WASHINGTON-A Minnesota federal court has upheld a new state law forbidding mobile-phone carriers from making significant changes to service contracts without obtaining written or verbal permission from subscribers, but ruled regulatory recovery fees can be passed through to consumers without notice.
The Minnesota wireless consumer protection law, whose July 1 start date was put on hold after a group of mobile carriers sued Attorney General Mike Hatch to prevent its enforcement, will now go into effect Sept. 15.
Verizon Wireless, Sprint PCS, AT&T Wireless Services Inc., T-Mobile USA, American Cellular Corp. and others argued the state law-also known as Article 5-illegally regulates wireless carriers’ rates.
U.S. District Court Judge John R. Tunheim disagreed.
“Although Article 5 is directed at wireless providers, the court is no longer convinced that the law represents impermissible rate regulation,” stated Tunheim in his 16-page decision. “Article 5 manifests basic principles of contract law. Nothing in the law prevents wireless providers from charging any rate the market will bear. Nothing in the law caps wireless rates. Similarly, the law does not dictate whether a particular billing method is unreasonable . Instead, the law requires notice and informed consent to contract changes.”
The state law was prompted partly by consumer complaints about automatic renewal of their mobile-phone contracts. Once the contract was renewed, a consumer was forced either to remain with his/her service provider or pay an early termination fee to break the contract.
Karen Smith, a Verizon Wireless spokeswoman, said the nation’s No. 1 cellular operator is reviewing its options.
