By Paul Barbagallo
The wireless industry came out strongly against proposals for new rules that
seek to prevent cellphone “cramming,” while the Federal Trade Commission and
consumer advocates told the Federal Communications Commission that regulations
are necessary to combat the onslaught of unsolicited service fees tacked onto
wireless phone bills.
In the latest round of comments filed with the FCC about the issue, wireless
companies large and small called for a kind of industry self-regulation similar
to what was agreed upon for wireless “bill shock.”
They noted that even though cramming has been a popular landline scheme,
wireless should be seen differently, as many consumers legitimately pay for and
use third party-provided services, such as online games and ring tones, and
prefer that the charges for such services appear on their monthly bills. What is
more, third party-provided services typically are purchased directly from the
consumer's handset by the consumer, they say.
“Making it more difficult for a customer to purchase and consume third-party
content not only risks cutting off customers from innovative products and from
the convenience of their portable devices, it also potentially subjects a
burgeoning industry of entrepreneurs and job creators to financial distress,”
AT&T Inc. said in comments July 20.
Phone companies like AT&T have been under increasing pressure recently
from the FCC, the Federal Trade Commission, and Congress to do more to stop
crammers, as the number of complaints from consumers of both landline telephone
services and mobile services has grown in recent years. According to FCC
figures, illegal cramming affects between 15 million and 20 million American
households each year, while third-party billing has grown into a $2
In April, the FCC approved new rules aimed at thwarting cramming, but only
for landline phone bills. That decision left many, including the FTC and
consumer advocates, unsatisfied.
One proposal that has been floated by the FTC would require wireless
companies to offer their customers the ability to “block” all third-party
charges. Another would make their customers opt in, instead of forcing them to
opt out, of purchasing third-party-provided services. Either way, advocates
argue, consumers would not find themselves suddenly enrolled without their
consent in a text-message service that delivers celebrity gossip.
But to Verizon, such rules would be extraneous.
The company explained in comments that it already requires a “double opt-in”
The way it works, in most instances, is that the customer seeking third-party
content enters his or her phone number on the provider's mobile web page, then
the provider sends that customer a password, to the phone, which the customer
must then enter on the provider's purchase page.
“Despite already completing this double opt-in or equivalent process with the
third-party provider, customers would often have to take a third step--i.e.,
contacting their provider to lift a default block or reverse a negative response
to a hypothetical question about third-party billing made when signing up for
service--to complete a purchase,” Verizon Wireless wrote in July 20 comments.
“This additional step would be inconvenient for customers and could deter them
from participating in the mobile marketplace.”
T-Mobile USA Inc. added that most carriers require third-party content
providers to abide by both Mobile Marketing Association and company-specific
guidelines. Many companies also participate in a program developed by CTIA--The
Wireless Association to monitor for fraudulent activity.
“These industry-wide and carrier-specific efforts have successfully prevented
significant cramming problems in the [wireless] industry,” T-Mobile wrote in
July 20 comments. “Because these efforts are continually under review and are
modified to address new issues and trends … they better address the issues and
consumer needs and are preferable to inflexible commission rules.”
The Rural Cellular Association, a trade group representing rural and regional
wireless companies, noted that the problem of cramming is not as pervasive in
the wireless industry as it is in the landline phone industry.
According to the FCC, only 16 percent of the cramming complaints it received
from 2008-2010 relate to wireless services. During that same period, only 3.5
percent of all FTC “unauthorized charge” complaints concerned wireless
To RCA and the industry as a whole, current efforts to stop cramming have
The FTC does not necessarily agree.
The agency, in lengthy comments filed with the FCC, suggested that despite
the differences between the wireline and wireless phone businesses, cramming
could become as much a problem for cellphone users as landline phone users.
“Charges are simply placed without any authorization,” the FTC wrote in July
20 comments. “In the landline context, crammers have shown that they are able to
fabricate records and thus circumvent requirements that they provide that
consumers have 'authorized particular third-party charges.' ”
To illustrate, the commission cited two court cases--FTC v. Nationwide
Connections, in which a convict, from his jail cell, charged consumers for
collect calls they never authorized; and FTC v. Inc21.com, in which a
company falsified verification records for telemarketing calls that purported to
show consumers' consent for charges.
The FTC noted that it is still unclear whether a double opt-in requirement is
being “consistently followed” or even effective at all.
Besides, not all double opt-in procedures require that a consumer
“affirmatively respond” to a confirmation text message, the FTC said. A user
could simply click through on a website accessed on a mobile device without
viewing the full terms and conditions explaining that he is in fact authorizing
a charge to a mobile phone bill.
“At a minimum, all wireless providers should offer their customers the
ability to block all third-party charges,” the FTC wrote. “Wireless providers
should clearly and prominently inform their customers that third-party charges
may be placed on the consumers' accounts and explain how to block such charges
at the time accounts are established and when they are renewed. And wireless
providers should provide a clear and consistent process for customers to dispute
suspicious charges placed on their accounts and obtain reimbursement.”
The FTC said such measures should be “mandated by law or regulation” to
ensure that consumers have at least “baseline protections.”
Also advocating FCC regulations were the Center for Media Justice, Consumer
Action, Consumer Federation of America, Consumers Union, and National Consumer
In a joint filing, the groups took issue with a “voluntary industry effort”
approach to dealing with the problem of cramming.
“Just as in 1998, CTIA states now that the 'commission should continue to
support voluntary industry practices directed toward any cramming
concerns--including cramming by third parties. Also just as the industry asked
in 1998 for time to implement current rules and practices, today AT&T urges
the commission to 'give its new rules time to go into effect,' ” the groups
wrote. “Nonetheless, despite the commission's review of this issue for nearly 14
years, cramming persists.”
For comments filed with the FCC, visit http://apps.fcc.gov/ecfs/proceeding/view?name=11-116.
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