Wireless Industry Needs Better Oversight From FCC, Says Government Audit

The Government Accountability Office (GAO) has just completed a survey of wireless customers and a review of the “tens of thousands” of complaints made to the FCC every year, and they’ve reached a verdict: the FCC needs to step up and provide a better way for consumers to get help.

According to the GAO, the FCC does a great job of forwarding customer complaints to wireless carriers, but does little beyond that to follow up on issues, to enforce existing regulations, or to educate consumers on how or where to file complaints in the first place.

[FCC] has conducted little other oversight of services provided by wireless phone service carriers because the agency has focused on promoting competition.

However, GAO’s survey results suggest that most wireless consumers with problems would not complain to FCC and many do not know where they could complain.

[…]

Additionally, without knowing to complain to FCC or what outcome to expect if they do, consumers with problems may be confused about where to get help and about what kind of help is available. FCC monitors wireless consumer complaints, but such efforts are limited.

Lacking in-depth analysis of its consumer complaints, FCC may not be aware of emerging trends in consumer problems, if specific rules are being violated, or if additional rules are needed to protect consumers. FCC has rules regarding billing, but has conducted no enforcement of these rules as they apply to wireless carriers.

Oops. In the FCC’s defense, there’s only so far a budget will stretch, and it’s not like promoting competition is a trifling issue.

At the end of the report, the GAO recommends that the FCC:

  1. communicate better with customers,
  2. set up some internal analytics so that it can better monitor complaints, and
  3. communicate better with state agencies.

They note that FCC has said it has already begun to take action (for example when they asked Verizon to explain why it recently doubled its ETFs on smartphone customers):

We provided a draft of this report to FCC for its review and comment. FCC provided written comments, which appear in appendix V. FCC agreed with our recommendation on monitoring and had no position on the others, but noted it has started to take steps to address the issues we raise in our report.

In particular, FCC noted that its August 2009 notice of inquiry sought comment on a number of issues related to the findings and recommendations in this report. The agency views this action as the first step in implementing several of the report’s recommendations.

As an example, the agency has asked Verizon to explain how in the hell it can justify its recent doubling of Early Termination Fees for smartphone owners, especially since the carrier’s “we have to pay for those subsidized phones” excuse doesn’t seem to hold water.

“GAO: FCC must improve wireless industry oversight” [Associated Press]
“FCC Needs to Improve Oversight of Wireless Phone Service” (pdf) [Government Accountability Office]

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  1. Muthafodder says:

    If there were no ETFs…cell phone companies would fight for it’s customer base.

    As it is now, they pretty much have us by the balls…

    • opticnrv says:

      …you mean by the ‘bills’…

      • Muthafodder says:

        I bought a ‘smartphone’ for $250 and a 2 year contract with AT&T.

        I never had one, so I figured why not…enjoyed it the first 12 and half months.

        I babied my phone, hell, I’d yell at my wife for mishandling it.

        One day in the middle of the night, the phone keeps beeping, I realized it wasn’t charging and removed the charger cable…THE DAMN FEMALE RECEPTACLE CAME OFF THE CIRCUIT BOARD…

        I contact AT&T, they could give a rats ass it was only 2 weeks outside warranty and offer an upgrade…no thanks, why on God’s green earth would I want to extend my contract another two full years with a company who can’t even give me a phone that works during the length of the initial contract.

        So what do I do, cancel unlimited texting, cancel unlimited data, cut my plan minutes in half. I have reduced my phone bill by $60+.

        They’d rather lose $600 over the course of my remaining contract, not to mention keep me happy, than give me a replacement/refurb. I have to charge my batteries externally with a battery charger…THANKS AT&T!!!

        I can’t wait until my contract is up…Verizon here I come!!!

        • Tiaris says:

          We just made this switch, ourselves. We tried to downgrade from iPhones to dumbphones when my husband was laid off earlier this year. After FOUR in-store visits, each of which produced a little “receipt” assuring us that our plans had been modified and the iPhone plans dropped, our account STILL had iPhone plans and/or other issues such as no voicemail at all anymore. That was the last straw for us (after years of crap reception in Atlanta where there are towers EVERYWHERE). Once my hubby was employed again we paid the ETF and switched to Droids. The experience of switching and getting the phones alone was better than any service we’d ever gotten from AT&T, period. For one thing, they got the plans and attachments right the first time.

    • Muthafodder says:

      It’s like a restaurant manager telling you to pay $150 to leave a restaurant in which wish to leave because of the poor service…

      Or, being a season ticket holder to an NFL team and being forced to pay a penalty to leave a game early because you don’t want to watch your team get slaughtered 59-0 by a rival…

      I know phones are subsidized, but I’d rather pay full price for a phone…know it’s mine…and know I could take it to any carrier without boundaries.

      It’s extortion…at the very least the ETF should be the difference in the subsidized amount and the market value of the phone…WAY LESS than the ETF in most cases, especially basic phones.

      • P=mv says:

        Paying full price for a phone will work when you can actually go to any other carrier you wish. Right now, they’ve ensured you have to keep buying phones by using different techs for each carrier.

