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Regulating Wireless Company Billing Practices to Prevent Bill Shock

Maria Fechter, St. John's University School of Law Class of 2012, is the author of the final article in a ten part series from the staffers of the Journal of Civil Rights and Economic Development under the direction of Professor Leonard Baynes. She writes on the need to provide regulations that prevent bill shock...

In 2010, Kerfye Pierre traveled to Haiti to help the victims of the country's devastating earthquake. Upon her return to the US, T-Mobile had billed her $35,000 for cell phone usage while in Haiti. Although Pierre was aware that T-Mobile had granted its customers that were volunteering in Haiti a temporary free voice plan, T-Mobile failed to make clear that it was still charging for data and text messaging services. While in Haiti, Pierre text messaged friends and family to let them know she was safe. T-Mobile never alerted Pierre that it was charging her for those text messages at a higher roaming rate. She remained unaware of this higher charge until she received the bill. T-Mobile offered to reduce Pierre's $35,000 bill to $5,000, which was still unaffordable.

Kerfye Pierre is not alone in her experience with "bill shock." A recent survey done by the Federal Communications Commission (FCC) indicated that 30 million Americans — or one in six cellphone users — have experienced bill shock, and 88 percent of those users were not contacted by their cell phone companies before incurring such charges. The charges range from a dollar to thousands of dollars above a customer's normal monthly bill. 23 percent of the customers surveyed reported charges that exceeded their normal monthly bill by more than $100.

To address this problem, the FCC proposed a regulation that will "empower consumers to avoid bill shock." Under the regulation, cell phone companies are required to alert customers when they are approaching or begin incurring overage or roaming charges. Additionally, under the FCC's proposed regulation companies must provide clear disclosure of any tools offered to track usage. The question remains: are these protections really enough?

One major flaw in the FCC's proposed regulation is that it does not require cell phone companies to allow customers to cap their usage. Such capping requirements would mean that customers could select a specific overage amount, for example $50, at which point their wireless service would be disabled. The purpose of this requirement would be to provide a secondary protection for consumers in case they exceeded their monthly plan's allowances. Thus, customers would be alerted if they are approaching, or begin incurring, overage or roaming charges, as the FCC's proposed regulation currently proscribes. Then they could also choose to set a specific capping amount at which their service would be disabled altogether. In fact, the FCC has a model to look to for these capping requirements, the EU's 2007 regulation [PDF] to address the bill shock problem in Europe. Given the capping requirement's success in EU regulation, this requirement would create a more complete regulation for US wireless customers, and would empower them to proactively avoid the bill shock problem.

The FCC's proposed regulation also fails to address the problem of a consumer's ability to block services that they wish to exclude. The danger of not including such a provision in the proposed regulation can be exemplified by the dynamics of a family wireless plan. Children on family plans have access to costly services through their personal wireless devices, like premium text messages, yet they may not understand the true cost of those services. Premium text messages are text messages provided by third party content providers that subject customers to additional charges beyond their standard messaging charges. For example, consumers may incur premium fees by participating in interactive voting during television shows, purchasing ring tones, or subscribing to daily jokes that are sent to your cell phone. Without enabling parents to limit their children's usage of specific services, wireless companies are exposing parents to the bill shock that may result after their children have already incurred these unexpected fees. Thus, the FCC's bill shock regulation should make the ability to block specific services mandatory, as such a requirement would further the FCC's mission of providing greater transparency and allowing consumers to set personal limits on their cellular usage.

Furthermore, these two additions to the proposed regulation are well within the FCC's authority to institute. In light of the broad discretionary standard set forth by the Supreme Court in Chevron USA Inc. v. Natural Resources Defense Council, Inc., and the great public interest at hand in regulating to protect consumers against bill shock, the FCC certainly has the authority to enact such a regulation under the Communications Act.

All in all, the call for bill shock protection is merely a call for transparency and consumer empowerment. Wireless companies should give their customers adequate information upfront to prevent bill shock from ever occurring. Specifically, consumers should be notified if they are exceeding their usual monthly bill amount, they should be aware of the tools that are available to monitor their usage, and they should have the ability to protect themselves from incurring such charges.

Maria Fechter is an Articles Editor for the Journal of Civil Rights and Economic Development at St. John's University School of Law. She graduated summa cum laude from Binghamton University in 2009.

Suggested citation: Maria Fechter, Regulating Wireless Company Billing Practices to Prevent Bill Shock, JURIST - Dateline, Oct. 24, 2011, http://jurist.org/dateline/2011/08/maria-fechter-preventing-bill-shock.php.

This article was prepared for publication by Megan McKee, the head of JURIST's student commentary service. Please direct any questions or comments to her at studentcommentary@jurist.org

Opinions expressed in JURIST Commentary are the sole responsibility of the author and do not necessarily reflect the views of JURIST's editors, staff, donors or the University of Pittsburgh.

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