RCR Wireless News

WASHINGTON — The California Public Utilities Commission‘s decision to suspend the telecom consumer bill of rights could prompt a showdown between GOP Gov. Arnold Schwarzenegger and the Democratic-controlled state legislature, a battle with major implications for mobile-phone carriers and state regulators across the country.

At least one California lawmaker said she might pursue writing into law a bill of rights for telecom consumers.

Last week’s CPUC vote to put the bill of rights on hold until the controversial consumer protection rule can be re-examined was a huge victory for the mobile-phone industry and Schwarzenegger. Both vehemently criticized last May’s CPUC approval of the bill of rights, which created a slew of new regulations requiring clearer and fairer billing, contracts and advertising. Wireless carriers claim the new guidelines are costly, burdensome and counterproductive.

Schwarzenegger and his staff, according to sources, had a direct hand in making last Thursday’s vote possible by the independent state agency. The governor’s press office did not reply to a request for comment.

”I think the governor’s office effectively made its views known to the commission,” Commissioner Geoffrey Brown, whose bill of rights plan was shelved, said last Friday.

Brown had put a hold on last Thursday’s vote, but withdrew it when the meeting began, in recognition that he would be overruled. When the item came up for vote, Brown decried the move to stay the rule. ”This is the most shameful process I’ve seen in my four years on the commission. This ill-considered, hurried action will haunt us for years,” he said.

Consumer groups loudly criticized the CPUC decision to stay the bill of rights, while the mobile-phone industry applauded the action.

”In May, the CPUC implemented a set of misconceived telecommunications rules that placed a number of wireless consumer benefits in great jeopardy. The rules would have set California on a path toward higher prices, fewer choices and less information for consumers,” said Steve Largent, president of CTIA, the trade association of cell-phone operators.

The mobile-phone industry, fearful of seeing a precedent set for the rest of the country, poured hundreds of thousands of dollars into California lobbying in hopes of derailing the initiative last year. Since the bill-of-rights passage last May, cellular carriers have requested-and been granted-extensions to comply with most bill-of-rights provisions that were to have kicked last December.

Last week, it was the consumer advocates’ turn to cry foul.

”This is a ‘cell-out’ of the public by unelected political hacks who are beholden to the cell-phone companies,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights. ”Today’s decision will lead to more cell-phone abuses, including overcharges, undisclosed fees, misleading advertising, billing mistakes, dropped connections and abuses by cell-phone
companies. Now consumers’ only option when they are ripped of by a cell-phone company will be to go to court to stop these abuses.”

Michael Shames, executive director of the Utility Consumers’ Action Network, said the CPUC’s vote to suspend the bill of rights is a sign of things to come.

”The new Schwarzenegger commission has signaled its intent to become toothless pussycats when dealing with the wireless phone carriers. At least that message came through loud and clear today. The message from the state’s 35 million telephone customers was apparently never heard,” said Shames.

Carl Hilliard, president of Wireless Consumers Alliance, said the existing bill of rights should remain intact. California Attorney General Bill Lockyer and advocates for disabled persons have taken the same position.

”The well-crafted rules provided needed balance for an industry that scores just below used car salesmen in terms of customer dissatisfaction,” said Hilliard.

The CPUC vote appears to put Schwarzenegger on a collision course with the state legislature.

”The PUC is clearly more interested in protecting the wireless phone companies than it is in protecting the millions of Californians who use cell phones,” said Sen. Debra Bowen (D). ”The notion that competition will somehow protect phone users from misleading advertising, poor service, reception that comes and goes with the wind, and inaccurate billing practices doesn’t even pass the straight-face test. The latest issue of Consumer Reports found only 45 percent of people are satisfied with their wireless service, yet this PUC seems to think the wireless companies have nothing but their customers’ best interests at heart.”

Bowen said she is ”seriously considering” re-introducing a bill to write a bill-of-rights law that an aide said could be more expansive than the one the CPUC voted 3-1 to put on hold last Thursday.

Bowen, who has sponsored bills to ban teenage driver cell-phone use and to protect consumer privacy in radio frequency identification system deployments, sits on the Rules Committee. That panel is charged with recommending whether the Schwarzenegger’s two CPUC appointees-Republican Steve Poizner, who has yet to be sworn in, and Democrat Dian Grueneich, who has been sworn in and voted last Thursday to delay the implementation of the telecom consumer bill of rights-should be confirmed to their positions on the CPUC.

In December, not long after mobile-phone carriers challenged the bill of rights in federal court and began seeking compliance extensions, Schwarzenegger named Poizner and Grueneich to replace commissioners Carl Wood and Loretta Lynch. The terms of both Democrats expired Dec. 31.

Wood, the bill-of-rights brainchild, and Lynch voted for the sweeping telecom consumer protections last May.

Bowen said she is ”looking forward” to the Senate Rules Committee’s hearing to review Schwarzenegger’s appointment of Grueneich and Poizner to the PUC. A hearing has yet to be scheduled.

The status of Poizner, who in 2001 sold Snap Track Inc. to Qualcomm Inc. for $1 billion, remains a mystery. Sources close to the CPUC say Poizner may haveconflict-of-interest problems as a result of telecom and high-tech investments. Whether he would be forced to recuse himself from the bill-of-rights proceeding is unclear. Also uncertain is whether he will join the CPUC at all. One
possibility, according to a news report last week, is that Schwarzenegger may chose to re-assign Poizner to secretary of state if current office holder-Kevin Shelley (D)-is forced out by an escalating scandal.

In the end, Grueneich provided the decisive vote-joining pro-business Democratic commissioners Susan Kennedy and Michael Peevey, in putting an immediate halt to the bill of rights.

”My goal … is to emerge this year with a refined bill of rights that addresses problems with the implementation schedule and which addresses other issues currently being raised by consumer groups and carriers,” said Grueneich, a former environmental and energy law consultant.

Grueneich said she was troubled by some aspects of the bill of rights and the process by which it was enacted. Grueneich, who now appears to be the swing vote in the proceeding, said she plans to solicit input from the public, consumer advocates and industry in coming months on how the bill of rights can be improved.

Kennedy, who last year toyed with exempting wireless carriers from a bill of rights and ultimately failed to push through less-regulatory consumer protections for telecom consumers, is the force behind the current campaign to stop the clock on the bill-of-rights rule.

”It is urgent that this commission stop and make the changes necessary to create an effective, enforceable consumer protection structure that doesn’t have unintended consequences such as causing small carriers to raise prices or leave the state, or giving one group advantage over another,” said Kennedy.

Kennedy said the bill of rights could force one carrier-U.S. Cellular Corp.-to leave the California market. Another wireless carrier, according to Kennedy, said the new rule likely will force it to cease prepaid operations.

Kennedy said she is committed to issuing a revised bill of rights by the end of the year.

Brown, whose bill-of-rights plan was approved by the CPUC last May, accused Commissioner Susan Kennedy of having a broader agenda in her desire to stay the bill of rights.

”Suspension, in this case, is a fig leaf for elimination,” said Brown, a former San Francisco public defender.

”Let us have no illusions. Commissioner Kennedy believes that any regulation will strangle a nascent industry in its infancy, saddling it with rules that stifle creativity and kill innovation. She seems to deny that even the most dazzling devices can be marketed through sharp, deceptive practices,” said Brown.

Peevey, president of the CPUC, said he still supports the goals of the bill of rights. He said the vote to stay the rule was not an underhanded attempt to undermine it. Critics have asserted that that is precisely the objective of the revamped CPUC.