WASHINGTON-The 8th U.S. Circuit Court of Appeals decision to scrap Minnesota’s wireless consumer protection law could come into play as truth-in-billing litigation moves into a serious phase in January at a U.S. appeals court in Atlanta.
Mobile-phone carriers, federal and state telecom regulators and consumer advocates are set to file briefs in the coming weeks with the 11th U.S. Circuit Court of Appeals. But the legal landscape has changed since truth-in-billing lawsuits were filed nine months ago by the National Association of State Utility Consumer Advocates and the Vermont Public Service Board. The 8th Circuit sided with industry in determining the Minnesota law-which included a provision requiring carriers to give consumers 60 days written notice of proposed contract changes-was pre-empted by federal law.
At issue before the 11th Circuit is whether the Federal Communications Commission overstepped its authority in pre-empting state regulation of line-item charges on mobile-phone bills.
The FCC in early 2005 extended truth-in-billing rules to cellular carriers despite industry protests. At the same time, the agency refused to ban regulatory recovery fees-as requested by the National Association of State Utility Consumer Advocates-so long as such charges are not misleading. The line items in dispute are fees levied by wireless operators to recover the cost of implementing federal mandates such as enhanced 911, local number portability and universal-service-fund contributions. The FCC also pre-empted state regulation of line items on wireless bills.
In that sense, NASUCA’s petition for declaratory ruling backfired and the wireless industry gained more than it lost. Industry may be poised to make even more gains on billing and other consumer issues increasingly being addressed by states.
NASUCA voiced outrage at losing ground on a matter in which it had hoped to gain more leverage.
“Instead of bringing consumers truth in billing, the FCC has taken consumer protections a step backward by eliminating individual states’ rights to protect cellular customers from deceptive bills,” said David Bergmann, of the office of the Ohio Consumers’ Counsel and chairman of NASUCA’s telecommunications committee, at the time of the March decision.
The wireless industry argues line-item regulatory recovery fees allow consumers to see where their money is going. Others contend complying with federal mandates is a cost of business that should be built into the base rate, explaining that breaking out regulatory recovery fees distorts the true cost of monthly wireless service.
The cellular industry insists any meddling with carrier practices affecting charges to consumers is pre-empted by a 1993 federal law banning state regulation of rates and market entry of wireless operators. The same law also gave states jurisdiction over “other terms and conditions.”
Indeed, in a pending FCC proceeding, CTIA has asked the agency to determine whether early termination fees-hefty charges to subscribers who break service contracts with carriers-are considered rates charged within the meaning of the 1993 law. If the FCC concludes fees fall within the scope of rates charged, states and plaintiffs’ lawyers would find it harder to sue wireless carriers over early termination charges.
U.S. courts have read the 1993 pre-emption clause differently, resulting in a mix of rulings for cellular carriers and consumer advocates.
NASUCA and the Vermont PSB, whose separate appeals were consolidated in the 11th Circuit, share the view that the FCC erred in pre-empting state jurisdiction over wireless line items. But the two groups otherwise have embraced different legal strategies in challenging the FCC’s truth-in-billing ruling.
In a follow-up rulemaking last March, the FCC tentatively concluded non-tax line items be located in a section of a wireless bill separate from government-imposed charges and that carriers disclose to consumers the full rate-including any non-mandated line items as well as an estimate of government-imposed surcharges-at the point of sale. The agency also initially determined that state truth-in-billing regulations inconsistent with federal guidelines are pre-empted. No final decision has been reached yet on the matter, however.
The FCC earlier this year qualified its preliminary findings by stating future pre-emption would not limit the ability of states to enforce their own consumer-protection laws.
The cellular industry wants a national framework for wireless billing based on its voluntary code of conduct for service.
Verizon Wireless, on the other hand, recommended to the FCC that any federal billing regulations be patterned on a legal settlement between a group of state attorneys general and major wireless carriers on carrier business practices.
On Capitol Hill, wireless lobbyists are seeking further pre-emption of states in telecom reform legislation.
