WASHINGTON-Cingular Wireless L.L.C. is negotiating with the California Public Service Utilities Commission to settle a year-long probe of the nation’s No. 2 mobile-phone carrier’s business practices, a development that could signal a strategy shift in industry as states contemplate landmark legal and regulatory action against wireless operators on behalf of irate consumers.
Cingular Wireless faces more than $80 million in fines in one of the biggest state investigations of any mobile-phone carrier to date. Nextel Communications Inc. and Sprint PCS said they are in settlement talks with Missouri Attorney General Jay Nixon in a billing lawsuit about how the two firms classify non-tax fees associated with the cost of implementing federal mandates. A trial date is set for early October.
Legg Mason Wood Walker Inc. has advised investors that in addition to the Missouri AG lawsuit, Nextel was sued recently in Pennsylvania for adding line items to wireless consumer bills.
Elsewhere, 20 state attorneys general continue their investigation of the mobile-phone industry and contemplate legal action.
Back in California, state regulators are poised to issue a tentative decision in July creating a telecom bill of rights for consumers, a potential trend-setting move that increases carrier obligations to wireless subscribers. The telecom bill of rights could be enacted this fall.
Wireless carriers are aggressively lobbying state regulators.
“We continue to keep a close eye on wireless-related events in California. In addition, CTIA has been briefing the CPUC commissioners on the issues, and we think they’ve found them educational. Our message has been straightforward: Increased regulation will lead inexorably to higher prices,” said Travis Larson, a spokesman for the Cellular Telecommunications & Internet Association.
Talks between Cingular Wireless and the California PUC come as the state agency’s investigation reaches a critical stage. Final briefs were filed earlier this month. The matter is ripe for a decision by Administrative Law Judge Jean Vieth.
Neither Cingular Wireless nor the California PUC would confirm settlement talks.
Last June, California regulators began looking into consumer complaints about Cingular Wireless’ service quality, advertising, contract termination fees and other business activities that may violate state guidelines.
“The evidence in this record shows that Cingular was aware its system was and remains to a large degree riddled with coverage holes, especially inside the homes and buildings where customers live and work,” stated California PUC’s consumer protection and safety division. “Instead of the [coverage] maps to which Cingular’s engineers and employees have access, however, Cingular provides its customers with largely useless hand-sized brochures. … Simply put, Cingular does not tell its customers about material limitations of its system. In no other industry can a product or service be sold that will not work in the homes of a third or half of the people who buy it, without full and conspicuous disclosure of the product’s `as is’ nature.”
State regulators claim Cingular Wireless attempts to keep customers from leaving after they discover service quality problems by forcing customers to sign contracts requiring payments of up to $300 if they want out of the service agreement.
Cingular Wireless said glitches in its wireless network are overstated, and it argued California’s legal basis for the investigation is pre-empted by federal law. Cingular Wireless also accused state regulators and consumer activists of having an agenda unrelated to the issues before the California PUC.
“This proceeding is intended to single out and coerce one carrier into adopting unprecedented practices in a form of back-door regulation,” said attorneys for Cingular Wireless. Cingular has fought with mixed success to keep its engineering maps and other company information confidential.
Despite the strong rhetoric, sources said Cingular is now open to settle the case.
Elsewhere, the mobile-phone industry appears to have reached consensus on a voluntary wireless code-of-conduct. An industry source close to the negotiations regarding a code of conduct said the new plan is being vetted among the industry. Plans are being made for a nationwide rollout, but no official announcement from CTIA is expected before the plans have been completed.
“When something comes out, people want to use it,” said the industry source, who asked not to be identified.
But industry’s attempt to self-police itself will not necessary rid it of its troubles.
One state regulator said she this month plans to ask her colleagues to pass a resolution calling for a wireless consumer checklist and for states to pass regulations on billing.
Anne Boyle, chairman of the Nebraska Public Service Commission, told RCR Wireless News on Thursday that she plans to offer a resolution at the summer meeting of the National Association of Regulatory Utility Commissioners that would set up a wireless best practices services that she likened to the “Good Housekeeping Seal of Approval.” She apparently tried something similar at last year’s meeting but it did not pass, but this year she said there is more momentum. In the meantime, she tried to meet with industry to get it to adopt her plan all to no avail so she believes she will prevail in Denver at the NARUC meeting.
CTIA said Boyle is attempting to regulate an industry over which she has no jurisdiction.
“If you give a regulator a hammer, they will find a nail to hit,” said Steven Berry, CTIA senior vice president for government affairs, obviously agitated at the thought of state regulation.
One issue that is expected to be included in both the wireless industry’s voluntary code-of-conduct and Boyle’s best practices is truth-in-billing.
State regulators have been agitated about line items that are appearing on customers’ bills that hike up the price of service above the advertised price.
At the Denver meeting, NARUC is expected to act on a resolution to regulate line items and surcharges on wireless customer bills. The resolution follows on a letter sent recently by the Vermont Public Service Board questioning how carriers can charge for implementing wireless local number portability when they are not providing that service. Of the six nationwide carriers, only Verizon Wireless and T-Mobile USA Inc. do not charge their customers a version of a regulatory implementation charge meant to recover their costs of implementing wireless LNP, wireless enhanced 911 and other regulatory mandates.
