'Bill shock': Are voluntary warnings against extra wireless fees enough?

The wireless industry is being told by the FCC to curb 'bill shock' notifying consumers when they are about to be charged extra for going over monthly limits for voice, data, texting, and roaming.

By , Staff writer

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    iPhone fan Mitsuru Endo, right, and others try out Apple's latest iPhone 4 models at a Softbank store in the Harajuku district in Tokyo.
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The wireless industry is being told to notify consumers when they are about to be charged extra for going over monthly limits for voice, data, texting, and international roaming. But the new rule, issued by the Federal Communications Commission (FCC) Monday, is only voluntary – leaving the regulation toothless according to critics who say the industry is not policed enough to prevent consumers from unscrupulous billing practices.

The announcement temporarily halts a stiffer FCC proposal to prevent what consumer advocates term “bill shock” – or sudden increases resulting from unexpected overcharges.

Last year, the FCC released a survey that showed about 30 million wireless customers received bills that jumped unexpectedly from the previous month even though they made no changes to their voice, text or data plans. Over half said the increases were at least $50 and none received warnings. The agency also reported that it received over 764 complaints from consumers in the first six months of 2010 connected to unfair overcharging.

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The wireless industry however has long opposed federal regulation, saying that they already give customers several options to track their minute and data usage and that imposed rules would harm market growth. Instead, they advocate for more voluntary regulation, which they say is more effective in protecting consumers.

In a press conference with reporters Monday, FCC Chairman Julius Genachowski said last year’s mandatory notification regulation proposals were “put on hold” and he suggested that now they might not be necessary as the industry “understands there’s no upside” to non-compliance. Mr. Genachowski also said the FCC will launch a website that will track the variety of alerts each carrier provides to its consumers.

Similar legislation was proposed last year by New Mexico Sen. Tom Udall (D) that would require carriers to issue free alerts to consumers when they used up 80 percent of their monthly limits. The bill is pending in committee.

Steve Largent, president of the Cellular Telecommunications and Internet Association (CTIA), a Washington D.C. trade group representing the major wireless carriers, said the deal to make the guidelines voluntary represented “a perfect example of how government agencies and industries they regulate can work together.”

Monday’s announcement comes at a time when the wireless industry is moving away from unlimited plans to tier-based plans that charge according to the amount of minutes and data used. There are currently 328 million wireless subscribers in the US, according to the CTIA.

The voluntary nature of the new policy make some consumer advocates, like Joel Kelsey, a policy analyst at Free Press, a media reform advocacy group in Washington D.C., concerned that it protects the wireless companies more than consumers.

“It’s not regulation. There’s no accountability for the wireless industry,” Mr. Kelsey says. “When a consumer faces a $5,000 bill six months from now when the cameras aren’t watching, where do they go for relief based on this voluntary agreement?”

A key problem with the guidelines, says Kelsey, is that it doesn’t address “the systemic causes of the dynamics in the wireless industry that led to ‘bill shock’” and that is does not provide a “place for consumers to bring problems and seek relief” from hidden fees and unfair billing practices.

All four wireless carriers that control 90 percent of the market — AT&T, Verizon, Sprint, Nextel Corp. and T-Mobile USA — have agreed to follow the new guidelines. Also participating are US Cellular Corp. and Clearwire Corp.

The companies will immediately establish notifications of at least two of the four now required — voice, data, texting and international roaming. Notifications for all four will be required by April 17, 2013 and will apply to both wireless phone and tablet services.

Until Monday, subscribers were not notified of potential overuse unless they requested to be notified. The new guidelines provide all users of the alerts unless they opt out.

The White House praised the new policy, saying it will help protect consumers. “Our phones shouldn’t cost us more than the monthly rent or mortgage,” said President Obama in a statement.

Jared Newman, a technology writer for PCWorld.com and Time, described the new requirements as a “win-win” for both the industry and the FCC. The agency, like many under the Obama administration, has been under fire from business groups for proposing to expand government regulation in a troubled economy.

They new policy, Mr. Newman says, puts the burden more on the consumer to monitor the use of their phone. He compares criticism with the overcharges to the overdraft fees imposed by banks on debit purchases and A.T.M. transactions.

“You still have to monitor yourself. They’re just giving you better tools to stay on top of that. If you ignore those rules, you’re still subject to ‘bill shock’,” he says.

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