Ed Markey’s at it again, this time meddling in the wireless services market. He has a new bill out which is aimed at wireless carriers primarily (see my post on his previous effort here.)
From the preamble, which lays out the context for the proposed legislation:
(2) Wireless service has become a replacement for traditional telephone service for millions of consumers in the United States.
(3) As wireless service is increasingly used and relied upon by residential and business consumers, such consumers will increasingly depend on Federal and State authorities to apply and enforce essential consumer protections applicable to such service in a manner commensurate with the role such authorities have played in ensuring consumer protection with traditional telephone service.
So, the key argument here is that, since wireless services are replacing wireline services for at least some people, the same (or similar) “consumer protection” provisions are required for wireless services as have previously been made for wireline services. Before I got to the second half of (3) above while I was reading it, I assumed it was going to say “the same protections as are applied to other commercial businesses under existing US law.” Because that’s the logical thing to say: wireless consumers should be subject to all the same consumer protection provisions as consumers of any other product or service. Why do we need special rules for wireless services?
In Section 101 (a) (1) we get to the meat of the matter. The Bill proposes that carriers should have to disclose to consumers the complete terms of any plan they’re signing up for, including the duration of the plan, the number of minutes included (although no mention of data transfer), any trial period, “the terms of subsidizing any wireless customer equipment” (whatever that means), and information on early termination and other non-recurring fees. Carriers also have to disclose up front any and all charges, including taxes (which could be tricky since they change from time to time, as do charges).Now, in and of itself, this is reasonable enough, but isn’t the bulk of it covered by existing consumer protection laws? And if not, why does the wireless industry have to be different from other industries?
Section 102 deals with early termination fees. The first requirement is:
each commercial mobile service provider to offer a wireless service plan for which there is no early termination fee;
Which would presumably be covered by prepaid plans, now offered by all major carriers. Which makes this a bit of a hollow provision. Section (2) adds:
that if a commercial mobile service provider offers such plans with subsidized wireless customer equipment, such provider shall offer to consumers the opportunity to purchase subsidy-free wireless customer equipment in return for the ability to secure service, without a long-term wireless service plan, at a price no higher than a comparable wireless service plan offered with subsidized wireless customer equipment;
Now, some people have assumed this means that AT&T would have to offer unsubsidized iPhones. I’m not sure it does, since it doesn’t specify that customers shall get the same “wireless customer equipment”. At the very least, this is an easily exploitable loophole. But it’s not clear that Markey’s intention is even to force de-subsidization of all handsets, just the option to buy one or more handsets in this way. Of course, Verizon Wireless has already announced that it plans to allow customers to attach any phone that meets basic requirements to its network, and AT&T and T-Mobile as GSM carriers offer this option by default.
Section (3) requires that early termination fees (ETFs) must be prorated over the life of the contract, and that the proration is just based on the cost of subsidizing handsets (which suggests that ETFs should be different for each handset rather than standardized).
Then we get onto wireless coverage maps, which must be provided by each carrier, and which must depict sufficient detail that they show
(A) generally geographic areas where commercial mobile service is not predicted to be regularly available; and
(B) whether or not a consumer is predicted to receive commercial mobile service in the general geographic area in which such consumer’s primary residence is located, to the extent prediction of reception in such area is feasible using the formats specified in paragraph (1).
“General geographic area” is just vague enough to be completely useless. All carriers provide some kinds of maps for coverage - see:
These tend to provide enough detail to see if your street gets coverage, and that’s about all that can reasonably be expected. So what’s the point of this provision? To be really useful, these maps need to tell you whether you can get coverage inside your house (which is where most people have problems) but that’s impossible. So again, this feels pretty pointless, especially given the fact that the carriers are already providing such maps without legislation requiring them to.
Markey also wants the carriers to do the government’s dirty work for it:
to require that any charge specifically required by a Federal, State, or local statute, rule, regulation, or order to be collected from a subscriber be listed in a separate section of each bill sent to a subscriber and itemized separately in clear and plain language;
Section 105 is the “create employment in the wireless industry section” (not really, but it could be), since it requires potentially huge amounts of disclosure on the part of the carriers about their coverage, signal strength and other items. This seems to be covering more or less the same ground as the mapping question, but could potentially go a lot further in the hands of an interventionist FCC.
Now onto contract extension. The bill requires that customers not be provided contract extensions unless:
the subscriber agrees to extend such plan by providing express consent to such extension
Cue angry customers a few months from now wondering why the heck their cellphone service has been cut off when they pay their bill every month, because the alternative to extension is cessation of service, and we all know a lot of customers won’t respond in time.
We now get to the Verizon clause. Apparently, the fact that Verizon has offerered a 30-day trial period (its “Worry Free Guarantee“) means not that the market will take care of this on its own, but that everyone should be forced to do it. At least the bill doesn’t require carriers to pay back any fees racked up during those 30 days as Verizon has willingly agreed to do.
This Worry Penalty Free option is pretty ironclad:
a wireless service plan may be canceled upon the request of a subscriber for any reason during the 30-day period that begins on the date on which such plan was executed.
Note: “for any reason” - i.e. just if they feel like it, or if they enjoy hopping from carrier to carrier just to drive them nuts and cost them money by forcing them to restock used devices and sell them at a discount. And this next point is not quite clear either:
If a subscriber exercises the right to cancel such plan under paragraph (1), a subscriber shall receive a pro rata refund of the charges, if any, paid for wireless customer equipment used in conjunction with such plan if such equipment is returned during such 30- day period.
What’s pro rata about buying a phone? If they mean that carriers can charge a reasonable re-stocking fee, that seems sensible, but there’s nothing pro rata about that.
I’m not going to dwell on the wireless broadband stuff or the spectrum efficiency stuff at the end but might come back to that later.
Overall, this feels like more intervention in a market which has generally done very well by consumers in terms of providing good service at declining prices and offering compelling devices and services. Yes, there are transparency issues, and yes, there are misunderstandings about contracts, but I believe these can be addressed under existing laws and through market-based incentives (just look at that Verizon Worry Free Guarantee and the presence of coverage maps on all the major carriers’ sites as examples). We really don’t need more legislation in this area.
