FCC Adopts Bill Shock NPRM

October 14, 2010. The Federal Communications Commission (FCC) adopted and released a Notice of Proposed Rulemaking (NPRM) [32 pages in PDF] that proposes to regulate the billing and notice practices of mobile service providers. The FCC and proponents of such regulations describe this as "bill shock" relief.

This NPRM states that it proposes rules that would require "mobile service providers to provide usage alerts and information that will assist consumers in avoiding unexpected charges on their bills".

The FCC also released another paper on "bill shock" on October 13. This paper defines "bill shock" as "a sudden, unexpected increase in their mobile bill from one month to the next".

The proposed rules do not define the term "mobile service provider". The NPRM asks, "Should any rules we adopt apply to all communications services provided by mobile wireless providers, including voice, text, and data services? Should providers of mobile data services that do not also offer Commercial Mobile Radio Service (CMRS) be included?"

The proposed rules would require that these providers "shall provide notification alerts when: (1) subscribers are approaching an allotted limit for voice, text, and data usage. (2) subscribers have reached their monthly allotment limit and begin incurring overage charges for any subsequent use of that service. (3) subscribers will incur international or roaming charges that are not covered by their monthly plans, and notification if they will be charged at higher than normal rates."

The FCC issued a Public Notice regarding imposing a "bill shock" regulatory regime on wireless service providers in May of this year. It also released another paper in May. See, stories titled "FCC Starts Bill Shock Proceeding" and "FCC Releases Paper on Consumer Understanding of Cell Phone Billing Practices" in TLJ Daily E-Mail Alert No. 2,088, May 27, 2010.

On October 13 the FCC released an advocacy paper in support of the proposed rules contained in the just released NPRM. It states that there were "764 bill-shock complaints in the first six months of 2010".

Also, Sen. Tom Udall (D-NM) introduced S 3872 [LOC | WW], the "Cell Phone Bill Shock Act of 2010" on September 30, 2010. See, story title "Sen. Tom Udall Introduces Bill to Regulate Cell Phone Billing Practices" in TLJ Daily E-Mail Alert No. 2,137, October 1, 2009.

The FCC's consideration of "bill shock" is limited to sudden unexpected increases in monthly bills. First, it does not go to consumers' reactions to the pricing of mobiles services.

Second, the FCC's papers and NPRM do not address whether or not consumers are shocked by the extent of federal and state taxes, fees and mandatory contributions that are collected from them regularly via their monthly bills. The FCC's papers do not reveal whether more consumers are shocked by the prices of mobile services, the amount of taxes that they pay, or sudden unexpected increases in their monthly bills.

Steve Largent, head of the CTIA, stated in a release that he hopes that the FCC will also consider "the discriminatory 15 percent in taxes and fees that wireless consumers pay each month, which is more than double the rate for other taxable goods and services." He added that "this tax policy makes zero sense as it will not advance broadband adoption or deployment".

Largent also encourage the FCC to "stop states from raiding their E911 funds. Millions of wireless customers pay the monthly ‘911 tax and fee,’ believing that their contributions will ensure that first responders are properly equipped to handle the more than 300,000 wireless distress calls they receive every day. Unfortunately, an August 2010 FCC report said that 13 states used 911 funds to support programs other than 911/E911, including 10 states that used it to close budget gaps in their general funds." See, FCC report [PDF] and story titled "FCC Reports that States Divert 911/E911 Fees to Subsidize other Programs" in TLJ Daily E-Mail Alert No. 2,126, August 19, 2010.

Largent also urged the FCC "to take meaningful action to address violations of the Telecommunications Consumer Protection Act (TCPA), which includes unwanted or 'SPAM' messages and calls to wireless consumers by third parties. In 2009, the FCC received nearly 48,000 wireless TCPA-related complaints -- nearly 32 times the number of estimated annual 'bill shock' complaints."

Chairman Genachowski noted in his statement that "iPad users are automatically signed up for text alerts from AT&T when they are about to incur overage charges". He argued that mandating notices for other services would be "non-burdensome measures" that could be implemented "easily and inexpensively".

In contrast, Commission Robert McDowell wrote in his statement that "While it may be tempting to shrug off regulatory costs, the reality is that businesses pass on their costs to consumers. We all pay for the cost of government mandates."

Commissioner Copps asserted in his statement that the FCC is a "consumer protection agency", but that the FCC "has spent more time listening and responding to the interests of big business than to consumers". This item, he said, is consumer friendly.

There is also an anti-competitive aspect to these proposed rules. Like the disability access requirements imposed by the just enacted 21st Century Communications and Video Accessibility Act, as well existing FCC rules, such as those regarding location surveillance and the CALEA, the rules proposed in the just released NPRM would impose design mandates and costs on service providers.

Moreover, smaller companies, new entrants, and providers of lower priced services are likely to be more adversely impacted. In addition, large incumbent companies are more adept at participating in FCC proceedings and influencing FCC rules to their advantage than smaller and new service providers.

FCC Commissioner Meredith Baker (at right) wrote in her statement that "we risk imposing costs on providers that could result in higher prices and lower quality of service for consumers. Upgrades to providers' billing systems may be expensive and burdensome for smaller providers and prepaid services and put them at a competitive disadvantage."

This NPRM is FCC 10-180 in CG Docket No. 10-207 and CG Docket No. 09-158. Initial comments will be due within 30 days of publication of a notice in the Federal Register. Reply comments will be due within 60 days. As of the October 19, 2010, issue of the Federal Register this notice had not yet been published.