The wireless trap

Los Angeles Times Staff Writer

Raul Martinez's cellphone plan offered free roaming for calls to anywhere in the United States and Canada. So when the 50-year-old resident of East Hollywood took a two-week vacation north of the border last summer, he assumed he had nothing to worry about.

He didn't read the fine print.

Martinez said he was astounded when about $400 in roaming fees appeared on his next Verizon Wireless bill. The free roaming included calls made to Canada, but not from Canada.

"You just have to be careful that you really read your bill," said Martinez, who works for a real estate firm. "Some of it's a little sneaky."

Pressure is mounting on wireless companies to stop the sneakiness. Consumer advocates and lawmakers are trying to get providers to make cellphone bills easier to understand and lower some charges, such as the termination fees for canceling service before your contract ends.

They've made some headway. California and several other states have started more aggressively responding to fraud and billing complaints. The Federal Communications Commission is considering holding hearings on the issue. And two bills have been introduced in Congress in the last year that would guarantee nationwide consumer rights, such as prorated early termination fees and better disclosure of contract terms.

At a recent congressional hearing, Rep. Jane Harman (D-Los Angeles) related her own frustration over spending two weeks last summer trying to replace a broken BlackBerry. Her office wouldn't identify the company she had dealt with.

"Millions of phone-toting Americans still anguish at the prospect of resolving disputes with carriers and even understanding the terms and conditions of their wireless service," she said.

We can hear you now, wireless companies are telling consumers. The providers say they are responding to the concerns and warn that more regulation could stunt the industry's growth.

Changing the industry's practices often requires only one company to act. Competition in the wireless market is so intense that when one company makes a consumer-friendly move, its rivals often follow suit.

For example, wireless companies for years have charged early termination fees, arguing that they're needed to offset the discounts provided to customers on new phones. But consumer advocates have argued that the penalty should decrease over time because the company recoups part of that subsidy each month.

In 2006, Verizon Wireless announced it would lower its standard $175 early termination fee by $5 each month during the term of a contract. AT&T Inc. and T-Mobile USA later said they would also start pro-rating their fees, though the changes have not yet kicked in.

Business rivalries also are driving down prices. On Feb. 19, Verizon Wireless announced a flat $99.99-a-month, all-you-can-use domestic calling plan. Before the end of the day, AT&T and T-Mobile had matched it. Less than two weeks later, Sprint Nextel Corp. went one better, offering unlimited phone, text messaging and other data services for the same price.

"Right now, our industry and our business is hypercompetitive," said Kevin Kunkel, Sprint Nextel's area vice president for Southern California.

Some people point to Sprint Nextel as proof that consumers can ditch a company they are unhappy with. The nation's third-largest wireless provider, which is based in Reston, Va., recently reported a $29.45-billion fourth-quarter loss. Its stock has tumbled about 70% from its 52-week high as customers have complained about poor service and defected to rivals.

But Christine Mailloux, a telecommunications attorney with the Utility Reform Network in San Francisco, said consumers can't count on competition alone to get wireless companies to become more customer-friendly. She advocates stronger regulations.

"We don't view it as a victory if all we get is voluntary industry changes and promises," she said.

Plus, if companies don't live up to those promises, changing wireless providers can be difficult -- and costly.

Judy Lepe, 50, who runs a construction company in San Francisco with her husband, has been desperate to leave Sprint Nextel after several of their phones malfunctioned. They thought their two-year plan, which also includes their 12-year-old son's phone, was scheduled to expire in March 2007, until they discovered that Sprint extended their contract each time they changed their plan -- including when they received new phones to replace the broken ones.

Their latest contract finally expires next Sunday. Noting that they'd be charged a $150 early termination fee for each phone, Lepe said she was counting the days.

"There's no way you could just walk away from your contract," she said.

Consumer advocates said the stakes go up as we rely more on our cellphones.

Federal data show that the percentage of households with cellphones and no land line increased to 13.6% in June 2007, from 5% three years earlier. And from 2001 to 2006 the average monthly usage by all wireless customers nearly doubled, to 714 minutes from 380 minutes.

But familiarity has bred contempt.

Wireless companies are highly unpopular. Although complaints have grown less quickly than the number of subscribers, cellphone providers ranked first among all industries in complaints to the Council of Better Business Bureaus from 2004 to 2006.

In October, readers of Consumer Reports magazine ranked cellphone service 18th out of 20 industries in customer satisfaction, ahead of only digital cable TV and personal-computer makers' technical support.

"There's some tension there as people adjust to the way the wireless industry does things as opposed to the land-line phone companies," said Rachelle Chong, a member of the California Public Utilities Commission.

California has been active in trying to regulate the wireless industry. In 2004, the commission approved a tough telecommunications bill of rights. But new appointees to the commission scaled back the rules a year later. Since then they have added more staff members to focus on responding to complaints, Chong said.

States are allowed to regulate terms and conditions of wireless contracts. They were given that right by a 1993 federal law that made all other wireless issues national and took a light regulatory approach to encourage growth of the nascent industry. The law worked: Wireless subscribers soared to 243 million last year from 16 million in 1993.

"The wireless industry continues to be one of the great consumer and economic success stories of the 21st century," said Steve Largent, president of CTIA -- the Wireless Assn., a trade group of leading cellphone companies.

The industry does not oppose some national regulations, Largent said, but it wants to avoid rules that vary state by state.

The most recent congressional proposal, by Rep. Edward J. Markey (D-Mass.), seeks to continue a regulatory balance. It would add tougher nationwide rules, such as giving customers the ability to cancel their contracts without penalty within the first 30 days. It also would require early termination fees on a two-year contract to be cut in half or more after a year, while allowing states to help the FCC enforce those rules and in some cases set their own.

Consumer advocates said lawmakers and regulators needed to keep the pressure on wireless companies and that states often could react more quickly to new problems than Washington could.

Martinez, the East Hollywood Verizon customer, estimates that he now uses his cellphone for 98% of his calls and wants more protections.

"I don't want to say there's widespread abuse," he said, "but there's a certain amount of it out there."


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