Wireless Industry Agrees to Warn Cellphone Customers of Extra Charges

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Wireless Industry Agrees to Billing Alerts

New Development: Major wireless carriers agree to alert customers who exceed voice, text, or data limits.

Potential Impact: FCC places proposed rulemaking to avert unexpected charges on hold.

What's Next: A new portal on the FCC website to allow wireless consumers to see what types of alerts are provided.

By Paul Barbagallo  

AT&T Inc., Verizon Wireless, and other major wireless carriers have agreed to begin sending alerts to customers who are approaching their monthly voice, text, or data limits and are about to incur extra charges.

Federal Communications Commission Chairman Julius Genachowski joined the head of CTIA-The Wireless Association and an executive from Consumers Unions to unveil the new voluntary guidelines, which are designed to prevent incidences of what is known as “bill shock”—consumers' reaction to unexpectedly high charges on their monthly bills that can range into the hundreds or thousands of dollars.

“Bill shock is a real consumer problem that needs to be fixed.”

FCC Chairman Julius Genachowski “Bill shock is a real consumer problem that needs to be fixed, and there are ways to do this easily and inexpensively, using technology that is widely available,” Genachowski said in prepared remarks at an event hosted by the Brookings Institution Oct. 17.

From the industry's perspective, the initiative will put on hold a FCC rulemaking proceeding aimed at imposing similar rules to prevent unexpected charges.

According to a 2010 FCC study, one in six consumers have at one point experienced bill shock. Specifically, in the first six months of 2010, 764 people complained to the agency about unexpected high charges on their cellphone bills. Nearly 70 percent of those complained about amounts of $100 or more, while 20 percent logged complaints of $1,000 or more. The largest complaint received during this time was for $68,505.

The issue has come into sharp focus over the last several years, as more phones with web surfing capability have hit the market.

Genachowski cited the case of a teenager who racked up a $22,000 bill, mostly from surfing the web on her phone, and a woman who received an even higher bill—$30,000—for data and texting charges incurred while she was visiting her sister following the earthquake in Haiti, despite being told by her wireless carrier that a “courtesy plan” would be extended to those affected by the disaster.

According to a more recent survey conducted by Consumers Union, one in five Americans with cell phone plans received unexpected charges on their bills during 2010.

Industry Prefers Voluntary, Not Mandatory Rules.

But CTIA has bristled at regulations, claiming that carriers have already taken steps to ensure customers are not surprised by high monthly charges.

Last October, when the FCC proposed the rules (198 TCM, 10/15/10), CTIA argued that U.S. mobile carriers already allow their postpaid customers to check their usage online by dialing a shortcut number from their wireless devices. Many also offer additional usage management tools that allow subscribers to limit minutes, messages, and downloads. And some send alerts to subscribers about usage and have cut-off mechanisms, the trade group said.

Under the voluntary industry guidelines, companies will send alerts when customers are close to exceeding their plans' limits and are subject to overage charges. Customers traveling abroad will also be warned that they are about to incur international roaming fees. Going forward, customers will automatically receive the free alerts unless they elect not to.

Wireless carriers will provide at least two of the four alerts—voice, text, data, or roaming—within 12 months and the rest within 18 months.

FCC Will ‘Trust, but Verify’.

With its proceeding on hold, Genachowski said the FCC will take a “trust, but verify approach.”

“We will, however, be closely monitoring industry practices to make sure that all carriers provide this necessary information to consumers, as promised, and, if we see non-compliance, we will take action,” Genachowski said.

Consumers Union and the FCC will work together to launch a new web portal on the agency's website that will allow consumers to see what types of alerts are provided by each CTIA member. The portal will allow the FCC and the public to track whether carriers have complied with their obligations, the FCC said.

Obama Pleased.

The White House lauded the voluntary industry guidelines in an official statement. “Far too many Americans know what it's like to open up their cell phone bill and be shocked by hundreds or even thousands of dollars in unexpected fees and charges,” President Obama said in a statement. “Our phones shouldn't cost us more than the monthly rent or mortgage.” CTIA represents carriers serving 97 percent of wireless customers.

The alerts will require substantial investment from wireless companies as they must make upgrades to their billing systems, officials and agency officials said.