EXPERTS DISAGREE ON COSTS AND BENEFITS OF WIRELESS REGULATIONS

“My problem with their voluntary code is that it is voluntary,” Boyle said. “There are no repercussions if they don’t agree to it. They can turn their back.” Elements of the plan, unveiled in Sept., such as a 14-day trial period for subscribers, are a “nice first effort,” Boyle said. “But a 14-day trial period is not going to show you a billing problem because usually you won’t receive a bill until at least after 30 days.” Proposed service quality rules, such as a pending “consumer bill of rights” in Cal., are different from wireline regulations, Boyle said. “I see it as regulation for consumer protection. There shouldn’t be a business that is taking advantage of people simply because there’s no rules in place.”

Boyle said that in some cases her constituents felt too intimidated to make direct complaints about wireless quality to the FCC or didn’t know where to go because carriers didn’t provide FCC contact information on their bills. She said 25% of the consumer complaints received by the Neb. PSC on services in the state involved wireless.

CTIA unveiled a wireless industry voluntary consumer code in Sept., including 10 guidelines that covered areas such as rate disclosure and provisions that would allow consumers to terminate service if contract terms changed (CD Sept 10 p1). House Commerce Committee Chmn. Tauzin (R-La.) said at the time the guidelines might stave off efforts, such as those by the Cal. PUC, to regulate wireless service quality. Rubin, who teaches economics, said Fri. that the Cal. PUC had been scheduled to take up the “consumer bill of rights” Thurs., but he said a vote apparently had been postponed. Wireless carriers have raised concerns about the Cal. PUC proposal and other state wireless regulatory efforts, opposing what they called a “patchwork” of rules that would vary from state to state for a service that was largely national in scope.

Rubin described the potential impact of the Cal. PUC proposals on the wireless industry, saying a set of changes in July marked an improvement but “the proposals are fundamentally misguided and should not be adopted.” He said there were 158 wireless providers in Cal. and most consumers had a choice of 6-8 carriers. He said that in a market that already was so competitive, carriers competed by offering a large range of plans. If the issues covered by the Cal. proposal, which include ad disclosure requirements and billing details, were found useful by consumers, he said carriers already would be competing on that basis, as well. But because they aren’t competing on that basis, any new protections covering billing and ad disclosure protections would either add costs for consumers or reduce service, Rubin said. “Although some of the ‘rights’ might be beneficial, they also have costs, and nothing in the record indicates that the California Public Utilities Commission has considered the costs, or whether any benefits of the rules are worth the cost,” he said. Rubin said that by requiring carriers to make additional disclosures in ads, they would face increased ad costs and would provide less information to consumers as a result.

FCC Wireless Bureau Chief John Muleta said a 1993 statutory framework outlined what states could and couldn’t regulate in the wireless arena. The 1993 Omnibus Budget Reconciliation Act bars states from regulating the entry or rates of wireless carriers but still gives them purview over conditions of service. Muleta said wireless local number portability, Enhanced 911 and CALEA were “public goods” that had emerged as wireless penetration had increased rapidly. “There are issues, once you become a consumer service, that you need to address that are a public good,” he said. How such services are funded is a legitimate topic of debate, but not whether they should be, he said. Customer service requirements don’t represent “a public good and that’s something the competitive marketplace will take care of,” Muleta said. “My position is let the carriers figure out how to deal with customer service issues without us.” He also stressed the importance of carriers’ creating transparent funding mechanisms for services such as E911. “If collection mechanisms are opaque, it’s going to create a huge amount of dissonance in the marketplace,” he said.

“The wireless success story is in many ways a testament to the success of competition,” said Thomas Lenard of the Progress & Freedom Foundation. He gave figures that showed the upfront cost for LNP was $1.02 billion for the industry, with $849 million for 2004 and $383 million annually after that. Lenard projected that churn be $2 billion per year as a result of LNP, which took effect for the top 100 markets Nov. 24. However, Muleta said that the costs of such customer turnover in effect had been artificially depressed before LNP took effect because customers weren’t able to take their numbers with them when switching carriers. One effect of LNP is that with that choice in place, carriers are competing more on factors such as quality, he said.