Consumer group says $629M paid for WLNP, mandates

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WASHINGTON — A watchdog group says consumers paid $629 million in fees since January 2002
on wireless services required by federal regulators, including a charge for implementing a local number portability rule whose implementation has been delayed more than a year because of legal challenges.

The Center for Public Integrity’s survey of the 10 largest wireless carriers found that nine of them collect a federal cost recovery fee, with differences among service providers on the fee level itself; how the fee is presented on monthly bills to consumers; and how fee components are applied to individual federal mandates.

The fee, which ranges from a few cents to nearly $2 every month, covers federal mandates such as LNP (which takes effect Nov. 24), number pooling, enhanced 911 and digital wiretap requirements. Carriers do not break down how the fee is calculated and apportioned among the various mandates.

”Consumers are being bilked billions of dollars, and there’s nothing that they can do about it,” said Chris Murray, legal counsel for Consumers Union, in the report.

The report comes down as hard on the Federal Communications Commission as it does on mobile-phone carriers, defendants in a growing number of billing lawsuits and subjects of increased scrutiny by state attorneys general and public utility commissions around the country.

CPI said John Muleta, chief the FCC Wireless Telecommunications Bureau, told it federal regulators are helpless to force wireless carriers to account for how they arrive at the fees because the agency does not exercise price regulation of mobile-phone operators.

Instead, according to the watchdog group, Muleta said the competitive wireless marketplace will sort out the fee controversy.

”There is zero accountability here,” Consumer Union’s Murray told CPI. ”There is no way for consumers to know. Forget about trusting the carriers to be honest in their accounting for what these line items cost. We don’t even get (an accounting)-consumers have no information whatsoever about what the cost of these mandates are.”

CPI said two of the 10 mobile-phone carriers surveyed-T-Mobile USA Inc. and Alltel Corp.-declined to disclose LPN implementation costs. Five carriers-Verizon Wireless, Sprint PCS, Nextel Communications Inc., T-Mobile USA Inc. and Alltel Corp.-would not say what their projected annual costs will be to maintain LNP after implementation. Finally, according to CPI, five mobile-phone operators-AT&T Wireless Services Inc., Nextel, Alltel, United States Cellular Corp. and Western Wireless Corp.-refused to reveal the charge they now levy for wireless local number portability.

A T-Mobile spokeswoman said the data in the report was accurate, but declined to offer any comment on the study itself. Other carriers declined to comment.

The mobile-phone industry attempted to make the best of what has turned into a colossal public-relations problem.

”The wireless industry has long argued that the implementation of number portability would be an expensive government mandate whose costs will ultimately be borne by wireless customers. Whether these costs are passed on to customers through separate line-item charges or by being bundled into per-minute charges is a competitive decision, but at the end of the month, consumers will end up paying for a choice made by policy-makers,” said Michael Altschul, general
counsel of the Cellular Telecommunications & Internet Association. ”The good news for consumers is competition has been driving down the price of wireless service, and competition-which will increase with number portability-will continue to serve consumers. The bad news is there is no free lunch: every wireless consumer, whether they change carriers or not, will help pay for this government mandate.”

On a related front last week, consumer advocates filed a billing lawsuit against Nextel in Los Angeles Superior Court. The Foundation for Taxpayer and Consumer Rights lawsuit claims the carrier billed subscribers for errant text messages without notifying them or compensating all affected wireless customers.

Audrey Schaeffer, a Nextel spokeswoman, said the company could not comment because it has not seen the suit. However, she said subscribers can obtain details about their bills on the Nextel Web site.

In recent months, Nextel has been barraged with billing lawsuits. The wireless carrier currently is attempting to have about two dozen lawsuits consolidated in a Missouri federal court.

Earlier this month, FTCR filed a class-action suit and a state suit against Cingular Wireless L.L.C in the same court. The lawsuit alleges Cingular falsely advertised the quality of coverage to boost subscribership and revenues without having adequate network facilities in place to accommodate increased demand. As a result, according to the Santa Monica-based organization, consumers suffered dropped calls and poor service generally. The suit closely tracks findings by the California Public Utility Commission that resulted in a $12 million fine against Cingular Wireless.

Cingular appealed the fine earlier this month, denying any wrongdoing.

”Thanks to deregulation, the only way cell-phone abuses can be rectified is through lawsuits on behalf of the public,” said Harvey Rosenfield, a lawyer representing FTCR. ”Nextel‘s duplicitous new billing practice is the cover-up of a major rip-off strategy that is starting to spread to other companies. Cingular is the poster child for poor-quality service and sharp business practices designed to enrich the company by ignoring its legal obligation to its customers.”

Meantime, the California PUC is working on a bill of rights for telecom consumers. The measure, opposed by the wireless industry, could go to a vote early next month. The mobile-phone industry, attempting to tamp down consumer backlash, has adopted a 10-point voluntary code of conduct.

Consumer Watchdog
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