Liveblogging The Senate Commerce Committee Hearing: Cellphone Companies And The Customers They Hate

Today at 10 a.m., the Senate Commerce Committee will pry through bone and muscle to see if cellphone companies really do have hearts of pure stone. The Committee will question the industry’s most egregious practices: junk fees, illegal contract extensions, and early termination fees. The industry is working overtime to cast itself as the consumer’s best friend, with AT&T recently agreeing to prorate ETFs as part of a desperate attempt to show that federal regulation is unnecessary.

AT&T doesn’t have the cojones to appear before the committee, so the heavy task of defending the industry will fall solely to Verizon CEO Lowell McAdam. Facing off against the industry, Minnesota Attorney General Lori Swanson – who sued Sprint for illegally extending contracts – and representatives from Consumers Union, the Public Service Commission of West Virginia, and a researcher from George Mason University.

Set your phones to vibrate and keeping hitting refresh to watch as the Senate asks Verizon: “Can you hear me now?”
(Photo: KB35)

09:50: The video feed is alive and well.
10:05: C-SPAN was going to cover this hearing, but apparently the Attorney General confirmation hearing is more important.
10:09: “Meeting to order!” “Let me say two things: I will have to leave soon.” Looks like Amy Klobuchar is going to chair this meeting. Good, we like her style.

