WHILE IT WAS NOT A MAJOR COUP THAT WIRELESS carriers found a Democratic lawmaker to sponsor a wireless consumer- protection bill less regulatory than another measure with more backing by Congress’ ruling party, Sen. Mark Pryor (D-Ark.) could pick up a powerful political ally in his campaign to champion the wireless industry’s top legislative goal-a national regulatory framework with expanded federal pre-emption-after the 2008 presidential election.
Though a newcomer to Congress, Pryor comes from a political family-his father David was a U.S. senator from 1979-1997-and he hails from the state that produced former president Bill Clinton, a pro-business New Democrat. So it came as little surprise-except perhaps from a timing standpoint-when Pryor in June endorsed the former president’s wife, Sen. Hillary Clinton (D-N.Y.), for president in White House race in which she has excelled to date.
As such, the Cellphone Consumer Empowerment Act backed by Sens. Amy Klobuchar (DMinn.) and Jay Rockefeller (DW. Va.) has political momentum in the current political environment. But that could change, especially if Clinton goes on to become president.
“I don’t want to get too hung up on the numbers [of wireless complaints]. The bottom line is there are a number of consumers who are dissatisfied with their service for various reasons. Some of those things I think we need to address in federal law,” stated Pryor at a Senate Commerce Committee hearing last week.
“The uniform wireless consumer rules must be comprehensive and they should address, in my view, a broad range of issues including disclosures of contract terms and conditions, service area maps, trial periods, early termination fees and we could add more to the list if you wanted to.”
Wireless behind Pryor
The Pryor bill, whose uniform wireless framework would dramatically weaken state oversight of mobile-phone operators and deputize the Federal Communications Commission as the overseer of carrier business practices, is highly unlikely to move in Congress the rest of the year. The best industry can hope for is that the Klobuchar-Rockefeller wireless consumer bill does not pass this year or before next year’s presidential election.
“We definitely support the Pryor bill,” said Joe Farren, a spokesman for cellphone industry association CTIA. National wireless carriers and Republican lawmakers oppose the Klobuchar-Rockefeller legislation, viewing it as unnecessary and possibly harmful to the most competitive sector in the telecom industry.
The telecom sector has been generous to Pryor the past five years. Little Rock-based Alltel Corp., set to be acquired by private-equity companies TPG Capital and Goldman Sachs for $27.5 billion by year’s end, contributed $14,000 in political action money to Pryor between 2001 and 2005. During the same period, BellSouth Corp., before being bought by AT&T Inc., donated $15,800 to Pryor’s Senate campaign. AT&T on its own threw in $12,500 to the cause.
Lowell McAdam, president and CEO of No. 2 Verizon Wireless, told lawmakers the Klobuchar-Rockefeller bill threatened to turn back the clock on the enormous economic growth, competition, consumer choice and technological innovation spurred by cellular industry during the past two-and-a-half decades. He said lawmakers should focus instead on the patchwork of utility-style regulation in states and the imposition of discriminatory local and state taxes on wireless carriers.
Klobuchar maintains heat
Meantime, Klobuchar is keeping the political heat on the mobile phone industry.
“The rules governing our wireless industry are a relic of the 1980s, when cellphones fit in a briefcase instead of a pocket,” said Klobuchar. “While cellphones have modernized, the rules haven’t. It’s past time for more consumer-friendly policies that keep up with the needs of consumer, allowing them to get a phone that works when and where they need it at a price they can afford.”
Among the provisions in Klobuchar-Rockefeller bill are detailed data on coverage areas and dropped calls, pro-rated early termination fees for those who exit their contract after 30 days, the ability to exit a contract within 30 days without a termination fee when wireless service is found to be unsatisfactory, and transparency in contracts and billing, including explanations of taxes and fees. The measure also directs the FCC to conduct a study on the pros and cons of handset locking by wireless carriers.
Klobuchar pointed out that carriers typically put disclaimers on their maps, and that such verbiage makes it difficult for consumers to make informed decisions on the cellular service that will work best for them.
On the eve of last Wednesday’s hearing, AT&T Mobility announced it would allow subscribers beginning next month to make changes to contracts without their service contracts being extended and would pro-rate early termination fees beginning early next year. Verizon Wireless was the first national carrier to embrace the latter policy a year ago.
State powers threatened
The Klobuchar-Rockefeller bill is supported by consumer and state advocates, who do not want to see limited state jurisdiction over mobile-phone carriers eliminated as the Pryor bill explicitly does. It remains somewhat unclear whether the Klobuchar-Rockefeller measure could end up diluting state powers reserved to states by Congress in 1993.
Minnesota Attorney General Lori Swanson last month sued Sprint Nextel Corp. to prevent the No. 3 wireless carrier from automatically extending terms of subscribers’ contracts after they make contract changes. The wireless industry succeeded in persuading a federal appeals court to strike down a Minnesota wireless consumer law in 2005 on federal pre-emption grounds, but a separate federal circuit court last year concluded state regulation of line-item fees on wireless bills is not pre-empted by federal law. Sprint Nextel and T-Mobile USA Inc. have asked the U.S. Supreme Court to review the latter lower- court ruling.
“The propensity of the cellphone industry to challenge legitimate state consumer-protection regulations is another reason why Congress should act in this area,” stated Swanson in written testimony for last week’s Senate hearing. She added: “The United States Congress should pass meaningful consumer-protection legislation so that consumers are treated fairly and not subjected to a game of ‘hide the ball’ when navigating the cellphone maze.”
