WASHINGTON-At the same time the wireless industry was telling Congress and the Federal Communications Commission that it could not deploy enhanced 911 without liability protection, it was developing and implementing wireless arbitration rules designed to keep wireless carriers out of court.
Congress bought the industry’s argument and last fall passed legislation to give state-deregulated wireless carriers (and their 911 suppliers) limited liability protection equal to that enjoyed by state-regulated landline monopolies.
The liability provision was tucked into a bill touted by industry and lawmakers alike as a public-safety bill. The legislation, signed into law by President Clinton last October, also makes 911 the universal emergency mobile-phone telephone number.
It is unclear whether lawmakers were aware at the time that the 911 bill was in play on Capitol Hill that at least some carriers had liability protection by virtue of wireless arbitration rules, which kick in after a customer signs a contract containing an arbitration clause as a means of dispute resolution rather than going to court.
In addition to reducing legal exposure through industry-crafted arbitration and federal legislation, the mobile-phone industry is also trying to secure even broader liability protection in the courts.
The three-pronged approach-Congress, arbitration rules and the courts-was necessary because the arbitration rules, effective July 15, 1997, were voluntary and envisioned to handle commercial complaints rather than 911 service problems, said Michael Altschul, vice president and general counsel of the Cellular Telecommunications Industry Association.
“The arbitration program was a voluntary program, and not every one of our members was interested in it …,” Altschul said. “Second, the focus was really the commercial kind of disputes, not the liability caused by 911 calls … the arbitration program is something that works for new customers or customers who renew an existing service agreement and replace an old one with a new one. But it doesn’t cover both the non-customers that are required to access 911 by the FCC’s rules or customers that have a service agreement that hasn’t renewed and doesn’t have an arbitration agreement. You can’t impose an arbitration agreement and make it retroactive.”
The Wireless Industry Arbitration Rules are standard guidelines to be used to mediate disputes between carriers and their customers. They were developed by CTIA after some of its members suggested they would be useful. The arbitration rules were then blessed by the American Arbitration Association, which is the body that oversees arbitration.
“We went to the effort of getting the AAA’s stamp of approval. They have a lot of credibility. They have a process. They wouldn’t have approved them if they weren’t fair. We could have had one-sided rules and not gone through the AAA process,” Altschul said.
The Wireless Consumers Alliance-which strongly opposed last year’s 911 legislation and is currently awaiting a decision from the FCC on its petition to have the agency declare that 1993 amendments to the communications act do not pre-empt state courts from awarding monetary relief against commercial wireless carriers for consumer fraud, false advertising and other violations of state laws-expressed outrage that new customers would be required to go to arbitration rather than a trial by jury.
“How outrageous … I am not sure that you can be held to a guideline that was not provided at the time of signature,” said WCA President Carl Hilliard.
Hilliard also suggested that requiring customers to go to arbitration rather than a jury trial is a “conduct of adhesion,” which means the customer doesn’t have a choice if he or she wants to sign up for service with that carrier. He likened it to driving into a parking garage and being handed an agreement saying that you implicitly agree to just by parking your car, even though you were not aware of it before pulling into the lot.
Not all carriers have the arbitration clause in their contracts. For example, Tommie Morgan, general manager of Mobiletel Inc., said his contracts do not contain the clause.
“It is not part of the contract … we depend upon the success of the services to maintain” customers, Morgan said.
Indeed, Morgan said he believes that smaller carriers may be moving away from contracts due to industry competition. At least one large carrier-Sprint PCS-does not use contracts.
Indeed, without contracts, forced arbitration disappears.
If a consumer doesn’t want to go through arbitration using the wireless industry rules, the consumer could also go to the FCC. An FCC official said that even for complaints not related to actual regulatory actions, the FCC would try to act as a mediator between the carrier and the consumer.
It is hard to tell whether the switch to arbitration has been a good or bad thing for carriers. A random sampling of carriers that say their contracts include arbitration clauses found either no instances where the company has gone to arbitration or an unwillingness to say.
Mobile-phone firms oppose the WCA petition, arguing the 1993 statute pre-empts states from regulating entry and rates of commercial wireless carriers shields them from having to pay damages in state courts. Any monetary payment awarded by a state court, they say, would have to be passed on to subscribers in the form of higher service charges. Such a consequence, mobile-phone firms contend, would constitute rate-making in violation of the 1993 language.
Another legal argument the industry also uses to defend against consumer-fraud lawsuits is the “filed-rate doctrine,” which gives regulated landline monopolies limited liability.
Hilliard said the wireless industry is taking a tortured and overly liberal interpretation of the 1993 statue and filed-rate doctrine. He points out, among other things, that wireless firms-unlike wireline monopolies-are not regulated by the state. Precisely because of the competitive nature of the wireless industry, Hilliard believes strong state consumer laws are all the more important and relevant.
At least one state may be preparing to enact much stronger consumer rules. In California, where Hilliard is based, the California Public Utilities Commission has released for comment a staff proposal that would revise that state’s customer-protection rules and require wireless carriers to live by them.
“The Telecommunications Division staff recommends replacing consumer-protection rules specific to each class of [telecom] carrier with generic rules applicable to the entire regulated [telecom] market … (This) would help ensure that no provider has a cost advantage from not honoring fundamental consumer rights … have us apply the consumer-protection rules flowing from this proceeding to wireless providers,” said the CPUC document, dated Feb. 4.
In the meantime, some courts are buying industry’s argument. In fact, a major California case involving allegations of consumer fraud is on hold pending the FCC ruling on WCA’s petition.
WCA’s petition has the support of attorneys general from California, Wisconsin and Connecticut. Mobile phone companies oppose it. The FCC’s Wireless Telecommunications Bureau said a decision on the petition is expected sometime this spring.
Samples of customer contracts vary about how arbitration is invoked. Indeed, Altschul said that while CTIA developed the guidelines as an industry standard, there is no standardized invocation clause.