  2. Darrone says:

    The FCC is simply over-matched. It’s massively out funded and its power is debatable. Commissions, inquiries, and investigations are great, but the FCC lacks the teeth to really do anything.

    • zacox says:

      The FCC has all the power in the world. It is the FCC who doles out slices of spectrum to the wireless carriers. It is the FCC who approves handset product design (anything radio based). And finally, it is the FCC who has the power to fine carriers for their shoddy or anticonsumerist performance.

      Imagine what would happen to a carrier who didn’t play ball with the FCC. Their licenses to use spectrum wouldn’t be renewed, and they wouldn’t have any new spectrum licensed. No spectrum means no bandwidth, and no bandwidth means limited ability to service new and existing customers. Additionally, no new products would be in the pipeline. Imagine a carrier with phones that are a year or two old, with no chance of getting new ones anytime soon. How many people would be rushing to sign up with that carrier?

    • Naame says:

      If that were true then why do so many big mega corps act so threatened by the FCC and try and pay top dollar to lobby them into making decisions that they prefer? I realize there is a limit to the FCC’s power, but if they were as powerless as you claim then the mega corps would ignore them instead of paying tons of money to try and control them.

  3. apd09 says:

    I believe there also needs to be a group that watches over the Government Accountability Office (GAO)

  4. NightSteel says:

    ‘…the math clearly shows that the carrier’s “we have to pay for those subsidized phones” excuse doesn’t hold water.’

    Is there a separate citation for that? I’d like to see the math, I’m curious.

    • Chris Walters says:

      Follow the link in the first part of that same sentence. Nearly every news story in the past several days on the FCC’s investigation points out that demanding such a steep ETF in the final month of a 24 month contract–$120 in the example the the FCC uses–doesn’t seem designed to recoup cost. One would expect a cost-recouping plan to be evenly spread out over the entire 24 month agreement, and it’s unreasonable to think that the cost of subsidizing a smart phone is $2,880 ($120 x 24).

      However, “the math clearly shows” was overstating it. I’ll remove that phrase.

      “It appears that if a customer cancels a two-year contract after 23 months, the customer would still owe an ETF of $120,” the FCC said in the letter. “Is this correct? If the ETF is meant to recoup the wholesale cost of the phone over the life of the contract, why does a $120 ETF apply?”

      • Oranges w/ Cheese says:

        It usually isn’t $120 x 24 – they’ve gone to a fixed ETF regardless of the phone you buy (which is dumb because many of them DON’T COST THAT MUCH) and they prorate it $5 or $10 depending each month, so the $120 is what’s left after the proration. Again, stupid, but just clarifying.

      • NightSteel says:

        Okay, thank you, Chris. ‘The math clearly shows’ made me think that the article was referring to some kind of comprehensive study about cost of phone vs. ETF, and I just didn’t see anything with that level of detail. So it was partly me not seeing it, and partly it not being there, heh.

  5. Loias supports harsher punishments against corporations says:

    The FCC is focusing on competition…. which I hope really means they are trying to ensure fair competition amongst carriers and preventing monopolies. Because if not, they are failing miserably. As another responder stated (in less colorful words) carriers use contracts and EFTs to essentially eliminate competition.

    If a carrier truly believed it offered the best product available (or even a great one), it would have no EFTs and rely on it’s stellar phone service and customer service to maintain its base. And companies do exist without EFTs; but these smaller carriers generally make you purchase a phone that is only compatable with their service, which is really the same song and dance as an EFT.

    The solution is three-fold:
    1) Drop EFTs
    2) Make manufacturers lower the cost to buy a phone. This is caused by a combination of a fierce “need” to keep creating the best and greatest phone which raises R&D costs, the carriers’ demand to create multiple designs of a phone to meet their methods of data storage and making it “exclusively” work for a specific carrier, and the aforementioned ETFs.
    3) Fight the system. You are more dangerous when not on a contract. You can leave, and therefore the carrier is enticed to treat you better. When on a contract, as long as they don’t violate it (or have you know they did) then you are their slave.

    • blogger X says:

      I don’t understand the whole deposit issue when it comes to people who want to get a phone with bad/no credit. I wanted to get a Nextel phone when I was 20. I had no credit. They wanted me to put down $500. Went to AT&T instead, no deposit required.

  6. HogwartsProfessor says:

    Prepaid all the way, baby. I won’t get a contract phone until I have some legs behind me if something goes wrong. If something sucks with the prepaid, I can just stomp on it and chuck the pieces in the trash.

    • webweazel says:

      HERE! HERE! My (T-Mobile) flip-phone cost me $40 and included a $25 prepaid card, so phone=$15. I spend about $100-125 per YEAR for minutes. My phone breaks, I pick up another phone out of my pocket change, stick in my SIM, and go.

    • BluePlastic says:

      Exactly. Get an inexpensive phone that WORKS but doesn’t necessarily have the extra frills and get it on a pay-as-you-go plan.

