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Dec. 14, 2009

Although the FCC is already placing the whole wireless industry under its own radar, the U.S. General Accountability Office (GAO) says the agency needs to greatly improve its policing of wireless and mobile phone services.

Overall, a GAO report of 1,143 adult wireless phone users reveals that about 84 percent of them are very or somewhat satisfied with their wireless phone service.

That part of the study pleased the CTIA (Cellular Telephone Industries Association). "In this fiercely competitive industry, our members work hard for each customer to provide them with the best products and services," CTIA President and CEO Steve Largent said in a release.

On Dec. 7, the FCC sent a letter to Verizon Wireless seeking answers to its ETF policy changes and the rationale for increasing the fee for an "advanced device." Verizon was given until close of business on Dec. 17 to respond to the letter and to explain its actions.

In response to the GAO report, Chris Riley, policy counsel at the consumer rights group Free Press, said it confirms that wireless carriers are using inflated early termination fees to lock millions into long-term contracts. And Verizon certainly isn't the only one either.

"Consumers are being forced to pay hefty termination fees that the carriers simply just can't justify. Public interest groups, consumer protection associations, Congress and now the GAO have all expressed concern with these so-called ETF fees," he said in a statement. "The FCC must act and put a stop to this anti-consumer practice that threatens innovation and competition in the mobile industry."

In November, some reports surfaced that Verizon Wireless was doubling its ETF from $175 to $350 for more pricey, advanced devices, prompting Sen. Amy Klobuchar to introduce the Cell Phone Early Termination Fee, Transparency and Fairness Act.

According to the GAO survey, most wireless users with problems would not complain to the FCC and many don't even know where they could take their complaints to in the first place. "Lacking in-depth analysis of its consumer complaints, the FCC 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," the GAO suggests.

The Federal Communications Commission was given a chance to comment on the report, and it said the agency has begun work to address many of the concerns raised in the GAO report.

The GAO estimates 86 percent to 89 percent of wireless phone users are satisfied with their coverage when using their phones at home, work or in a vehicle. But the GAO does estimate that about 19 percent of wireless users wanted to switch wireless carriers during the survey period last year and early 2009 but did not do so.

About 42 percent of mobile users didn't switch because of early termination fees (ETFs), which are increasingly coming under government scrutiny, not just in the U.S. but also in Canada and a few more countries.

In his statement, Largent said the CTIA understands there may be some confusion over early termination fees. "There are many choices available for consumers," he said, including options that do not have any ETF, such as unsubsidized wireless handsets without a contract and a prepaid plan that has no contract – options that 20 percent of U.S. wireless consumers now choose.

The 71-page GAO report also encourages more interaction between the FCC and state agencies.

State commissions surveyed indicated that communication with the FCC about wireless phone service oversight is very infrequent. As such, the "FCC is missing opportunities to partner with state agencies in providing effective oversight and to share information on wireless phone service consumer concerns," the GAO report says.

The report was done at the request of Rep. Edward Markey, member of the House Energy and Commerce Subcommittee on Communications, Technology and the Internet and a longtime proponent of net neutrality.

The GAO now expects the FCC to adopt new plans that will improve its accountability and oversight of the wireless industry, and that would take effect in the new year.

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Source: The U.S. General Accountability Office.