Consumer Watchdog

Expose. Confront. Change.

Donate
Consumer Watchdog
Home About Us
Our Approach Our Team Our Books Contact
Updates
News Releases Consumer Alerts Video In The News Reports
Our Issues
Healthcare Energy Privacy Insurance Accountability In The Courtroom
Get Involved
Submit a Complaint Take Action
Donate Now
Privacy

Consumer Group Sues Cell Phone Companies for “Locking” Handsets

PUBLISHED ON June 8, 2004  |  BY CONSUMER WATCHDOG  ·  2 MIN READ

Wall Street Journal


LOS ANGELES — A consumer watchdog group is suing three cell phone companies for “locking” their phones to make it harder for customers to switch carriers.

The Foundation for Taxpayer and Consumer Rights filed suit accusing AT&T Wireless Services Inc., T-Mobile USA Inc. and Cingular Wireless, of using software in their handsets that prevents them from being used on a competitors’ network.

The practice effectively thwarts recent federal regulations allowing people to retain their phone numbers when switching mobile carriers, according to the lawsuit, filed Monday in Superior Court in Los Angeles.

The lawsuit accuses the companies of engaging in unfair and deceptive business practices under state law.

“If you can use the same phone number with other carriers, you should be able to use the same phone,” said Jordan Lurie, an attorney representing the plaintiffs.

The phone companies defend their policy, saying they routinely subsidize handset cost. Companies would lose money if they allowed customers to then use those phones with another carrier.

“What we do not wish to do is subsidize the cost of a handset for another carrier,” said Tony Carter, a spokesman for Atlanta-based Cingular Wireless.

Carter said he had not seen the lawsuit. T-Mobile, based in Bellevue, Wash., did not immediately return a call seeking comment.

A spokesman for Redmond, Wash.-based AT&T Wireless said he had not seen the lawsuit, but called the company’s sale of handsets legal and pro-competitive.

“This subsidy is a great benefit to subscribers,” AT&T spokesman Art Navarro said. “We simply can’t afford to subsidize phones, however, unless they are used on our network. The FCC has previously examined this issue of bundling phones and service in this way and found that it promoted competition.”

Consumers Union sent a letter to the Federal Communications Commission in March protesting the practice of locking handsets. The CU argued that consumers pay the cost of subsidizing the handset purchase over the life of a contract or through a hefty termination fee if the contract is broken early.

“After the consumer has fulfilled the terms of the contract, there is no longer any justification on the company’s part to keep the handset locked,” said Janee Briesemeister, who heads a campaign targeting cell phone company practices.

The lawsuit targets companies that use a particular technology called Global System Mobile communications, or GSM. Those phones contain a computer chip, called a SIM card, that links the phone to a particular network.

Consumers should be able to simply swap a SIM card from a competitor’s network to change carriers.

But the lawsuit claims that Cingular will provide a code to customers to unlock the SIM card only if the customer’s contract has expired. T-Mobile provides an unlocking code after the customer has subscribed for a number of months, while AT&T will not unlock the SIM card under any circumstances, the lawsuit charges.

Consumer Watchdog

Consumer Watchdog

Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

All Articles →

MORE IN PRIVACY

More Privacy stories →

Consumer Group Sues Cell Phone Companies for “Locking” Handsets

PUBLISHED ON June 8, 2004  |  BY CONSUMER WATCHDOG  ·  3 MIN READ

T-Mobile, AT&T and Cingular Use Software to Disable Cell Phone Portability, Prevent Customers from Taking Phones to New Company


Santa Monica, CA — In a new effort to protect consumers against cell phone rip offs and anti-competitive tactics, a California consumer group sued three of the nation’s top cell phone companies, alleging that the companies surreptitiously insert software in the phones they sell that disables the phones from being used on another company’s system. Read the complaint here: http://www.consumerwatchdog.org/corporate/rp/rp004334.pdf.

According to the suit, filed in Los Angeles Superior Court under California’s powerful consumer protection law, cell phones sold by T-Mobile, AT&T and Cingular were designed to allow users to swap a chip inside their phone that identifies them as a customer of one of the companies. Consumers who wished to take advantage of the Federal Communications Commission’s recent “number portability” rule by going to another new company and keeping the same phone number would also be able to keep their phones under this built-in technology. However, the complaint alleges that the three companies have inserted software inside the phones they sell to prevent such interchangeability. Thus, a dissatisfied customer of one company must be willing to buy a new phone and throw away an otherwise perfectly good phone in order to change carriers. The result, the consumer advocates said, is that many consumers are forced to stay with a cell company whose service they find unsatisfactory, competition is frustrated, and usable phones clog our landfills.

“If you can use the same phone number with other carriers, you should be able to use the same phone, ” said Jordan Lurie, of the Los Angeles office of Weiss & Yourman, FTCR’s co-counsel. The practice by companies that all use the same Global System Mobile (GSM) network is particularly egregious, Lurie noted. “Pop out the SIM-chip, pop in a new SIM-chip. That’s how easy it should be to use your GSM phone with another carrier. Handset locking is just another unfair way to lock customers into their networks.”

“Like the ‘early termination fees’ that cell phone companies charge dissatisfied customers, this handset locking scheme is designed to force unhappy consumers to stay with a cell phone company no matter how poor the service is,” said consumer advocate Harvey Rosenfield, also representing FTCR.

Group Challenging Other Abuses

FTCR called today’s action “Round 2” in its effort to protect Californians against rampant abuses by cell phone companies that range from poor service quality to unfair billing practices. Last October, FTCR sued Nextel for unilaterally deciding to begin charging its customers $2.50 to get a fully itemized bill, which makes it nearly impossible for consumers to determine if they are being billed correctly. Indeed, the new policy made it nearly impossible for Nextel customers to detect charges for four phony text messages Nextel transmitted to every California customer that month.

FTCR’s case against Cingular centers on Cingular‘s inability to provide adequate coverage for its customers, and for misleading advertisements regarding the quality of its cellular service. The Cingular lawsuit has been joined with two related cases in San Diego Superior Court.

The FTCR lawsuits are brought under California’s powerful consumer protection statute known as he Unfair Competition Law (Business and Professions Code section 17200). That law authorizes members of the public to challenge illegal or unfair practices.

“Consumers are mad as hell about cell phone service,” said Rosenfield. “First of all, you can’t get access, you can’t make a call or you get disconnected in the middle of a call. Then there are the bogus fees and overcharges that nickel and dime us out of our money and the deliberately lousy customer service that prevents you from getting the bill fixed. If you try to walk away, they punish you with an ‘early termination fee.'”

Cell phone companies are deregulated. As a result, only court action can protect the public against improper conduct. The non-profit said it intended to pursue other cell phone abuses.

The group can be contacted at www.consumerwatchdog.org or by sending an email to:
[email protected].

FTCR is a non-profit, non-partisan citizen research and advocacy organization.

-30-

Tags: News Release
Consumer Watchdog

Consumer Watchdog

Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

All Articles →

MORE IN CWD