Carrier ETF plans targeted

Sen. Amy Klobuchar (D-Minn.) asked chief executives of AT&T Mobility, Sprint Nextel Corp. and T-Mobile USA Inc. to explain whether they will pro-rate early termination fees as previously promised. Her letter comes amid a new Government Accountability Office report that found shortcomings with how the Federal Communications Commission processes consumer complaints.
“Early termination fees have been a real sore spot for consumers,” Klobuchar said. “Too often, consumers find out only after committing to a multi-year contract that their wireless service doesn’t meet their needs. That realization comes after it’s too late to exit their contracts without paying excessive penalties.”
Sens. Klobuchar and Jay Rockefeller (D-W.Va.) are co-sponsors of a sweeping wireless consumer protection bill that would mandate the pro-rating of ETFs, charges levied on customers who prematurely break 1- and 2-year contracts covering subsidized handsets and service.
“It is time for the wireless companies to adhere to the assurances they made to the American consumer and start pro-rating these fees,” stated Klobuchar in the letter directed to AT&T Mobility’s Ralph de la Vega, Sprint Nextel’s Dan Hesse and T-Mobile USA’s Robert Dotson.
Klobuchar cited a recent report by Consumers Union, which said cellphone companies ranked 18th out of 20 industries for consumer satisfaction in its annual survey of consumer sentiment.
In the face of the Klobuchar-Rockefeller bill and Verizon Wireless’ decision to begin pro-rating ETFs in November 2006, the other three national carriers promised to follow suit.
A Sprint Nextel spokesman said the company is in the processing of unifying its billing system and is expected to announce details of its ETF pro-rating policy at the end of the second quarter. T-Mobile USA said it is sticking to its previously announced plan to implement the policy in the first half of 2008. An AT&T Mobility spokesman declined to speculate when the No. 1 wireless operator would change its ETF guidelines.
ETFs, which can cost consumers up to $200, have been the subject of complaints and lawsuits against cellular carriers in recent years.
The cellphone industry opposes the Klobuchar-Rockefeller bill, preferring a national framework measure penned by Sen. Mark Pryor (D-Ark.) that would be less regulatory and explicitly repeal a provision in a 1993 law giving states limited oversight of wireless carriers. Industry also has problems with draft legislation written by House telecom subcommittee Chairman Edward Markey (D-Mass.) because states apparently could still retain some clout as part of a new national regulatory framework with consumer safeguards.
FCC can’t properly enforce, Markey claims
Markey said the GAO report highlights why there needs to be solid and realistic consumer protection enforcement mechanisms along the lines of his draft bill on new national consumer protection rules for the wireless industry. The GAO said most complaints between 2003 and 2006 involved alleged violations of the do-not-call list request and telemarketing calls during prohibited hours.
“Without an effective FCC enforcement program, consumers are left out in the cold. Moreover, the GAO’s report makes clear that any legislation establishing national consumer protection rules for the wireless market, must have meaningful, supplementary enforcement at the state level,” stated Markey. “Unfortunately, solely relying upon FCC enforcement for consumer protection is utterly unreasonable in light of the GAO’s findings.”
The GAO report is apt to give leverage to Markey and Klobuchar, while further diminishing chances for any movement on the Pryor bill. Realistically, none of the legislative initiatives is likely to make much process in this election year.
“In order to fulfill its mandate to protect consumers, ensure public safety and encourage competition, the FCC must be an effective enforcer of our telecommunications law. If it is not doing the job, reform existing procedures and bolster the resources at the commission to protect consumer welfare and ensure fair competition,” stated Markey.
Markey pointed to GAO findings, which – among other things – revealed:
–The FCC receives about 100,000 complaints from individuals and companies every year. The FCC investigated approximately 10% of complaints received between 2003 and 2006 and closed 83% of those investigations with no enforcement action.
–The FCC’s Enforcement Bureau has no specific enforcement goals, does not have a strategy for enforcement actions and does not track of the effectiveness of enforcement actions.
–The FCC’s Enforcement Bureau uses five separate databases, in addition to manually searching tens of thousands of paper case files, in order to track enforcement activities. The database contains no standard information on why the vast majority of investigations are closed with no enforcement action.
Progress recognized
At the same time, the GAO recognized some progress achieved by the FCC. When presented with the draft report, FCC Enforcement Bureau Chief Kris Montieth complained that congressional investigators relied on outdated information and asserted there were other flaws in GAO analysis.
“We take enforcement matters very seriously and the commission has already implemented measures that address both GAO recommendations. The most important goal we have is to respond to 100% of the complaints we receive and we now do that,” said an FCC spokesman. The spokesman added that the FCC agreed with the thrust of the GAO report.