PUC Gives Protections to Wireless Consumers

A divided state Public Utilities Commission on Thursday approved the nation’s first “bill of rights” to protect wireless and other telephone customers from deceptive marketing and billing.

Concluding a four-year process, the PUC voted 3 to 2 on a compromise proposal meant to assuage the objections of the largely unfettered wireless industry. But it left consumer advocates dissatisfied, wireless companies upset and Gov. Arnold Schwarzenegger disappointed.

Among other things, the rules provide a 30-day trial period allowing customers to test products and calling plans and to return them without paying penalties. The rules also require clearly organized billing, specific disclosures, and writing that is unambiguous and in a minimum 10-point type size. Deceptive, untrue and misleading marketing is prohibited.

“These are mostly ‘thou shalt not deceive the consumer’ rules,” Commissioner Geoffrey F. Brown, who authored the compromise, said before the vote. His goal for the landmark regulation was to establish fundamental rights that “only the most shameless people could object to.”

The governor, however, was worried more about whether the bill of rights would impede economic growth in the competitive wireless industry and lead companies to shift investments and jobs outside California.

“The PUC has an important role to protect consumers by creating a regulatory structure that produces the highest level of service at the lowest possible price,” Schwarzenegger said. “These regulations fail on all of these accounts.”

He predicted that the attempt to protect consumers would have the “unfortunate consequence of increasing litigation, growing a bureaucracy, raising rates and costing consumers.”

Consumer advocates pointed out that none of the six major wireless firms were based in California, and they doubted that any would curtail operations in one of the nation’s biggest wireless markets. They were frustrated that the agency didn’t adopt stronger protections that were in the initial proposal by Commissioner Carl W. Wood.

“The decision today is nonetheless a victory for 19 million cellphone customers in California who are often in a ‘cell hell’ of poor service and billing nightmares,” said Janee Briesemeister of Consumers Union, which publishes Consumer Reports magazine.

Even so, said Christine Mailloux of Utility Reform Network, an intense lobbying campaign by the wireless industry “paid off” because Brown’s draft reduced or eliminated protections on advertising, contracts and privacy.

The wireless industry has been chafing under the prospect of new rules, saying the bill of rights will ultimately lead to higher prices for California cellphone users. “These rules are unnecessary,” said Steve Largent, president of the industry’s main trade group, the Cellular Telecommunications and Internet Assn.

He predicted that the rules would increase costs and reduce customer choice.

Michael Bagley, West region public policy director for Verizon Wireless, said the PUC’s “command-and-control approach” wasn’t needed in a rapidly evolving, intensely competitive industry.

“Competition means that if you don’t do the right thing by consumers, you lose them,” he said. “So in our view, there is no reason for these rules. They don’t solve anything and they don’t make the market more efficient.”

His company and others are reviewing options, including an administrative appeal and possible court action. The Federal Communications Commission already has talked to Brown about possibly preempting some of the rules that may infringe on that agency’s right to regulate rates.

Brown said competition was not the “perfect antidote to the necessity of regulation.” Numerous competitive industries -- including fine art, pawnshops, politics and sports memorabilia -- are specifically regulated, he said, “presumably because market competition did not produce appropriate behavior.”

He defended the commission’s action, saying his compromise draft was the result of incorporating the industry’s concerns, a typical process for commission rule making.

The bill of rights applies to all forms of telecommunications service, but many of those companies already are regulated. Wireless carriers, largely overseen by federal regulators, have been subject to little if any regulation on the state level. California’s action, however, could spur other states to follow suit.

Brown was lobbied heavily by consumer groups and industry. Politicians in both parties and Schwarzenegger, in a private call Wednesday, urged him to delay action for fear of any effect a bill of rights could have on the state’s economy.

The governor, Brown said, didn’t try to strong-arm him and didn’t have a problem with what the commission was trying to do. It was the “psychological significance of rule making,” he said, that Schwarzenegger wanted to avoid. The governor’s office would not comment on the conversation.

Commissioner Susan P. Kennedy, who opposed the rules, issued an alternative as a way to “provide a rational proposal,” but it garnered only her vote. The PUC never got to Wood’s proposal because Brown’s passed first.

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What carriers must do

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* Post their current tariffs, any pending changes to those tariffs, and key rates, terms and conditions on the Internet.

* Provide the address and toll-free telephone number of the PUC’s Consumer Affairs Branch and a toll-free number and address for the carrier.

* Provide a description of customers’ privacy rights and how the carrier handles confidential consumer information; also provide information regarding state and federal laws that protect the privacy rights of residential telephone consumers with respect to telephone solicitations.

* Not make solicitations that are deceptive, untrue or misleading.

* Provide customers written confirmation for orders.

* Allow customers to cancel without fees or penalties any new tariffed service or any new contract for service within 30 days after the new service is initiated.

* Offer a four-hour or shorter period for appointments to establish or repair service for which a customer must be present.

* Clearly organize bills and charge only for products and services authorized by the customer.

* Credit payments effective the business day payments are received by the carrier or its agent. The date after which a bill is considered overdue and delinquent, and after which late charges may accrue, must not be earlier than 22 days after the date the bill was mailed.

* Notify all affected consumers at least 25 days in advance of every proposed change in consumers’ service agreements or non-term contracts that may result in higher rates or charges or more restrictive terms or conditions.

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Source: California Public Utilities Commission

Los Angeles Times