McDowell, Baker Question Need for ‘Bill Shock’ Rules
The FCC unanimously approved a wireless “bill shock” rulemaking notice Thursday. But Commissioners Robert McDowell and Meredith Baker questioned how large a problem bill shock is and the wisdom of imposing additional regulations on carriers. The commission’s three Democrats, led by Chairman Julius Genachowski, were more enthusiastic, signaling carriers that additional regulation is likely.
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An FCC white paper released Wednesday (CD Oct 14 p1) said the commission received 764 bill shock complaints in the first half of 2010, McDowell observed. “Although not noted in the white paper, America is home to an estimated 295 million mobile wireless subscribers,” he said. “Being data-driven means more than focusing on only a few facts and figures.” McDowell said the FCC should not ignore the costs of imposing more regulations on carriers. “While it may be tempting to shrug off regulatory costs, the reality is that businesses pass on their costs to consumers,” he said. “We all pay for the cost of government mandates. As such, it is important to proceed carefully.”
"We as a commission must … be wary that even well-intentioned regulation, such as this one, often imposes unintended costs,” Baker said. “If we don’t strike the right balance as regulators, we risk imposing costs on providers that could result in higher prices and lower quality of service for consumers.” The cost of upgrading billing systems can hit smaller providers and prepaid services hardest “and put them at a competitive disadvantage,” she said. Baker also said the issue is well suited to an industry-led solution. “Competition on the basis of better customer service already distinguishes and differentiates carriers,” she said.
"There’s more than ample evidence to confirm the existence of a problem here … for us to move forward in the way that we are,” Genachowski said. “As with all new technologies, particularly ones that involve complex pricing schemes and bundles and new terminology like megabytes, issues emerge, and issues have clearly emerged here."
Consumer and Government Affairs Bureau Chief Joel Gurin said the FCC is receiving 1,500 bill shock complaints yearly, comparable to the rate of complaints on early termination fees. In the first six months of the year, 20 percent of complaints involved amounts above $1,000 and eight complaints more than $10,000, Gurin said.
Commissioner Michael Copps said the rulemaking was long overdue. “Who among us has not been shocked with one charge or another that we've received on a bill from a service provider?” Copps said. “It goes without saying that, in these economic times when the next mail delivery might bring a foreclosure notice, consumers need predictability in their bills more than ever.” The rules will help the U.S. catch up with Europe, he said. “Customers throughout the European Union already enjoy protections against bill shock. I am a firm believer in learning -- and building upon -- the success of international counterparts.”
The notice should be viewed as “just the beginning of a process to write overdue rules for the wireless market,” said Free Press Political Adviser Joel Kelsey: “We also encourage the commission to examine handset exclusivity agreements, which tie mobile phones -- and subscribers -- to one carrier, and to look into early termination fees incurred when subscribers choose to end their contracts early.”
Free State Foundation President Randolph May said the proposal tilts “towards a nanny-state mentality and away from the view that individuals bear some responsibility for knowledge concerning the services they purchase.” The wireless industry is highly competitive, he said. Carriers “can be expected to respond -- indeed, already have responded -- to consumer desires for further disclosure and rate options,” May said. “I'm concerned that this may be a case of ‘regulation by anecdote’ that will exaggerate benefits and minimize costs.” The Competitive Enterprise Institute said “competitive forces are far better equipped than federal regulators to punish providers that engage in genuinely harmful practices or fail to satisfy consumers’ evolving preferences."
Bill shock offers Genachowski political risks and rewards, said Jeff Silva, an analyst at Medley Global Advisors. “Pursuing pro-consumer telecom and media initiatives could prove beneficial to Genachowski in the near term by temporarily diverting attention away from other politically charged issues,” he said in a research note. “But the tack could invite unintended consequences even if policy outcomes of pro-consumer measures are not overly onerous. Beware the plaintiffs’ bar."
Genachowski should refocus on other consumer issues, said CTIA President Steve Largent. His list includes stopping states from raiding E-911 funds and going after companies that violate the Telecommunications Consumer Protection Act (TCPA), which prohibits sending spam to mobile phones. “In 2009, the FCC received nearly 48,000 wireless TCPA-related complaints -- nearly 32 times the number of estimated annual ‘bill shock’ complaints,” Largent said.
Wireless carriers including Verizon Wireless, AT&T and Sprint Nextel put out statements explaining steps they have taken to prevent bill shock.