A state appeals court on Tuesday upheld a $12.1-million fine against Cingular Wireless for signing up customers faster than it could provide service and for imposing high cancellation fees without a trial period.
The mobile phone carrier also must pay as much as $10 million in refunds to people who canceled their contracts.
A three-judge state Court of Appeal panel in Santa Ana unanimously rejected the cellular phone company’s efforts to derail a 2004 order by the California Public Utilities Commission.
The PUC had found that Cingular was signing up too many customers for its network over a 29-month period starting in 2000 and then forcing them to pay as much as $550 to cancel service.
The decision elated consumer advocates.
“It is a very strongly worded affirmation of the principle to all of the cellular companies operating in California that they are not above the law and must be accountable to their customers,” said Michael Shames, executive director of the Utility Consumers’ Action Network in San Diego. “It was the court’s way of asking the carriers: ‘Do you hear us now?’ ”
Cingular, now the nation’s largest wireless company, said it was disappointed with the decision and was “strongly considering” an appeal to the state Supreme Court.
“The claims about our business practices, network and customer service quality were completely unfounded five years ago,” said Lauren Garner, a Cingular spokeswoman. “And today, Cingular is the industry leader in customer-friendly initiatives.”
Those initiatives include a nationwide 30-day return policy.
But from January 2000 to May 2002, the PUC found, Cingular did not allow customers to cancel service during a trial “grace period” unless they paid a fee, even though the company said that testing its wireless service was the best way to figure out whether it met customers’ needs.
Cingular charged $150 to release customers from their contracts, and independent agents were allowed to charge an additional $400.
The cellular carrier’s practices worsened during 2001, the PUC said, when Cingular acknowledged that its network couldn’t keep up with the addition of new customers. Yet it continued signing up new customers.
Anticipating the court’s ruling, PUC Executive Director Steve Larson sent a letter to Cingular Friday saying the company should prepare to start paying reparations immediately.
The PUC estimates that nearly 70,000 California customers would share in a little more than $10 million in refunds. Cingular is expected to deliver the names and numbers of affected customers in a report to the agency.
Cingular is 60% owned by AT&T; Inc. and 40% by BellSouth Corp. AT&T; has a $67-billion all-stock deal pending to acquire BellSouth.