FCC Focused On Fee Disclosure, Not Amounts
In its probe of wireless early-termination fees, the Federal Communications Commission won't focus on the amount of fees but on notice provided to consumers about them, according to an agency official.
That should come as welcome news to the major U.S. wireless operators, whose policies around early-termination fees -- imposed when customers break contracts prematurely -- came under scrutiny by the FCC last December after Verizon Wireless doubled its ETF for smartphones and other "advanced devices" to $350.
AT&T last week followed suit, announcing plans to increase the ETF on smartphones and netbooks from $175 to $325 starting June 1. (It also said it will lower the fee on regular phones and quick messaging devices from $175 to $150.)
But it appears the FCC will not end up taking any action over the size of fee hikes. "That's not an area we're getting into at this time," said Joel Gurin, consumer and government affairs bureau chief at the FCC, during a conference call Wednesday on a new consumer study the agency released on "bill shock" and ETFs. "Our focus is all about clarity and disclosure to consumers."
In its survey, the FCC found that only 36% of cell phone customers who are familiar with their bills said they include "very clear" information on ETFs. And of those subject to the penalties, 43% said it was $150 or more, but 47% didn't know how much it was. Gurin said the confusion surrounding the fees has to do with billing practices.
The FCC earlier this month also said it is considering a requirement for operators to alert mobile subscribers about excessive wireless charges to avoid so-called bill shock after receiving hundreds of consumer complaints. The proposal is part of a wider FCC inquiry into how to revamp "truth in billing" rules to give people more and better information about phone charges.
More than one in six U.S. mobile users -- or 30 million people -- have experienced bill shock, according to the new FCC survey. Of that group, 84% said their mobile carrier did not contact them when they were about to exceed their allowed minutes, text messages, or data downloads.
While there have been press reports of people running up thousands of dollars in unexpected charges, Gurin said that in most cases bill shock is in the range of $50 to $100. He added that the amount was still a "significant jump" for many people.
"The major take-home message from all this is that people still don't know what they should do in order to manage the fees and billing issues in a way that gets them the best service in the best possible way," said Gurin.
In their responses to the FCC inquiry on ETF policies in January, the four major carriers emphasized that customers are given clear and extensive notice about the fees during the sign-up process.
They also defended higher fees as necessary to be able to offer sophisticated devices at subsidized prices while ensuring that they can recover the cost of expensive subsidies if customers end contracts early.
Gurin said Wednesday that the FCC is continuing to work with the wireless industry as well as public interest groups to try to ensure that people have adequate information about charges so they're not taken by surprise. "What's important about this survey is that it gives us a common ground of understanding," he said.
But in a statement issued today, the CTIA took issue with the FCC's findings. "Contrary to the statements in the [FCC] press release, the industry does provide 'simple and easy to understand' plans for every type of American consumer," stated the wireless trade group's release.
The CTIA also accused the agency of attempting to micromanage what it called "an incredible array of choices for consumers," citing options such as prepaid or contract plans or contracts with ETFs to others offering various amounts of minutes.