Dial M for Misleading?
Mobile phone companies are moving at warp speed these days, signing up record numbers of customers, lowering prices, and unveiling gee-whiz phones that let users retrieve e-mail, buy gifts and play games with the touch of a few buttons.
But as service options grow, so do consumer complaints. There is mounting discontent among the industry’s 101 million domestic subscribers. Complaints and lawsuits have climbed steadily nationwide about everything from billing practices and hidden restrictions to substandard service and coverage.
For the most part, unhappy consumers have been left to fend for themselves against the industry. Deregulation put an end to pricing rules, and legislative exemptions have helped wireless companies deflect claims under state consumer protection laws.
“They have been saying, ‘Take a hike, we’ve got limited liability, we’re free and exempt from all those things,’ ” said Carl Hilliard, president of the Wireless Consumers Alliance, an independent group devoted to protecting wireless customers.
Now, however, the momentum is beginning to shift. In August, the Federal Communications Commission ruled unanimously that states can award monetary damages against wireless phone companies in cases involving false advertising, unfair business practices and other forms of fraud.
A wireless industry trade group, the Cellular Telecommunications Industry Assn., points out that the FCC decision is advisory and not binding on U.S. courts, and does not open the floodgates to more litigation.
“The important thing to draw from the FCC ruling is that every case has to be looked at on a case-by-case basis,” said Michael Altschul, CTIA’s general counsel.
Still, many believe that the FCC’s stance gives new strength to efforts to step-up oversight of the industry.
“We’re viewing this as a tremendous victory,” said Daniel Spitzer, an attorney representing Shlomo “Sam” Gonen in a case against AirTouch Cellular (now called Verizon Wireless). Gonen sued the company for extending his service contracts without his knowledge and then charging him $600 in early termination fees when he canceled service on four out of 10 AirTouch phones used at his business.
At the time, AirTouch was promoting a “no regrets” policy that the company said allows customers to “easily switch from one pricing plan to another at any time without incurring an early-disconnection fee and without extending your service agreement period.”
According to the lawsuit, Gonen changed plans when an AirTouch salesman called him to suggest an alternative. The company later told Gonen the switch triggered an automatic extension of his two-year agreements, in turn making him subject to early-termination charges when he halted service at the original two-year mark.
“The [FCC ruling] now puts the onus on the companies to improve their service and live up to the promises they make,” Spitzer said. If they don’t, he added, “there will be many, many more lawsuits to come.”
Earlier this year, California Atty. Gen. Bill Lockyer teamed with a Bay Area district attorney and the Los Angeles City attorney in a lawsuit accusing AirTouch Cellular and Tandy Corp. of false, misleading and unfair business practices in the sale of AirTouch service through Radio Shack stores.
The suit--which closely mirrors the Gonen case--alleges that the companies illegally enforced two-year oral contracts, misled customers into believing they could change plans without extending their service contracts, and improperly imposed early termination fees. The prosecutors seek an estimated $20 million in penalties.
Officials at Verizon declined to comment on the pending cases involving AirTouch.
State and national consumer groups say similar claims could be brought against nearly all the wireless carriers, most of whom have engaged in similar practices involving early-termination fees for canceled service. In California, for example, regulators have said that one-quarter of all complaints about wireless carriers involve early termination fees.
“I’m very concerned because our complaint rate is rising substantially every year,” said Helen Mac Murray, chief of the consumer protection section in the Ohio attorney general’s office. “Some of that is because there are more cell phone users out there, but there’s so much misinformation out there, that even an educated person has a hard time trying to figure out what these services give you or don’t give you.”
One issue headed for renewed attention is the industry’s insistence on billing customers for phone calls using whole-minute increments even though the carriers are capable of clocking calls down to the second--as Nextel Communications already does.
Wireless Consumers Alliance contends that billing in one-minute increments amounts to shortchanging customers. “If you buy a plan that comes with 100 minutes of use, the reasonable expectation is that you’re going to get 100 minutes of use, not something less than that because of rounding up,” Hilliard said.
The industry, however, is unapologetic.
“This issue has been around for years. . . . It’s been an issue with pay phones, with long-distance company charges too,” said the CTIA’s Altschul. “But given the nature of the services, there is going to be rounding up, for either the minutes or the cents.”
What’s more, “the law has been clear in saying that there’s nothing unlawful about any of these practices as long as they are disclosed,” he said.
Service quality has been another major issue for consumers, especially in the last few years, as new mobile phone companies jumped into the market and began aggressively selling service with only limited coverage and network capacity.
In Los Angeles, Sam Naficy sued Sprint PCS in early 1998, arguing the company had exaggerated the available service quality and coverage for Southern California. The case is pending, but Sprint PCS recently offered to settle it and give qualifying customers $20 credits each in restitution--a move that could cost the company as much as $12 million.
AT&T; Wireless drew jeers in New York, San Francisco and other markets when it was unable to handle the load of customers who signed up for a popular new service plan.
“In a lot of places, plans are oversold . . . and customers may have a hard time getting a free channel because the system is jammed,” said Lou Richman, who oversees coverage and testing of telecommunications services for the magazine Consumer Reports. “Isn’t failure to deliver the expected quality of service justification for exempting yourself from the obligations of the contract with the carrier?”
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Elizabeth Douglass can be reached at elizabeth.douglass@latimes.com.
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CELL PHONE USERS BEWARE
Deregulation has given consumers more choices, new services and lower overall prices in the U.S. mobile phone market --and wireless companies have been rewarded with unprecedented growth. But customer complaints and lawsuits still nag the wireless industry, and critics are calling for more consumer protections. Some of the most common complaints are listed below.
* Inadequate disclosure or nondisclosure of important terms and restrictions for service plans.
Examples: Fine print noting requirements for certain cell phone models or multiyear service contracts; no mention of per-minute costs for usage that exceeds monthly allotments; use of verbal contracts and refusal to put terms in writing.
* Early termination fees.
Examples: Plans with hefty penalties for dropping service before the contract expires, especially plans that have no provision for prorating the fee; carriers that convince customers to change plans without disclosing that the switch will automatically extend their existing contracts.
* Undisclosed service limits on mobile phones.
Examples: Cell phones that have been programmed not to work with a competing carrier unless they are “unlocked” for a fee; phones that use technology incompatible with competing services; when customers make calls outside their home territory some mobile phones are programmed for use only on specific wireless networks rather than seeking the strongest signal.
* Misleading coverage maps.
Examples: Maps not detailed enough to give consumers solid information about service availability; nondisclosure of major coverage gaps within areas said to be covered.
* Substandard service quality.
Examples: Long hold times for customer service; frequent dropped calls; inadequate network capacity; inaccurate directory assistance listings from mobile carrier operators.
* Unfair billing practices.
Examples: Rounding up calling times to the nearest whole minute despite capabilities to bill by the second; billing from the moment a caller hits “send” or “call,” instead of when the connection is established; not billing for out-of-region calls in the month they were made, leaving customers unable to budget their calling to stay within monthly limits.
* Unfair pricing and terms for prepaid wireless service.
Examples: Prepaid plans that charge customers rates as high as $1.50 per minute; plans that include expiration dates that wipe out unused minutes in customer accounts even though air time is paid for in advance. * Misinformation or inadequate information from sales employees.
Examples: Misstatements from poorly trained sales employees at electronics, office supply and department stores; off-the-shelf packages that include important price and service information inside the sealed box instead of outside so consumers can read it before buying.
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SOURCES: Los Angeles Times, consumer advocates, regulatory reports.