10:10: @Papa Midnight: Locked phones might make an appearance, but the Senate cares more about other practices. Even our favorite bill of the 110th Congress calls only for a FCC study on unlocking.
10:11: Over 230 million Americans in a country of 300 million have cellphones. 18% of us, present company included, use their cellphone as their sole number.
10:12: We think Rockefeller (D-WV) is talking, one of the co-sponsors of our favorite bill, The Cell Phone Empowerment Act.
10:13: He’s from West Virginia, where they don’t have good coverage, which is why a requirement for accurate maps made it into the bill.
10:13: Rockefeller: our limited regulatory system is inappropriate when only four companies control the landscape.
10:13: And he’s attacking the industry’s deceptive billing, where the industry charges ‘regulatory fees’ to cover ordinary operating costs.
10:14: “If the industry was so competitive, one would have expected these deceptive charges to have evaporated.”
10:14: “Sounds more like collusion than competition to me.” Yes, yes it does.
10:15: Rockefeller is attacking the industry’s assertions that the lack of complaints to the FCC indicates satisfaction with service. Most consumers know that a complaint to the FCC won’t go very far.
10:17: Ok, we can’t read nameplates today. This looks like Byron Dorgan (D-ND), but sounds like someone else. He has a story about how a cellphone once rang loudly in the oval office. Haha, irrelevant!
10:18: Ok Papa Midnight, he just mentioned that locking is only done in the U.S., and is something the Senate needs to take a look at as well.
10:19: The Senator is accurately tying Verizon’s latest rejection of NARAL’s text messages to net neutrality, and wants to hold a hearing just on that. Excellent.
10:21: Klobuchar is here, welcoming Minnesota’s AG. Apparently, the cellphone industry pockets $100 billion per year.
10:22: She’s painting the cellular landscape with remarkable accuracy: consumers enter into restrictive contracts without proper information, and can’t cancel without even when the service is subpar.
10:23: She’s casting her legislation as the modern-day solution that holds short of imposing new regulation, aiming only to give consumers the ability to find the best service at the best price.
10:24: Even with AT&T and Verizon’s pro-rated ETFs, only 55% of the market is covered, so the Cellphone Users Bill of Rights – the other name for the Cell Phone Empowerment Act – is still necessary.
10:25: “If the cellphone companies are advertising who has the least amount of dropped calls, consumers have the right to know just where those dropped calls are.”
10:27: “Competitive markets work best when consumers have access to the best information.”
10:28: Yay! Senator Stevens is here.
10:28: NO! The Senator dropped his statement into the record without reading a word.
10:29: Jim DeMint (R-SC) is attacking the government. His office, like all Congressional offices, gets thousands of complaints each day, which shows that the federal government can’t handle complex things (like a war in Iraq?)
10:30: DeMint thinks nothing beats a competitive market, which apparently, is provided by four cellphone companies that all follow the same practices. Still, “there is no compelling reason for the government to get involved.”
10:30: 150 companies are competing for our business? Oh really, Senator? Name 15 of them.
10:31: “Consumers really are empowered.” Um, no, they are not.
10:32: “Government regulation can’t keep up with this dynamic industry.” He’s citing trial periods and prorated ETFs. Great, that’s called staying ahead of the game so windbags like you can say, ‘see, industry already did it!’
10:33: According to DeMint, companies are embracing unlocked phones. Hear that, iPhone owners? By the way, how’s that 1.1.1. firmware update written at AT&T’s behest working out for you?
10:35: Oh good, DeMint is done so we can stop banging our head against the desk and go get some ice.
10:36: McCaskill has had and hated: Sprint, Nextell, AT&T, and Verizon.
10:37: Uh oh, she didn’t buy a text messaging plan for her three teenagers and didn’t realize that they could receive text messages without her consent. This, from a member of the Senate Commerce Committee.
10:38: Ha, she’s going on a good government bent and plans to introduce a bill banning people from taking cash to stand on line for Committee hearings. Lobbyists pay people big bucks to stand in line for a hearing so they’re guaranteed a spot in the room. The lines are one of the best ways to figure out which hearings deal with big bucks. This hearing had a long line.
10:40: Damn! Line standers get $60 an hour! If you could stand in line from 9-5 each day, that works out to $120,000 per year. But we digress…
10:44: Senator Cantwell is talking. We doubt her consumer credentials. She used to be a VP of Real Networks, notorious makers of the insidious crapware Real Player, perhaps the most consumer unfriendly piece of multi-platform junk floating around the internet. At least she thinks that ETFs are harsh and unnecessary.
