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Wireless service costs dominate consumer group 2009 agenda

Wireless service contracts and prepaid calling cards are high on the agenda for a consumer activist group that hopes the Obama Administration and a new FCC will act to protect consumers from what it considers excessive fees.

A consumer activist group this year is targeting five telephone service issues with wireless operators, Congress and regulators in an effort to protect consumers from mobile and prepaid calling-card fees that can drive up consumer costs.

Consumer Action, a nonprofit consumer education and advocacy organization,

I think we have some opportunities, both in terms of legislation and regulations dealing with disclosure but also tightening up the regulations ...
Ken McEldowney, executive director, Consumer Action,
expects to make progress on its national agenda this year, particularly with a new administration in Washington, D.C., according to executive director Ken McEldowney, who outlined the group's issues this week. Wireless operator contract issues dominate Consumer Action's agenda and include early termination fees, excessive overage charges, contract extension following phone loss, and increasing text-message fees. Fraudulent prepaid calling-card fees are the group's only issue outside wireless services.

"Now, with the new Administration, new [Democratic] majorities in Congress, plus new people being appointed to the FCC, I think we have some opportunities, both in terms of legislation and regulations dealing with disclosure but also tightening up the regulations on cell phone companies," McEldowney said.

Consumer Action will seek legislation on what it considers fraudulent practices and will continue to pressure service providers to improve their disclosure practices, according to Sol Carbonell, national priorities associate with the organization. Carbonell also urged consumers to research providers before signing a contract and explore all contract terms and conditions.

Not everyone agrees with the consumer group's agenda. CIMI Corp. president Tom Nolle said: "You can't take communications provider services and pull them out of the mix of services of profit and loss overall and make a determination on their individual appropriateness." Nolle cited a study by Andrew Odlyzko, a professor of mathematics at the University of Minnesota, which found that profits generated by text messaging far outweigh those of Internet backbone services. Nolle added that if wireless providers were forced to lower the cost of text messaging to equal that of Internet backbone, it would cause severe problems.

"If we do this, service provider profits will drop effectively to zero," he said, "and we will lose public communication."

Consumer Action 2009 telecom agenda

  • Early wireless termination fees: Consumer Action expects providers to offer only limited relief to customers who want to end their contracts early, although McEldowney hopes to see tighter legislation on wireless carriers coming from Obama Administration recommendations.
  • Excessive overage charges: The organization does not expect that wireless operators will this year decrease their per-minute charges for users who go over the number of minutes in their service plans, which can mean charges of up to 45 cents per minute.
  • Contract extensions following phone loss: Consumer Action will continue pressing wireless providers to improve their disclosure practices so consumers are aware that a lost or broken phone could result in a contract extension.
  • Increasing text message fees: The group considers any increased text fees unjustified, since they use little bandwidth. Per-text fees usually go into effect when a user has gone beyond the number of text messages specified in a service plan.
  • Calling card fraud: Consumer Action will press for legislation against calling card fraud, which often affects immigrant populations making international calls. McEldowney said many calling cards deliver only about 50% of the minutes users purchased.

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