FCC needs to stop 'cramming' on cellphones

The agency took steps against third-party charges on landline bills, but cellphone users still get hit by unauthorized charges — and phone providers get a cut.

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Wen Chao received a text message on her iPhone the other day from something called Ringtunecloud.com. It offered mobile content, such as ring tones, for $9.99 a month.

Chao, 43, ignored it.

About an hour and a half later, she received a more ambiguous text: "You play the peacemaker for others when two friends go to war. Suggest a new activity to the parties involved, and you will get peace."

Figuring it might have been from a friend, Chao clicked it open and — what do you know? — it, too, was from Ringtunecloud.com.

So she did exactly what wireless companies advise customers to do. She called her provider, Verizon Wireless, and asked that Ringtunecloud.com be blocked from sending any more texts to her phone.

The Verizon rep agreed to do this, but informed Chao that a $9.99 monthly service charge already had been applied to her account — just because she had clicked on the text.

"Opening a text can't possibly be interpreted as consent to receive whatever service they're trying to sell," Chao, a lawyer with the California Department of Insurance, told me. "But that's what they're trying to get away with.

"I don't see how this could even be legal."

Me, neither — and lawyers I've spoken with say it probably isn't. Nor do I understand how Verizon could be a willing accomplice in this racket by allowing Ringtunecloud.com easy access to a customer's bill.

Yet this kind of thing happens every day. It's called cramming, and it involves unauthorized charges ending up on people's phone bills.

Chao got her money back, but not everyone does.

The Federal Communications Commission adopted rules last year to prevent cramming on people's landline phones. The agency estimated that as many as 20 million households were affected by cramming annually and that third parties were responsible for about $2 billion in annual charges.

Phone companies such as AT&T and Verizon now have to notify landline customers that they may have the option of blocking third-party charges from their bills. But it's just a notice: The phone companies don't even have to offer the option.

Talk about toothless.

Worse, the FCC's cramming rules don't apply to wireless phones, though the agency later began the process of creating similar regulations for cellphones.

The Federal Trade Commission maintains that any unauthorized charge on people's wireless bills "poses a serious problem for American consumers." Wireless customers should be given the choice of blocking all third-party charges from their bills, the FTC says.

"We think it's important for consumers to have that choice," Duane Pozza, an FTC attorney specializing in mobile-technology issues, told me. "We're trying to make sure the problems we saw with landline cramming don't make their way into the mobile world."

But the wireless industry, which claims to have people's backs when it comes to cramming, thinks blocking all third-party charges would be a terrible idea.

And there's a reason for that: Phone companies get a cut of the action. More on that in a moment.

"Making it more difficult for a customer to purchase and consume third-party content not only risks cutting off customers from innovative products and from the convenience of their portable devices, it also potentially subjects a burgeoning industry of entrepreneurs and job creators to financial distress," AT&T said in its own comments to the FCC.

Wireless companies would prefer forcing customers to opt out of every single third-party gopher hole they stumble over, rather than adopting the FTC's more consumer-friendly blanket ban on third-party charges creeping into phone bills.

Verizon told the FCC that it would be too much of a hassle for people to have to lift the block any time they actually wanted a third-party service.

"This additional step would be inconvenient for customers and could deter them from participating in the mobile marketplace," the company said.

That concern would be a whole lot more believable if Verizon and AT&T weren't profiting from third-party charges. As it stands, they're probably pocketing many millions of dollars a year from crammers.

Lane Kasselman, an AT&T spokesman, called the company's share of cramming charges a fee for billing services. He declined to say how much of each charge is claimed by the phone company.

Ken Muche, a Verizon Wireless spokesman, also declined to specify how much his company takes from the likes of Ringtunecloud.com.

As for Chao's experience, he said, Verizon monitors third-party service providers, "and when we notice a pattern of problems from any particular provider, we work to rectify the issue — fast."

Muche said Verizon customers can go online and block various forms of mobile content from reaching their cellphones. This, he said, would prevent cramming charges from reaching their bills.

What happened to Chao proves that notion wrong.

I tried to reach someone at Ringtunecloud.com, but that proved impossible. There's a phone number buried in the company's online terms of service, but it wouldn't let me get anywhere close to a human being.

I tried to send an email from the site, but it required that I include a wireless number, and there was no way I was giving these jokers access to my cellphone.

The FCC shouldn't hesitate to follow the recommendations of its regulatory cousin, the FTC, which has ample experience with scams of all stripes.

Along with suggesting that consumers be able to block all third-party charges from their phone bill, the FTC is encouraging wireless providers to provide easy-to-follow instructions for dealing with the problem.

These are no-brainers.

Then again, maybe the phone companies have bigger fish to fry. It's no secret that these guys hope their smartphones will one day replace credit and debit cards as the main conduit for cashless purchases.

My hunch is that the industry is trying to keep new regulations at bay because it doesn't want anything hindering this brave — and lucrative — new world of mobile phone payments.

But the companies should remember that people will use mobile services only if they trust them. The more the industry allows the Ringtunecloud.coms of this world to mess with their customers, the more they're just shooting themselves in the foot.

Let the FCC know how you feel. Its email address is fccinfo@fcc.gov. And if you're going to be in Washington, the FTC will hold a conference on wireless cramming May 8.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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