• by Mark Walsh  @markfwal, October 13, 2010

In the wake of rising complaints over so-called bill shock, the Federal Communications Commission will propose new rules that require wireless operators to send customers a voice or text alert when they're about to exceed their monthly usage limits and incur additional fees.

In a press conference today focusing on the FCC's "consumer empowerment agenda," agency chairman Julius Genachowski said the five-member commission Thursday would offer new rules to prevent mobile consumers from getting hit with unexpected charges that can jump by hundreds or even thousands of dollars from one month to the next.

An FCC survey has shown that one in six mobile users, or about 30 million people, have experienced bill shock. Hundreds have complained directly to the agency over unexpected fees, typically imposed when users exceed monthly voice, text or data plan limits.

Growing use of mobile data services such as Web browsing and applications in particular has contributed to a surge in overage charges because people can't track megabit usage as easily as minutes, noted Genachowski. "How many people even know what a megabit is or can track it in their head?" he asked. "Companies should compete on price, value and service, not consumer confusion," he said.

New data released by the FCC indicated two-thirds of billing complaints the agency received in the first half of 2010 were over $100 or more and 20% involved amounts of $1,000 or more. The largest was for a whopping fee of $68,505.

The agency began its investigation of the bill shock phenomenon in May after stories began emerging about some of the more extreme instances of unexpected charges. The most notorious involved a Boston-area man whose son had racked up $18,000 cell phone charges from Verizon after his free data downloads expired without notice. The carrier ultimately agreed to cancel out the fees.

Verizon and other wireless operators have said mandatory notices are not necessary because they already give customers different ways to monitor mobile usage. In response to the FCC event, the CTIA issued a statement Wednesday reiterating that view.

"We agree with the FCC that the goal is to keep all customers happy, but we are concerned that prescriptive and costly rules that limit the creative offerings and competitive nature of the industry may threaten to offset these positive trends," it read. The wireless trade group pointed out that wireless-related complaints had declined 4% from 2008 to 2009, according to FCC data.

Genachowski on Wednesday acknowledged that some carriers have taken steps to keep consumers from running up added charges. As an example, he mentioned that AT&T sends iPad users text messages to warn them when they're approaching their data plan limits. But these types of messages, are the exception, not the rule, he said.

As part of its wider consumer empowerment initiative, Genachowski said the FCC would soon hold a forum on unexpected charges and related issues that would bring together consumer groups, industry representatives and technology experts to address these issues. Other topics likely to be covered include "mystery fees" buried in lengthy phone bills, and early-termination fees (ETFs) for prematurely canceled service contracts.

Earlier this year, the FCC began looking into ETFs after Verizon doubled its fee on smartphones to $350. Under scrutiny from the agency, the carrier removed some phone models from the category subject to the higher ETF.

There's no reason we shouldn't have clear and simple technology-based disclosure around ETFs," said Genachowski. "We're looking at this issue with the same basic view of harnessing technology to empower consumers with information in order to make the market work."

Separately, Verizon earlier this month said it would pay a total of $90 million to about 15 million subscribers who were incorrectly billed for accessing data services they didn't use. Complaints about the $1.99 charges to non-data customers when they accidentally accessed the mobile led the FCC to investigate. That probe is ongoing. A final vote on the FCC's proposed rules to stop bill shock could take place in the coming months.