10:46: Cantwell is arguing that the Washington State AG receives more complaints about cellphones than anything else, especially with regards to coverage, disclosure, and billing errors.
10:47: ‘I’m not convinced that the industry is self regulating.’
10:49: Another Republican, John Thune (R-SD) is here. Let’s see if he agrees with DeMint’s pro-industry anti-consumer views.
10:50: Tough to tell. He’s looking forward to the panelist’s testimony.
10:51: He agrees – $60 is a lot to stand on line.
10:52: We have no idea who is talking. Balding with glasses? Can you identify this Senator?
10:53: Glasses is taking us back to the first regulatory measures, which targeted the industry for its interstate nature.
10:53: He’s wondering if there is enough competition, arguing that four or five competitors is necessary. Even in rural areas, he says, there are 3.6 providers, which he thinks is enough. We want nothing less than DeMint’s 150 competitors IN EVERY SINGLE MARKET.
10:54: Pro-industry Senators are hellbent on proving that customers are satisfied because they aren’t complaining to the federal government. Our site’s existence apparently isn’t enough to sway them, so we will add to our list of recommendations: call you Senator!
10:56: He’s now railing against federal price controls, an idea nobody up until now has mentioned or endorsed. But yeah, Communism bad, competition good.
10:57: Ah, that was John Sununu (R-NH).
10:58: Senator Vitter (R-LA) is going Stevens on us and skipping his opening statement so we can get to the panelists.
10:59: Lori Swanson, the MN AG is talking about a Minnesota resident who was lied to by her cellphone carrier. She was told she could cancel anytime, but charged a $175 ETF when she tried to cancel. So sad and not at all uncommon.
11:00: 4 companies control 80% of the market.
11:01: Finally, the point we have wanted to hear: ETFs bear little to no resemblance to the costs incurred by carriers when they lose a customer.
11:01: “In a fair transaction, there is a meeting of the minds.” Nobody thinks that cellphone contracts are fair.
11:02: The BBB receives the most complaints about the cellphone industry, which beats out 3,600 other companies.
11:03: @Red_Eye, there’s no verbatim transcript, but the Commerce Committee website will have a link to the archived audio.
11:05: Verizon’s CEO is just going to talk, submitting his remarks for the record.
11:06: He’s praising the Clintons for establishing a “light touch” regulatory system, where companies earn customers’ business every day.
11:07: Verizon is always focused on what they could do better, which is why they talk to their customers every day. Oh, Verizon, it’s been so long since we’ve had a heart-to-heart. Are you really talking to all your other customers? You don’t love us anymore.
11:08: The ultimate authority is in the customer’s hand. Ha, right. We can apparently go to one of seven companies? What happened to 150?
11:09: He implores the Committee: “Let us compete!”
11:11: Patrick Pearlman of the West Virginia Public Service Commission makes a compelling argument that wireless carriers should be regulated as if they were landlines now that many consumers are using them as their sole number.
11:12: To back up his point, he mentions that wireless companies, like their landed brethren, are trying to get cash out of the Universal Service Fund.
11:14: Consumers Union bringing the sarcasm: “We’re sure the timing of AT&T’s announcement yesterday had nothing to do with this hearing.”
11:16: CU is attacking the premise of the ETF. The iPhone doesn’t receive any carrier subsidy, so what fee is the carrier recovering when charging an ETF? Prorating an unreasonable fee is still unreasonable.
11:17: Ah, good – he’s attacking carriers for crippling their phones (ahem VERIZON!) Specifically, he’s mentioning that Blackberries have mapping software that carriers block so consumers will be forced to use the carrier’s software.
11:18: ‘If they’re so competitive that they don’t need oversight, they can’t say ‘here’s a fee for canceling, here’s a fee for adding service, they can’t throw all these things in the way of competition.’
11:23: Mike Higgins, who represents a rural carrier, thinks rural carriers are great.
11:24: He thinks the FCC should handle all regulations, realizing that big carriers aren’t the same as small ones. If you guys are so great, then you shouldn’t worry about ETFs, junk fees or locked phones, right?
11:26: He supports unlocked phones because no handset maker will build his company a phone. “Apple won’t build an iPhone for Central Texas Tech.”
11:27: We’re onto Jerry Ellig of the Mercatus Center at George Mason University. The way this guy sits brings one word to mind: swashbuckler.
11:28: He’s not failing us! But he also doesn’t think that new regulations per se will improve his horrible experiences as a cellphone customer.
11:29: “We have to do more homework. (What would you expect an academic to say?)”
11:30: He’s going to try to answer three questions:

