AT&T Inc., which controls the nation’s largest mobile-phone carrier Cingular, agreed pay more than $30 million and withdraw a U.S. Supreme Court challenge to end a highly controversial, seven-year-old case at the California Public Utilities Commission.
In addition to the record $12.14 million fine levied by the CPUC in 2004 and later upheld by state courts, AT&T, which acquired complete control of Cingular earlier this year when it purchased former joint-venture partner BellSouth Corp., will refund consumers approximately $18.5 million in early-termination fees collected from former customers from January 2000 through April 2002. AT&T also must contract with an independent claims administrator to review claims for refunds of additional ETFs paid by former customers to AT&T wireless agents for which records of payment no longer exist. ETFs-charged to subscribers to break service contracts-typically range between $150 and $200 per line.
In 2003, after a three-year investigation, a CPUC administrative law judge proposed the $ 12.14 million fine against then-Cingular Wireless L.L.C. for charging early-termination fees and prohibiting refunds during a period when the mobile-phone carrier aggressively marketed its service without disclosing network problems to customers.
The CPUC found that Cingular’s ETF practice was fundamentally unfair to its subscribers.
“This settlement agreement demonstrates that the PUC takes its enforcement responsibility seriously,” said CPUC Commissioner John Bohn. “I support this settlement agreement because it will get reparations back to affected consumers expeditiously.”
Parties to the settlement are the CPUC, Utility Consumer Action Network and the CPUC’s Consumer Protection and Safety Division.
‘Time to move forward’
“Today, the CPUC approved a settlement agreement regarding a ruling concerning Cingular business practices during 2000-2002. While we have a strong case for appeal, it is time to move forward,” said Lauren Garner, a spokeswoman for AT&T.
One Supreme Court appeal left
On March 9, AT&T petitioned the U.S. Supreme Court to overturn the CPUC action on federal pre-emption grounds. It was industry’s second appeal to the high court that turned on claims of federal jurisdiction. With AT&T taking its Supreme Court petition out of play, the spotlight will be squarely on a high-court appeal brought by Sprint Nextel Corp. and T-Mobile USA Inc. The No. 3 and No. 4 carriers want the Supreme Court to review an 11th U.S. Circuit Court of Appeals ruling that tossed out a Federal Communications Commission decision to pre-empt states from regulating line-item charges on mobile-phone bills.
The cellular industry and the states will also be watching carefully to see if FCC Chairman Kevin Martin can round up the votes to pre-empt state regulation of early-termination fees. Mobile-phone carriers asked the agency in 2005 to declare ETFs part of the rate base and therefore off limits to states. Congress in 1993 pre-empted state regulation of wireless rates and market entry, but left some jurisdiction to states.
