The Year of the Consumer

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RCR Wireless News

WASHINGTON — Editor’s Note: Each year, RCR Wireless News chooses the person who has most impacted the wireless industry. Our choice for 2003 is the consumer, the collective 150 million wireless subscribers who are changing the wireless industry with both their praises and their complaints.

The mobile-phone industry in 2003 found itself face to face with the same mighty force that had made it one of the greatest success stories in American business-the consumer.

The wireless consumer-more than 150 million strong in the United States-was angry. Actually, mad as hell.

The rising tide of complaints about service quality, billing, contracts, customer service, marketing and business practices down the line-from coast to coast-had reached a critical mass right as industry reached its 20th birthday.

A celebration it wasn’t in 2003.

The consumer screamed bloody murder. The bellyaching was heard by Congress, state attorneys general, state public utility commissions and consumer activists around the country. They began to act. Trial lawyers quickly caught on.

Industry had a big problem on its hands, one that in its totality and long-term implications was far greater than implementing local number portability or enhanced 911 or disability accessibility or any other federal mandate decried by industry. The consumer backlash even eclipsed industry’s fight for legislation to secure military frequencies for third-generation wireless systems.

That the wayward wireless market improved this year and companies escaped relatively unscathed from the government crackdown on accounting fraud were of little consequence.

The angry consumer was still there, demanding satisfaction. And not budging an inch.
The consumer-more so than any other factor-fundamentally changed industry behavior in 2003. And it’s not over.

In 2003, scores of consumer lawsuits were in the pipeline in states everywhere and more being prepared. The California Public Utilities Commission-led by a former steel-mill worker and union sympathizer named Carl Wood-was advancing a bill of rights for telecom consumers that threatened to become a template for state regulators throughout the land.

The quake was felt all the way back East, so much so that the Cellular Telecommunications & Internet Association took the unprecedented step of steering more than $200,000 to lawyers and lobbyists in San Francisco in hopes of derailing the Wood initiative.

”My background is not as a businessman. It’s as a worker. I think my tendency is to approach this thing as a working person,” said Wood.

Wood harbors no illusions. ”The leadership in the cell-phone industry doesn’t like me a lot,” he said. ”It’s very clear they wish I’d go away.”

But that won’t happen until the end of 2004, when his term is up. Wood, unlikely to be re-appointed, wants the PUC to approve the bill of rights-which would impose new pro-consumer rules on wireless carriers-in early 2004, if not later this month. It’s the stuff of legacy.

”This is very important to me,” said Wood. Even the Terminator-recently promoted to governor of California-might not be able to stop him.

The California PUC, under Wood’s purview, hit Cingular Wireless L.L.C. with a record $12 million fine for business practices regulators said broke state laws. Cingular has appealed the fine.

In Congress, lawmakers were squawking, especially those New Yorkers. First, Rep. Anthony Weiner (D-N.Y.). Then, Sen. Chuck Schumer (D-N.Y.).

Reps. Rush Holt (D-N.J.) and Ed Markey (D-Mass.) weighed in too, tackling a completely different wireless consumer issue also of immense import: spam. Markey also drew a line in the sand to protect wireless consumer privacy in advance of next year’s issuance by industry of a national wireless directory. There were others who sounded off. The consumer bandwagon soon became crowded.

No one was discriminated against. All the carriers-Verizon Wireless, Cingular Wireless, AT&T Wireless Services Inc., Sprint PCS, Nextel Communications Inc. and T-Mobile USA-were on the firing line.

Americans’ love-hate relationship with the cell phone had taken a nasty turn for industry. The angry consumer cared less that mobile-phone carriers spent billions of dollars on network buildout or that 150,000 wireless 911 calls were made daily or that stodgy local officials, prodded by NIMBYs, blocked antenna siting or that the laws of physics governing radio propagation-not to mention weather, foliage and endless other variables-can interfere with successful call completion. All the angry consumer knew was the call didn’t always go through, even though most do.

It was a tragic irony for the wireless industry. American cell-phone consumers, bred on the best landline telephone system in the history of the world, are spoiled. They want cell-phone service quality on par with wireline service. Of course, the only reason this is an issue is because wireless is becoming a substitute for wireline service, which of course is why state regulators see a greater urgency to intervene. This is not what was supposed to happen, right? It could get worse as consolidation in the mobile-phone industry takes shape.

A whole new vocabulary and cast of characters emerged. Bitter talk of dropped calls, dead zones, coverage maps, disclosure, federal programs cost-recovery fees and early termination fees became commonplace. Court settlements were in vogue.

After the mobile-phone industry offered up a voluntary code of conduct in September in hopes of assuaging the California PUC and others, it was greeted with a blistering retort from what amounted to a Who’s Who List of consumer do-gooders, with a heavy California accent: Consumer Federation of America, Wireless Consumers Alliance, National Consumer Law Center, Consumers Union (sponsor of, The Utility Reform Network, Utility Consumers’ Action Network and the California Public Interest Research Group.

And who ever heard of Harvey Rosenfield, whose Foundation for Taxpayer & Consumer Rights in Santa Monica, Calif., filed suits against Nextel and Cingular, before the consumer thing hit the fan. Or what about Howard Finkelstein, the lawyer who with backing of consumer groups got Verizon Wireless, the No. 1 mobile-phone operator that boasts quality first, to agree to settle a lawsuit that could cost the carrier more than $1 billion.

Few knew either of Jay Nixon, the attorney general of Missouri, before he took on Nextel and Sprint in a billing suit that ultimately was settled to the state’s liking. Nixon was not willing to wait for nearly two dozen other state attorneys general who decided a few years ago to start probing into carrier’s business practices, but never managed to do anything.

Why the uprising in states across the country? Because of a lack of activity at the federal level, according to Michael Shames, executive director of UCAN. ”We’ve been frustrated with the Federal Communications Commission.”

With some other states poised to follow the California PUC‘s lead, Shames predicts Congress will step in at industry’s behest a couple years from now and set federal consumer wireless guidelines weaker than those in states.

While the FCC-having far more jurisdiction over wireless carriers than states-did not fight for wireless consumers with the same ferocity as states and consumer groups, it came through with something big for subscribers at the end. The agency stood firm and required carriers to honor subscribers’ new right to take their numbers with them.

In recent weeks-particularly with the Nov. 24 launch of LNP-the FCC has sounded like an avid consumer activist.

During an appearance earlier this month at an annual telecommunications policy conference, John Muleta, chief of the FCC’s Wireless Telecommunications Bureau, said that it soon would be the consumer that matters-not the carrier.

”The era of the service provider is probably on its way out,” said Muleta. ”There seems to be a notion that our industry is driven by the service provider. I think the trend is going to be that it is driven by the consumer and the person who has the direct relationship with the consumer. You will get this because the radio is intelligent enough to pick out available spectrum. It will not matter who owns the spectrum.”

Smart radios? Yep, the times, they are a-changin.

Carl Hilliard, president of WCA, is by no means new to industry. But his gadfly presence and clout became all the more pronounced as consumer angst heightened in 2003. He was everywhere, in court, at the FCC and on Capitol Hill.

WCA was the catalyst for a key FCC ruling-in response to a consumer lawsuit-that said a 1993 law largely deregulating wireless carriers at the state level did not prevent the filing of suits in state courts on consumer protection grounds. It was huge.

”There’s been an outcry because service has been abysmal and not as promised,” said Hilliard. ”The consumer finally, finally is getting some parity in the marketplace.”
Washington reporter Heather Forsgren Weaver contributed to this report.

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