Hate Your Cell Phone No More

The Cell Phone Empowerment Act of 2007, introduced to the Senate on September 7th by Senators Amy Klobuchar (D-MN) and Jay Rockefeller (D-WV), aimed to instill more flexibility and fairness into an industry notorious for its imperious treatment of customers. Now it seems some of the big cellular companies are aggressively fighting to undercut the bill, which could both help and harm consumers.

On October 16, AT&T announced (plans to pro-rate its early termination fees, and eliminate the required contract renewal that comes with upgrading or downgrading plans. AT&T didn't specify details of the change, but it will apparently go into effect next year as part of the company's new, "more consumer-friendly policies." Verizon also announced recently that it would allow customers to switch plans without a contract renewal, though it made no changes to its early termination fees.

While these are welcome gestures to some, the two cellular titans may be attempting to preempt the Cell Phone Empowerment Bill, which for consumers could have mixed results. Yes, they'll gain protection from a few unfair contract terms, but if the legislation gets voted down because it's deemed unnecessary, they'll be miss out on the other, more significant, benefits of the bill. "Anyone who's looked at a cell phone bill knows it's a hodge-podge of fees and surcharges that supposedly cover regulatory or administrative costs," says Rockefeller. "The reality is... these [are] deceptive billing practices."

The goal of the bill is to reduce the overall expense of owning and using cell phones, while preventing customers from being unpleasantly surprised by coverage claims unmet and contract changes unannounced. The bill would also require ultra-detailed maps of coverage, so that a prospective customer can be sure to receive service at his home or workplace, and it would demand that carriers publish reports detailing their annual rates of calls dropped. Other features of the legislation would mandate a 30-day, no-penalty cancellation period after signing a mobile contract and explanations of taxes and fees on every bill.

The bill would also require the FCC to examine the legality of "locking" phones to one carrier -- a process that has affected millions of iPhone users and become the subject of much Internet buzz. The process of locking involves shipping phones with extensive software limitations built in, so that consumers are prevented from using the phone on a competitor's network, or installing un-endorsed third-party software. While adventuresome phone-owners can often circumvent these limitations, they risk destroying their phone.

But regulating any industry is a big step for the government. "The rules governing our wireless industry are a relic of the 1980s, when cell phones were a luxury item that fit in a briefcase instead of a pocket," Sen. Klobuchar said in a public statement, suggesting that mobile phones have become, in the parlance of regulatory bureaucracy, "essential and large-scale" With more than 200 million subscribers in the U.S., it's hard to argue that mobile phones haven't met these conditions for regulation.

Predictably, lobbyists for the cellular carriers foresee numerous unanticipated consequences. Steve Largent of The Wireless Association (CTIA) said in a statement, "The Klobuchar-Rockefeller bill is unnecessary and, if enacted, threatens to increase the cost of wireless service and reduce the number of choices available to American consumers." Largent, a Republican former Congressman from Oklahoma, went on to note statistics that indicate "just nine for every one million subscribers" registered contract-related complaints between 2003 and 2006. As ArsTechnica comments, that data seems contradictory to the findings of other independent research firms and to the common knowledge of most customers.

It is true that the bill could end up passing on more costs to customers. Pro-rating early termination charges, for example, will reduce barriers to switching carriers more frequently. Because, by law, customers are allowed to take their numbers with them, this represents a potentially significant increase in costs for mobile companies; the more often people switch, the more often company personnel have to engage in the technical process of converting numbers to new carriers, which consumes time and resources.