill Shock." In Part IV, this Note will highlight the industry response from mobile phone providers and will review the arguments from CTIA-The Wireless Association ("CTIA") in favor of the current system. Part V will discuss the reaction from consumer groups and major media outlets to the proposed rulemaking, including some groups' arguments that the proposed rulemaking does not go far enough for consumer protection. Lastly, Part VI of this Note will argue in favor of the proposed rulemaking by the FCC. It will argue that the proposed rulemaking supplies consumers with the protection needed to ensure that unwanted overage charges are avoided. This Note will also argue that the wireless industry is attempting to tarnish the study by the FCC by proposing counterintuitive arguments for the current system in order to retain the lucrative method of operation that takes advantage of consumers' ignorance.

2. UNEXPECTED CHARGES AND THE NEED FOR CHANGE

   In August 2009, the FCC released a Notice of Inquiry seeking comments on the Truth-in-Billing Principles in Section 64.2401 of the FCC's Rules. Much of the focus was on the subject of how the cellular communication industry can better alert consumers of extra charges they may be incurring without knowing it. (8) The FCC reported that "[c]onsumer complaints at the FCC relating to billing and rates for wireless services increased from 8,822 in 2006 to 10,930 in 2008, an increase of approximately 24 percent, while the number of wireless subscribers during the same period increased by 16 percent." (9) The comments filed in response to the Notice of Inquiry found that state and consumer representatives feel that, due to a lack of clear understanding of the information given to them, many consumers are overpaying for mobile communication or paying for services they do not need. (10) The FCC concluded, the government has a substantial interest in ensuring that consumers are able to make intelligent and well-informed commercial decisions in an increasingly competitive marketplace." (11)

   1. Specific Examples of Bill Shock

      In May 2010, the FCC launched an initiative to help save consumers from the effects of "bill shock," a phrase the FCC coined to explain the experience when a consumer receives a wireless phone bill that is unexpectedly high. (12) Examples that the FCC gave of bill shock charges range from the moderate to the outrageous* One example involved a man who watched an NFL football game on his computer via his mobile broadband card while he was onboard a cruise ship docked at a port in the United States. (13) This consumer was under the belief that because he was docked in the United States, he would not be charged any roaming fees for accessing the Internet via his broadband Internet card. (14) Unfortunately, this passenger's dismay, the card did not connect to the local AT&T tower, but rather to the ship's microcell tower, which caused his bill to reach an astounding $28,067.31. (15) While this excessive bill was eventually resolved, it was only after the passenger contacted the Chicago Sun-Times with his story. (16) Another example involves a T-Mobile consumer who was visiting Belize. (17) This consumer's phone bill was approximately $2,600 after a thief stole her phone and ran up charges for international calls and data usage. (18) The woman called T-Mobile after the incident and was told that she was responsible for the charges; this situation was also resolved, but only after the New York Times contacted the mobile provider on the woman's behalf. (19) Both of these wireless consumers were lucky that they were able to gain the interest of large newspapers that aided them in getting the charges waived; however, most consumers do not have this luxury. While many of the complaints received by the FCC were not as outrageous as those described above (47 percent of complaints filed with the FCC were between $100 and $999), (20) some of the bills were more expensive than most automobiles, including the largest bill complained of, which topped out at the shocking amount of $68,505. (21)

   2. European Union Legislation on Wireless Billing Practices

      The FCC has looked at many different possible solutions for ways to notify consumers of possible bill increases. The FCC believes that the rules currently in place in the EU provide a good system to emulate when modeling possible legislation for the United States. The EU Consumer Alert Laws, passed in 2007 and amended in 2009, ensure that mobile communication providers notify consumers about their bills and possible increases. (22) Due to the ease of entering an international calling area in Europe, bill shock in the EU has become a serious issue for wireless consumers. (23) Article 6 of the new law passed by the European Parliament states:

      [E]ach home provider shall, except when the customer has notified his home provider that he does not require this service, provide the customer, automatically by means of a Message Service, without undue delay and free of charge, when he enters a Member State other than that of his home network, with basic personalised pricing information on the roaming charges.... (24) Article 6 also gives consumers further rights upon request, such as the rights set forth in Article 6, Paragraph 2:

      In addition to paragraph 1, customers shall have the right to request and receive, free of charge, and irrespective of their location within the Community, more detailed personalised pricing information on the roaming charges that apply in the visited network to voice calls, SMS, MMS and other data communication services, and information on the transparency measures applicable by virtue of this Regulation, by means of a mobile voice call or by SMS. Such a request shall be to a free-of-charge number designated for this purpose by the home provider. (25) In 2009, the EU added Article 6a, which provides other safeguards that allow consumers to better understand the billing structure of his or her wireless plan. For example, Article 6a, Paragraph 1, ensures that consumers are well-informed by requiring ongoing reminders from mobile service providers about the risk of roaming charges as well as explaining to consumers how to control the phone's automatic roaming settings. (26) According to many commenters, the EU system is a great example of the type of system that should be implemented in the United States. Joel Gurin, Chief of the Consumer and Governmental Affairs Bureau, acclaimed the system set forth in the EU and believes it is...