Early Termination Fees Top Consumer Beefs, GAO Report Says
The FCC needs to improve its oversight of wireless companies’ customer service, said a Government Accountability Office report released Thursday. Nearly 84 percent of customers are satisfied with their wireless service, the report found, but problems with billing, contract terms and customer service bring complaints from as many as 14 percent. The proportions of dissatisfied customers “represent millions of consumers” of the estimated 270 million U.S. wireless phone users, the GAO said.
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The commission receives “tens of thousands of wireless consumer complaints each year … but has conducted little other oversight of services” because it concentrates on promoting competition, the GAO said. Many people with problems don’t complain to the FCC and “many do not know where they could complain,” it said. The commission lacks goals and measures that could identify outcomes of complaint processing efforts. “Consequently, FCC cannot demonstrate the effectiveness of its efforts to process complaints,” the report said. Because the commission hasn’t studied the complaints closely, it “may not be aware of emerging trends in consumer problems, if specific rules are being violated, or if additional rules are needed to protect consumers.”
“GAO has pinpointed one key reason for consumer dissatisfaction early termination fees charged by carriers which raises concerns both from a consumer protection and a competition standpoint,” said Rep. Ed Markey, D-Mass. The GAO estimated that among wireless users who wanted to switch carriers during their contract period but didn’t, 42 percent reported holding back to avoid paying an early termination fee, he said.
The FCC should work with state utility commissions to educate consumers about how best to address these issues,” said Chairman Rick Boucher, D-Va., of the House Communications Subcommittee. “My subcommittee will continue to monitor this issue closely.” Commerce Committee Chairman Henry Waxman, D-Calif., called strong competition the best way to protect consumers, but said it’s “critical that the FCC, Congress, and the wireless industry monitor this situation closely and be prepared to act in the best interests of consumers.” Markey, who requested the study, said he also would follow up on the issue.
CTIA said its members work hard to provide good service and many plans are available without early termination fees. “We understand there may be some confusion over early termination fees,” said President Steve Largent. “After listening to their customers, carriers who serve more than 94 percent of the postpaid market have adopted pro-rated early termination fee policies.” CTIA said it will work with policymakers on the issue.
Free Press said the report “confirms that carriers are using these inflated early termination fees to lock millions into long-term contacts -- and customers want out,” said Policy Counsel Chris Riley. “Consumers are being forced to pay huge fees that the phone companies just can’t justify,” he said, saying the FCC needs end the “anti-consumer” practices.
The GAO’s analysis “makes clear that State commissions remain an important presence with respect to wireless consumer protection,” Vermont Public Service Board Commissioner David Coen said for the National Association of Regulatory Utility Commissioners. States need to work with the FCC to help consumers resolve complaints, he said. The report makes the “logical recommendation that the FCC should ‘partner with State agencies in providing effective oversight,'” Coen said.
The FCC told the GAO that it started dealing with the issues raised in the report by launching three proceedings in August. The proceedings will look at the free flow of information to consumers, state of competition in the market and innovation and investment, the commission told the GAO by letter. Comment is being sought on the need for additional consumer protection regulation, the letter said.
“It’s a real problem to me that millions of consumers are unaware of their options when they experience problems with their wireless phone service,” said Chairman Jay Rockefeller, D-W.Va, of the Senate Commerce Committee. “The FCC can -- and must -- do more to make sure consumer concerns are resolved by wireless carriers and oversee the wireless industry with a greater focus on consumer protection.” Sen. Amy Klobuchar, D-Minn., said she’s concerned that early- termination fees “unfairly prevent consumers from switching providers, even when they are dissatisfied with their service.” Klobuchar has introduced a bill about the matter.