3 top cell-phone firms agree to clarify bills, areas

Settlement with 32 states stems from complaints

July 22, 2004|By Paul Adams | Paul Adams,SUN STAFF

The nation's three largest mobile phone companies pledged to provide more consumer protections for tens of millions of cellular users after a three-year probe by state regulators into growing complaints about murky billing practices and deceptive advertising.

A settlement was announced yesterday between 32 state attorneys general, including Maryland's, and Verizon Wireless, Cingular Wireless LLC and Sprint PCS.

Under the agreement, the three cell-phone companies must provide customers with detailed maps of their coverage areas, clearly spell out monthly service charges and allow customers to cancel their service within the first two weeks without being charged an early termination fee.

Consumer advocates said the agreement should help customers avoid surprises as they sort through the bewildering array of calling plans, which carry widely varying usage charges and terms.

The agreement stems from a probe of wireless advertising and marketing practices launched by 22 states in March 2001. The initiative was later joined by 10 other states, with Maryland among those leading the effort.

"The carriers will now have to spell out very clearly where their coverage is, so if they advertise nationwide or coast-to-coast coverage when in fact there are areas that they don't have coverage, they'll have to show that on a map," said Maryland Attorney General J. Joseph Curran Jr.

The investigations focused on the three largest companies because that's where the bulk of the complaints were coming from, Curran said.

AT&T Wireless will likely become part of the agreement if its pending purchase by Cingular wins approval. Together the three cell-phone companies have 85.3 million customers out of a total of 158 million nationwide.

Curran said his office has fielded numerous complaints from cell-phone users about unexplained charges on their bills and spotty coverage in areas where consumers expected to have clear service.

Under the settlement, companies must give customers a clear explanation of all service charges in their calling plan. Consumer advocates note that calling plans can grow complex because of the variety of options and rate structures.

In addition to the two-week cancellation policy, the three providers must allow customers to recover any activation fees if they terminate service within three days for any reason. The three carriers also agreed to pay $5 million toward consumer education efforts.

The Consumers Union called the agreement a step in the right direction, but said it doesn't go far enough.

The consumer advocacy group wants cell-phone companies to provide a 30-day window for customers to cancel their plans without paying a termination fee, similar to a regulation passed recently by the California Public Utilities Commission.

"I think overall it's a good agreement because it shows that those consumer frustrations are being taken seriously in that 32 states took action to address the kinds of complaints they were hearing from consumers," said Janee Briesmeister, who heads the Consumers Union's campaign to improve cellular service to customers.

Wireless carriers say the agreement mirrors industry practices already in place and closely follows a voluntary consumer code adopted by the Cellular Telecommunications & Internet Association, an industry trade group.

Major wireless providers have already adopted the code, which includes a 14-day return policy and disclosure of terms similar to those in the agreement with the 32 states. Consumer activists have criticized the code as being toothless since it is voluntary.

"That [code] actually achieves a lot of what's in the settlement with the states," said Travis Sowders, a spokesman for Sprint PCS.

The difference, Verizon spokeswoman Nancy Stark said, is that the three companies have committed to maintaining such practices well into the future.

"These are minimum requirements that, first of all, we hope raise the bar for the entire industry and all wireless consumers," she said.

Stark said Verizon, the nation's largest provider with 38.9 million customers, already meets or exceeds the standards set in the settlement, and points out that the attorneys general leveled no charges of wrongdoing against the companies involved during the three-year investigation.

"We aggressively disagreed throughout this process that there was any misleading advertising on our part," she said.

Jennifer Bowcock, a spokeswoman for Cingular, said the company already provides customers with color-coded maps showing its coverage areas, as well as a detailed service summary that explains all charges to customers.

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