WASHINGTON-The wireless industry is on the verge of arguably its biggest victory since congressionally mandated state deregulation in 1993: liability protection.
Congress is poised this fall to give wireless carriers liability protection on par with wireline carriers across the country.
In California state court, carriers have nearly succeeded in establishing legal precedent by convincing judges that monetary damages cannot be awarded against wireless firms because to do so would violate the federal ban on state rate regulation of commercial wireless carriers.
How did the industry pull off the coup? With a massive lobbying campaign the past two years and by cleverly couching legislation and legal arguments in public safety and rate regulation jargon.
Something else worked in the wireless industry’s favor as well: a pendulum swing against trial lawyers and the monstrous monetary awards they have won in recent years.
All told, the industry’s grand plan worked like a gem.
Secure within a bill to make 911 the universal wireless telephone number is a provision to shield wireless carriers and their suppliers from lawsuits. Congress is expected to pass the bill and send it to the White House for President Clinton’s signature before year’s end.
Not only will wireless carriers be exempt from lawsuits resulting from errant 911 calls-including dropped calls and calls never made because of no signal-but operators will be safe from most all non-emergency lawsuits as well.
Wireless carriers insist liability protection is needed before full-fledged emergency service (caller identification and position location) can be offered to consumers. Carriers also maintain they need liability protection to be competitive in local markets.
The Wireless Consumers Alliance, which is pressing the liability issue at the Federal Communications Commission, contends Congress and the courts have been hoodwinked by the industry.
Carl Hilliard, WCA’s president, questions how wireless carriers can use a rate-doctrine defense when mobile-phone operators are no longer subject to state rate regulation.
Legal immunity for monopoly landline telcos are included in tariffs. Wireless carriers, competitive and largely deregulated, do not file tariffs.
“Tariffs were part of the social contract negotiated on behalf of consumers,” said Hilliard. “The public utility commissions dictated the grade of service to be provided and required the installation of equipment to meet that level of service. The PUC also dictated the rate of return that the carrier would enjoy and the rates charged for individual services. The trade off was limitation of liability.”
In contrast, Hilliard said wireless liability protection provides no incentive for carriers to build towers in locations that may not be profitable, but that would enable a wireless caller to access a 911 emergency dispatcher.
In its quest to legally immunize itself against everything from dropped calls to rounding up to false advertising, the wireless industry has attracted the interest and ire of subscribers, consumer groups and state regulators.
Most recently, Public Citizen-the group founded by consumer activist Ralph Nader-has entered the scene to support WCA’s petition for a declaratory ruling that state courts are not precluded from awarding monetary relief against mobile-phone companies and other wireless carriers.
WCA’s July 16 petition is pending before the FCC.
In written comments, Public Citizen told the FCC the wireless industry reads 1993 pre-emption legislation “as a carte blanche to lie and deceive customers.”
The organization warned the FCC that failure to state that the telecom act does not pre-empt monetary damages in state claims “would have a pernicious effect: sweeping immunity from state lawsuits for monetary relief, regardless of the magnitude of the defendant’s misconduct or the severity of the consumer’s injury.”
WCA and others have challenged the wireless industry’s claim of liability immunity in California state court, but they have not fared well. The industry is winning in the courts and in Congress.
“State consumer fraud claims are intentionally preserved by the federal Communications Act, which intended to leave to the states the right to prevent the very practices plaintiff alleges here-fraudulent billing practices,” said attorneys for Erika Landin.
Landin sued Los Angeles Cellular Telephone Co. for being billed for dropped calls. L.A. Cellular is a partnership of AT&T Corp. and BellSouth Corp.
L.A. Cellular also has been taken to court in California by WCA and others for alleged false advertising.
In both cases, the judges have refused to award monetary damages on grounds it would violate federal pre-emption of state rate regulation of commercial wireless carriers.
Both cases are on hold, pending the FCC’s ruling on the WCA petition.
“The FCC does not need to provide a safe harbor for the fast-talking and fine-print business practices at issue here that leave consumers feeling they need an attorney present just to contract for wireless service,” said regulators from the state of Texas.
“Consumers feel safer in the knowledge that they have legal recourse for consumer law violations and this serves as a great incentive for providers not to engage in deceptive businesses practices,” said the Texas PUC.
The industry disagrees.
“In the competitive environment fostered by the commission, consumers dissatisfied with service from one carrier can `vote with their dollars’ and take business to another,” stated AT&T, BellSouth Corp. and AB Cellular Holding L.L.C., formerly known as L.A. Cellular.
The Cellular Telecommunications Industry Association argues that “a court could not award damages based on the quality or extent of a carrier’s coverage without adjudicating the reasonableness of the carrier’s rates, and any reward of damages would constitute retroactive modification of those rates or a refund for overcharging.”