  • Is there a systemic problem that regulation can solve?
  • Are there effective alternatives?
  • What are the unintended consequences?

11:31: He is skeptical that regulating specific contract terms does much, because apparently “research” shows that the market is competitive. The FCC concludes the same, but the FCC is owned by the industry (we still love you, Kevin Martin.) When the terms and pricing points are always the same, and companies move in lockstep, we’d argue that there isn’t much competition.
11:32: Alternative solutions: greater allocation of spectrum?
11:32: Unintended consequences: contracts aren’t regulated, so if we regulate some terms, the industry will screw around with others. That’s actually a fair point. The old whack-a-mole game. One alternative: comprehensive regulation of the entire contract, which we would not for a second oppose.
11:33: Question time. Klobuchar does want, as Verizon asked, to let the industry compete. There’s a “but” in here somewhere. Let’s wait for it.
11:34: But consumers can’t make sense of competing claims from the cellphone companies. Which is why the Cellphone Users Bill of Rights mandates that companies disclose to the FCC how many dropped calls there are in a given geographic area.
11:35: Let’s see if Verizon can give a yes or no answer to ‘do you support such an idea?’
11:36: Verizon is talking up their own coverage maps, which Klobuchar just pointed out are often inaccurate. Ah, he’s switching gears and promoting Verizon’s 30 day test period. We wonder how many customers actually leave within the period.
11:37: Klobuchar: Do the other carriers allow a similar period?
11:37: Verizon: Um, no, it’s 7 or 14 days.
11:38: One of Senator Klobuchar’s constituents was driving in Minnesota and found a Verizon billboard that says: “Count on us to keep you connected,” even though there is no Verizon service within yards of the billboard. She sent a staffer out to confirm. Too funny.
11:39: Verizon is again pivoting, blaming localities for standing in the way of site approvals. This is what happens when Verizon wants to put a cellphone tower on a preschool and the community complains.
11:40: Five minutes after the question was asked, Verizon still has not said whether they support reporting dropped call data to the FCC. Answer the question, Verizon man.
11:41: Verizon recommends, instead of handing over cold hard data to the FCC, that you ask your friends about the service. We consumers don’t need scary data. Anecdotes are more than enough. Everyone in Salem, MA agrees!
11:45: Softball question from Thune: “Is there competition out there, how has that affected you?”
11:46: Verizon: Having four carriers has put the power in the consumer’s hand. Four carriers can’t dominate the market because they each only have ~20% of the market. That’s why you see more services. Like Verizon’s VCast, which pries cash out of consumers for crappy locked-in media.
11:47: Whoa, fighting words, Verizon. They will soon introduce a phone to kill the iPhone.
11:55: Klobuchar will ask Swanson a few questions about contract extensions, but first took a second to point out that the one company present, Verizon, recently agreed not to extend contracts without the customer’s express consent.
11:57: Swanson is branding ETFs as the single largest barrier to meaningful competition.
11:58: CU thinks that the FCC might be able to bring an action like Minnesota AG, but points out that the FCC instead likes to shower the industry with gifts and exemptions and all sorts of giveaways. “I don’t trust the FCC to come up with a comprehensive set of regulations.”
11:59: Maybe Verizon meant that they speak with the FCC, not their customers, every day. Still waiting for our call, Verizon.
11:59: Verizon: “Competition punishes bad behavior.” Oh come on! They are all horrible, despicable companies! Not a single one knows how to do customer service right – competition doesn’t provide a single avenue to punish bad behavior. If it did, Verizon, we would have left you long long ago, but we’re not dumb enough to pretend that the grass is greener with someone else.
12:00: We now have Verizon face😦
12:04: Deceptive billing practices are everywhere, and everyone has their own hated charge, whether it’s lumping them together on one line, charging for made-up things, and mislabeling valid charges.
12:05: Verizon spends so much time making sure the bills are accurate, which is why in the past 8 years they have gone through 5 years. The CEO is calling @ColoradoShark a liar because they provide an estimated cost of the first month’s charges at the point of sale. Damn consumers, not reading the legalese and fine print. It’s all your fault. Punish their bad behavior with, um, competition?
12:08: The rural company has different regulatory fees than the national carriers for service in the same area. All signs point to shenanigans.
12:10: Swashbuckler Jerry Ellig has a study! 75% of the charges are taxes, either the now-vanquished excise tax, or state and local mandates. The other 25% are so-called regulatory fees and the USF fee.
12:11: He thinks the Cellphone Users Bill of Rights would result in a less information for consumers, that they wouldn’t be able to independently evaluate the worth of the USF or the state and local mandates.
12:12: CU calls bullshit, saying the bill is clear that taxes can be broken down on the bill, and that the bill would ban “muddy charges.”
12:13: Cute example: You know the price of a box of cereal when you take it off the shelf. You don’t pay a surprise property tax at the register.
12:16: Swanson, ETFs are punitive, the price of shopping around.
12:18: Business costs for the cellphone industry are declining.
12:19: Verizon wants to talk about NARAL. But first, they want to say that it costs between $300-$400 to acquire each customer.
12:22: Swashbuckler thinks that reducing the ETF will cause other costs to rise because of the whack-a-mole principle. He’s making a good argument to regulate the entire contract.
12:23: Klobuchar: “Ok, we get the point.”
12:24: CU hits back, saying the ETF is the single biggest hurdle to competition, and challenges AT&T to get rid of the ETF for iPhone owners.
12:24: Onto NARAL, and why Verizon loves women.
12:25: Verizon had a policy to block controversial text messages, which wasn’t updated, and somehow applied only to NARAL. After 15 minutes of discussion (it took that long?!) they decided to reverse course.
12:25: Verizon only found out about the issue only when a NYT reporter called for comment, and they changed the policy before they received NARAL’s complaint letter.
12:26: CU argues correctly that this is why net neutrality is needed. What would have happened if there was no NYT article? What happens when they cut off access to people on the fringe? Why should a telecom have the power to make that decision, especially when calls aren’t censored – text messages should be treated the same.
12:27: Klobuchar is calling the meeting to an end, and promises to keep working on the Cellphone Users Bill of Rights. For the sake of 230 million cellular customers, we hope she does.
12:28: “The hearing is adjourned. Everyone can turn on their cellphones!”