AT& T, Verizon Loosen Cell Contracts
Thursday, October 18, 2007
The nation's two largest wireless carriers amended their policies on cellphone contracts before a hearing held yesterday by lawmakers interested in legislating consumer-friendly practices.
AT&T and Verizon Wireless said they would let customers make changes to their calling plans without automatically extending their contracts. AT&T also announced it would reduce the fees consumers pay for breaking their long-term contracts.
"Consumers often feel like their wireless providers have the upper hand," Sen. Amy Klobuchar (D-Minn.) said yesterday at the Senate Commerce Committee hearing.
Consumers filed more complaints about the wireless industry than any other sector for the past three years, according to the Council of Better Business Bureaus. Contract-related problems rank among the most common complaints.
A bill introduced last month by Klobuchar would require wireless companies to prorate the fees they charge customers to cancel their cellphone contracts. Many carriers currently charge up to $200 to cancel cellphone service before the end of a two-year contract. The bill would also force companies to allow customers to make changes to their calling plans without automatically extending their contracts.
Some consumer advocates say this preemptive move by AT&T and Verizon Wireless is an effort to convince lawmakers that further legislation is not necessary.
"The political pressure appears to be working," Christopher Murray, senior counsel for Consumers Union said in his testimony at the hearing.
On Tuesday AT&T said it would replace its $175 cancellation fee with a prorated system allowing customers to pay less if they are near the end of their contract. AT&T also said that it would allow customers to make changes to their calling plans without having to extend their two-year contracts with the company.
Verizon Wireless has prorated cancellation fees for nearly a year, but last week it also began to let customers change their calling plans without extending their contracts by a year or two.
Wireless carriers say cancellation fees help offset the deep discounts they typically offer on expensive cellphones. Sprint Nextel and T-Mobile charge up to $150 and $200, respectively, to cancel a contract early. Sprint Nextel allows customers to change their plans during the first six months of their contracts.
AT&T spokesman Mark Siegel said that while "many factors" go into the company's decisions, the policy changes "were driven primarily by what our customers tell us. . . . we are always looking to do what's fair and right for the customer."
Klobuchar applauded the companies' voluntary efforts but said they were not enough. She has also proposed requiring carriers to provide consumers with detailed maps of their coverage areas and data about dropped calls before signing up with a contract. Her bill would also allow individual states to impose additional rules on carriers' contract terms and fees.
Lowell McAdam, chief executive of Verizon Wireless, said such rules would create a "patchwork" of burdensome regulation that would slow down carriers' abilities to roll out services or respond to consumers' needs. He said providing detailed information on coverage area is difficult because reception levels vary between cellphone models.
The bill, which is co-sponsored by Sen. John Rockefeller IV (D-W.Va.), would also ask the Federal Communications Commission to look at the ability of carriers to prevent cellphones from being used on other cellular networks. That issue heated up recently after consumers complained about not being able to use Apple's iPhone on networks not owned by AT&T, the iPhone's exclusive carrier.
Sen. Ted Stevens (Alaska), the committee's top Republican, said he worries consumers "would be forced into less attractive wireless plans" if Congress intervenes on companies' policies. "If Congress acts too rashly, the end result could be that consumer prices would go up," he said.