Phone Bill Woes

An Arizona court ruled in 2005 that the TCPA, which prohibits unsolicited phone calls to cell phones, also applies to SMS or text messaging. The defendant in the case, a mortgage firm by the name of Acacia, tried to appeal to the U.S. Supreme Court, but the appeal was rejected this year, so the Arizona ruling stands. It applies, however, only to mass e-mailings delivered to cell phones as SMS messages; customers remain unprotected if an individual uses a cell phone to send spammy text messages, say sources at the FTC familiar with the case.

The Mobile Marketing Association, an industry trade group, has recently developed guidelines for strictly policing text messaging ads, such as a double opt-in requirement where you must confirm your subscription. Marketers must now agree to abide by these MMA guidelines to gain access to carriers' customers. (See " Is That a Sales Pitch in Your Pocket?" Consumer Watch, January, for more.)

The American Association of Retired Persons and other consumer groups want to get more information from carriers about another often mysterious portion of cell phone bills: the taxes and user fees levied by local, state, and federal agencies. These taxes average 14 percent of a cell phone bill, according to the CTIA, and can be as high as 21 percent in states like Nebraska.

Such taxes and fees are often not factored in when wireless plans are marketed to the public, says Bill Ferris, a lobbyist for the AARP. For that reason, the AARP is fighting to allow cell phone customers to cancel their contract 15 days after receiving their first bill without getting hit with an early termination fee. The CTIA argues that early termination fees, which can be as high as $250, ultimately keep the price of wireless service and handsets low because they go toward helping companies recoup the cost of customer acquisitions, the administrative costs for creating and cancelling accounts, the cost of handsets, and so on.

These contracts have one simple purpose: to make it prohibitively expensive to dump a bad wireless service, counters Ben Schwartzman, an attorney with the Boise, Idaho, firm Greener, Banducci, Shoemaker. The firm is suing T-Mobile over the company's early contract-termination fees. Schwartzman says his firm decided to sue T-Mobile when several of the firm's attorneys discovered they couldn't get service on their new T-Mobile phones in remote parts of Idaho where they did business. The lawsuit, filed in an Idaho U.S. District Court, claims the $200 flat fee that T-Mobile charges when customers cancel service before the end of a contract violates consumer protection laws in 13 states. A T-Mobile spokesperson declined to comment, saying the company does not talk about pending litigation.

Some consumer advocacy organizations, such as the U.S. Public Interest Research Group, are turning to government for a solution. U.S. PIRG has been lobbying for truth-in-billing legislation, and its efforts, along with those of similar groups, are paying off as legislative proposals appear in several states around the country.

At least three states are currently dealing with wireless billing issues. California lawmakers have been pushing a Telecommunication Consumer Bill of Rights. Minnesota legislators are considering a statute establishing consumer protection for cell phone users. Similar efforts are under way in New York where the AARP is backing legislation forcing cell phone companies to make bills easier to understand and allow customers to cancel service contracts without penalties.

Wireless carriers oppose state-level regulations. They would prefer to have a single federal agency, such as the Federal Communications Commission, set national standards. "Complying with disparate regulatory regimes will only increase customer costs and slow innovation," CTIA president and CEO Steve Largent said in a statement.

At this writing in early 2007, none of the proposed consumer protection laws for cell phone users have yet been passed.

Dump Your Cell Phone Company

Unhappy with your wireless provider? You don't always have to pay hefty fees to break free from your contract. For a nominal one-time charge ranging from $15 to $20, some sites offer you a service that lets you jettison your unwanted contract or swap it with another user for a service you prefer.

Two such sites, CelltradeUSA.com and Resellular.com, have been around for about a year; newcomer Cellswapper.com launched in January. These sites create an online venue through which people who want to buy, sell, or swap a cell phone contract can meet and negotiate. If you want to transfer your account, however, you must call your carrier and make the request to transfer your phone and contract to someone else. Carriers go along because, although they lose one customer, they get another, and the contract is ultimately honored. "We look at it as an opportunity to win over a new customer," says Roni Singleton, the Sprint spokesperson.

Cellswapper.com co-founder Adam Korbl says that there are about 260 wireless contracts for sale on an average day at his site, and that about 100 contracts are purchased each week. Users who want to make their sale quickly tend to sweeten the deal by throwing in the old phone or by offering a cash incentive. If the seller doesn't include the old phone in the exchange, buyers must purchase their own to match the new service, with no carrier subsidy. Still, sellers and swappers tend to come out ahead since their final costs are often far below the termination fees, which can be as high as $250.

If you're looking for another escape route, pay close attention to the fine print in any contract updates your carrier sends you. For example, in January, Verizon offered some of its customers an opportunity to quit their cell plans and pay no termination fees because it raised the rates on its text message service, thereby changing the terms of the contract.