Cell carriers agree to send warnings to avert 'bill shock'

To avert new consumer-protection rules, U.S. wireless carriers have reached a deal with the FCC under which they will use voice or text alerts to automatically warn customers at risk of budget-busting charges for calls, texts or data.

The deal, which comes more than a year after the Federal Communications Commission began looking into so-called "wireless bill shock," was hailed this morning by FCC Chairman Julius Genachowski as evidence of the industry's "constructive engagement" in addressing the problem, which has led  some consumers to face hundreds or even thousands of dollars in unexpected charges.

The largest shocks have affected customers hit by surprise data charges, especially while traveling internationally. In his remarks, Genachowski mentioned a woman billed $34,000 "for international data and texting charges incurred while visiting her sister in Haiti after the 2009 earthquake," and a man billed for $18,000 "after his free data downloads expired without warning."  I've written about local cases here ($17,500 for data roaming in the Dominican Republic)  and here (nearly $20,000 for 934 megabytes of "pay per use" data in Poland), and also about the FCC's initial proposal to combat the problem with new rules patterned after rules governing European carriers.

Under the voluntary deal, the FCC expects U.S. carriers to take three steps similar to those required of European carriers - and to implement them automatically, with no requirement that consumers "opt in" to the protections:

  1. Send voice or text alerts to notify consumers when they approach and when they reach monthly plan limits for voice, data, and text that would result in overage charges
  2. Send alerts when consumers are about to incur international roaming charges that are not covered by their monthly plans; and
  3. Clearly disclose any tools that mobile providers offer to let consumers set their own usage limits and monitor their usage balances

Will it work? Mark Cooper, director of research at the Consumer Federation of America, warned that while self-regulation has advantages for a swiftly changing, high-tech industry such as wireless telecom, it has often proved inadequate to the task of protecting consumers from abusive practices. Meanwhile, he says, drawing out the process of setting firm and fair rules has contributed to concerns about regulatory uncertainty:

The danger is that the industry will see self-regulation as a way to avoid regulation – drawing up weak rules behind closed doors. When this happens, public interest groups will be vindicated in their concerns about self-regulation and become more adamant in their demands for traditional command and control solutions. The abysmal failure of self-regulation in the areas of online privacy and network neutrality should be a clear lesson for all stakeholders about what not to do. The resulting polarization and litigation serves neither consumers, who end up with weak regulatory regimes, nor the industry, which faces continuing uncertainty.

Genachowski says the FCC is taking a "trust, but verify" approach, promising to closely monitor industry practices "to make sure that all carriers provide this necessary information to consumers, as promised, and, if we see non-compliance, we will take action."