  7. milrtime83 says:

    If ETF’s are dropped outright, the carriers are just going to raise the cost of phones. The higher ETF seems relatively justifiable considering unlocked phones cost in the $500-600 range. The problem is that the ETF should approach $0 as you get to the end of the contract.

    • Slave For Turtles says:

      If folks were more aware of the true price of these phones, maybe that would encourage more competition among those as well. Sounds good to me.

  8. Oranges w/ Cheese says:

    I’d like to see some sort of regulation mandating maximum pricing for “overage” rates. Also, it would be nice if they could mandate more affordable options.

    Its all well and good that you give me 1000 minutes for $30, but you won’t give me 500 for $15 now would you?

  9. Quatre707 says:

    Cellular phone and both cellular and land-line Internet service needs to be treated as a necessary utility, just like electricity running into a house. I don’t know about the rest of you, but with my job I must have Internet access 24/7, wherever I am. Even if it means remote controlling a server or workstation from my phone instead of a computer.

    • Rena says:

      Being a necessary utility doesn’t stop my electric company from charging $45 worth of fees for $20 worth of electricity. What difference do you expect to see?

  10. diasdiem says:

    A separate study discovered that they sky is indeed blue and water is, in fact, wet.

  11. zacox says:

    Here is what the FCC needs to mandate:

    1. Carriers must offer handsets without subsidies (also known as full retail price), then reduce the monthly bills for those who buy unsubsidized handsets by the 1/24 of the amount they would have otherwise subsidized the handset. In other words, if you choose to buy a handset for full retail at $400, instead of the option to buy it for $100 subject to a 24-month agreement, your carrier should reduce your monthly bill by $12.50 for those same 24 months.

    2. Manufacturers must be required to build all major types of radios into their products. Having one set of products work only on CDMA, and another set work only on GSM is ridiculous. All handsets should be fully operable on CDMA *and* GSM networks, and when LTE becomes a reality, that radio must be added as well. In conjunction with number 3 below, this mandate would finally score some fully compatible handsets for all of us.

    3. Carriers and manufacturers must be prohibited from locking handsets to certain networks. Carrier-exclusive deals, such as iPhone-AT&T and Pre-Sprint, are anti-competitive. In conjunction with number 2 above, these rules would allow any user to take any handset to any network and know it will operate out of the box.

    4. Carriers must be required to fully disclose and make a part of the advertised monthly price any and all additional non-tax surcharges and fees, which typically add anywhere between 10-25% to the base advertised monthly fee. Depending on the carrier, these fees have different names, but are generally the Federal Universal Service (or Fund) Charge, Tower Mandates Fee, Regulatory Surcharge, Administrative Surcharge, Environmental Surcharge, Emergency 911 Surcharge, Pooled Number Surcharge, and the Telecommunications Relay Surcharge. These are *all* fees that are assessed to the carrier, *not* to the customer, though the carriers choose to pass them onto the customer.

    As it stands right now, carriers have no motivation whatsoever to make a customer happy unless that customer is in view of the renewal or end-of-contract horizon. If you’re unhappy with your service in month 3 of 24, there’s really nothing you can do about it, and the carriers know it.

    Adopting all these rules would shove carriers back into the real world where businesses are forced to trade on their quality and service, not simply rely on an arbitrary clock to tell them when to stop being anti-consumerist.

  12. ldavis480 says:

    The following scenario really happened to me but I want to use it as an example of the sort of nonsense that I am tired of.

    Wife goes to the Gap’s website to apply for a job. On their website (somewhere, I know not where) there is a link that asks you to particpate in an I.Q. test. We’ve seen stuff like this on the net, as well as “Take the idiot test” and all sorts of variations in between. After investing several minutes into this “I.Q. test” you are asked to enter your phone number where the results will be sent via SMS text messaging.

    Unbeknownst to the user, they have just agreed to subscribe to some form of nonsense service, usually something like “quote a day” or “joke a day” or other retarded useless banter sent to your cell phone. You are then very likely to have a surcharge of anywhere from $5-10 added to your monthly wireless bill.

    You have to wonder how many millions of dollars in revenue these companies are making from those who simply do not do a very good job of auditing their wireless bill. My issue is that the wireless companies are (in my opinion) complacent in this. They allow any third party to amend charges onto your bill without any sort of parity or consent from the subscriber. I don’t know what the legal repercussions of this are, but I know the system is fundamentally flawed (detrimentally towards the consumer).

  13. shalegac says:

    So how long do we wait for our bills to be lower after our contract is up?

  14. scootinger says:

    W nd mr rgltn? Wht w rll nd s LSS GBMNT! STTS RGHTS! STTS RGHTS! Hw dr th gbmnt frc m stt t llw “clrds” t mrr nt m wht fml!

  15. aparsons says:

    I want to know why pre-paid cell phones (i.e. Boost Mobile) are only $50 per month for UNLIMITED everything (texting, mobile web, p2t, and voice). My measly iPhone plan: 450 minutes, 200 text messages, unlimited data: $70/month. It’s almost like the people with good credit are being penalized.

  16. baristabrawl says:

    Yes. ETF, you are EVIL.