Twenty years ago, when cell phones first hit the market and the industry was in its infancy, cell phones were seen as the accessory of tycoons and moguls like Gordon Gecko in the movie Wall Street. Two decades later, cell phones are not just on Wall Street, they’re on Main Street, with more than 200 million subscribers nation wide. The wireless industry is now one of our nation’s largest, with revenues topping $100 billion per year.
Cell phones are no longer a luxury, but a necessary part of our lives. For an increasing number of Americans, their cell phone is their only phone.
Despite the explosion in the market, the wireless industry continues to operate under rules from two decades ago – when cell phones were a niche market and service was limited to urban areas (and phones were so large they could barely fit in a briefcase, let alone a pocket).
Under these outdated rules, consumers often feel like their wireless providers have the upper hand and consumers enter into restrictive contracts without full information.
Once they’ve signed the contract, they often find the quality of their wireless providers’ service is not what they need or expect. And they face cancellation fees that can total hundreds of dollars if they try to find better service before the end of their multi-year contract.
A recent Washington Post article illustrates the anger that consumers feel towards their wireless providers. That article profiled a man so upset with his cell phone service that he faked his own death in an effort to escape the contract and the cancellation fees.
Even that didn’t work!
It’s now time for some new rules in the wireless industry.
The legislation that Senator Rockefeller and I have introduced – a cell phone bill of rights – has a very simple goal: to enable consumers to make the best choice that fits their particular needs.
This legislation is narrowly tailored to allow consumers to make true market-based decisions, based on the best price and quality of service – which is what the cell phone industry says it wants. To do this, you need to be able to change carriers to get better service. And this is why our legislation will place limits on so-called "Early Termination Fees," which have been a real sore spot for consumers and a source of abuse by cell phone companies.
Most of the more than 200 million cell phone subscribers in this country are in long-term service contracts with their provider.
But, too often, consumers only find out AFTER committing to a multi-year contract that their wireless service doesn’t meet their needs.
Perhaps their wireless carrier’s quality of service is not what they had expected, providing only weak signal strength in the locations they need it most.
Maybe they got sticker shock from a bill that, after fees are included, is higher than they budgeted.
Or they could move their home or office, to an area where their existing cell service doesn’t work well or perhaps even at all.
But these realizations come after it’s too late to exit their contracts without paying these excessive penalties.
I know that yesterday, AT&T announced that it would pro-rate its ETFs and that Verizon has done so for some time now. But together, AT&T & Verizon comprise only around 55 percent of the market, meaning that the other 45 percent or so of subscribers – or over 100 million Americans – may still be subject to these fees.
Our legislation will require that ALL wireless providers pro-rate these fees so that, at a minimum, a consumer who exits a two-year contract after the end of the first year will have to pay only half of the Early Termination Fee.
This legislation will also require that wireless carriers provide consumers with information on their service quality, including maps that are honest, up-to-date, and detailed enough so consumers can tell if they will have service at their home, school or workplace.
To make a true market decision, a cell phone customer needs to know if their phone will work. Too often, the maps appear to show that a consumer will have coverage in a certain area, but if you read the fine print, the companies say that these maps may not be all that accurate, and in some cases, that "actual coverage area may differ substantially from the map graphics."
And in addition to maps, consumers should also be entitled to data on dropped calls and coverage gaps. If cell phone companies are going to advertise that they have "the fewest dropped calls" or "more bars in more places," or "the most reliable network," then they should be able to collect information on the number of dropped calls and service quality and provide this information to consumers.
Consumers also need to understand their bills so that they can compare wireless carriers by price. To do this, our legislation will require that wireless companies refrain from including on their bills charges or fees other than those for the wireless service or that are expressly authorized by federal, state or local regulation.
As a member of the Senate Commerce Committee, you would think I could understand my cell phone bill. I don’t. And most Americans don’t either.
In fact, most consumers can’t understand why their monthly bill is often higher than what was advertised by their wireless company. The bills are hard to translate, contain mysterious charges such as "regulatory fees," and seem to fluctuate from month-to-month for no apparent reason, making it difficult to balance the family budget.
As a simple matter of fairness, this legislation will require that wireless companies provide simple, easy-to-understand bills.
And finally, the legislation will put a stop to automatic, “secret” extensions of cell phone contracts.
For example, some cell phone companies will extend your contract without telling you, simply when you call up and add more minutes or make other minor changes to your plan.
This legislation will end that abusive practice.
Competitive markets work best when consumers have full access to information. And that is the overriding purpose of this legislation: to ensure that cell phone consumers have the necessary information they need to make the best decisions for themselves and their families.
Before concluding, I would like to recognize the witnesses here today:
Lori Swanson, the Attorney General of Minnesota. I worked closely with Attorney General Swanson when I was County Attorney for Hennepin County and she was the Solicitor General and I welcome her here this morning. I’d also like to welcome:
Patrick Pearlman, Deputy Consumer Advocate, Consumer Advocate Division, West Virginia Public Service Commission
Chris Murray, Senior Counsel with Consumers Union
Lowell McAdam, President and CEO of Verizon Wireless
Mike Higgins, CEO of West Central Wireless
Jerry Ellig, with the Mercatus Center at George Mason University
I look forward to hearing from our panel of witnesses.