Problem: Consumers have little power to negotiate or shop around when choosing a wireless service plan. Wireless companies control the game, trapping customers with exorbitant and unjustified termination penalties, unexplained and obfuscating fees and long contracts filled with anti-consumer caveats and clauses. Consumers who want to use specific types of cell phones are forced to choose service providers that might not have the best quality of service in their area. And they are saddled with prohibitive fees should they want to change carriers.
Action Requested: Congress has held hearings and introduced legislation on issues that would improve the consumer wireless experience. The Federal Communications Commission (FCC) is also investigating expensive early termination fees (ETFs). Congress and the FCC need to move forward with legislation or regulations that curb wireless companies’ most unfair and anti-consumer practices.
Why It Matters:
Congress and the FCC need to act on a number of unfair practices that harm consumers including:
- Early Termination Fees. Wireless carriers have been using ETFs to limit consumer choice and punish subscribers in search of competition for years. A recent survey of Consumer Reports readers found 17 percent wanted to switch providers, but didn’t because of early termination fees. A recent FCC survey found that only 36 percent of cell phone customers who were familiar with their bills said that the service providers’ bills included “very clear” information on ETFs. Even when consumers knew they would incur a fee if they tried to terminate service, many did not know what the fee would be. Recent moves by Verizon Wireless and AT&T to raise ETF’s to over $300 for consumers who use smartphones has drawn new attention to the issue. Consumers Union believes awmakers and regulators should require wireless carriers to prorate ETFs over the term of a subscriber’s contract and link the fee to the cost of the phone itself.
- Handset Exclusivity. Handset exclusivity deals—the ubiquitous agreements between cell phone manufacturers and wireless carriers that limit certain phones to only one carrier—thwart competition, discourage innovation, and lead to higher prices. Of the ten most popular handsets on the market in 2008, eight were shackled to a single wireless service provider such as AT&T or Verizon through exclusive deals. These exclusivity deals should be eliminated and consumers should be able to choose phones and carriers independently of each other. Consumers Union is pushing to have these exclusivity agreements banned.
- Text Message Rates. Despite the relatively small amount of data contained in a text message, the costs of sending one have climbed steadily over the last decade. Six hundred text messages contain less data than one minute of a phone call; at the current standard of twenty cents per text, those six hundred text messages would cost $120 for the data equivalent of a one-minute call. More troubling is that wireless carriers have raised their text message rates within months of each other, eliminating consumers’ options for reasonably priced service plans. Consumers Union believes Congress and the FCC should investigate the price increases and make sure they reflect the real costs of text messaging services.
- Truth in Billing. Consumers can experience substantial confusion and frustration when choosing a wireless service provider and plan because providers are not required to supply fundamental information needed by consumers to make informed decisions. Consumers Union and other groups have urged the FCC to adopt protective and enforceable advertising and point-of-sale disclosure standards and truth-in-billing rules. The FCC has opened a rule-making to study ways to deal with “bill-shock”, which is what consumers experience when they receive a monthly bill hundreds or thousands of dollars more expensive than they expected. Any final rules should require that service providers clearly and consistently disclose charges for going over text, voice or data usage limits, and send updates to subscribers when they are approaching their limits.