FCC Proposes Mobile 'Bill Shock' Rules

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The U.S. Federal Communications Commission has released proposed rules that would require mobile-phone and data providers to warn customers when they are about to incur charges above their normal monthly bills.

The proposed rules are intended to protect mobile customers against so-called bill shock, significantly higher-than-expected bills when customers exceed their monthly voice, data or texting plans, or incur large roaming charges. FCC Chairman Julius Genachowski has pushed for new rules after multiple reports in recent years of unexpected bills in the thousands of dollars.

Genachowski called mobile bill shock a "widespread and costly problem" for consumers. "People should be told they're risking extra fees before they incur them," he said during the FCC's Thursday meeting.

The FCC on Wednesday released a white paper on bill shock. The agency received complaints about unexpected mobile service charges from 764 people during the first half of 2010, the FCC said.

In 20 percent of the complaints, the unexpected charges were more than US$1,000, the FCC said. Eight complaints were for bills of more than $10,000, and the largest complaint was for a bill of $68,505, the FCC said.

Some critics questioned the need for new regulations. Carriers AT&T and Sprint Nextel noted that they already have warning systems in place, although AT&T said in a statement that it is looking forward to working with the FCC to "explore how we can better educate customers on the availability of these tools to ensure they are fully empowered in the use of their wireless devices and services."

The problem may be overstated, however, because many carriers have already begun to offer new billing services, said Randolph May, president of The Free State Foundation, a conservative think tank. Mobile prices have been "steadily declining" for years, he said.

"This is one of those proposals for further government intervention that seems to tilt a bit too much towards a nanny-state mentality and away from the view that individuals bear some responsibility for knowledge concerning the services they purchase," he added. "I'm concerned that this may be a case of 'regulation by anecdote' that will exaggerate benefits and minimize costs."

Commissioner Meredith Attwell Baker, a Republican member of the FCC, praised Genachowski for raising the issue, but suggested new rules may lead to unintended costs.

"If we don't strike the right balance as regulators, we risk imposing costs on providers that could result in higher prices and lower quality of service for consumers," she said. "Upgrades to providers' billing systems may be expensive and burdensome for smaller providers and prepaid services and put them at a competitive disadvantage."

Instead, mobile carriers may be better suited to address the issue, Baker added. "Competition on the basis of better customer service already distinguishes and differentiates carriers. Consumers have the ultimate power to manage their shock."

In Thursday's action, the FCC voted unanimously to approve a notice of proposed rulemaking, or NPRM, on bill shock. In an NPRM, the agency releases a set of proposed rules and asks for public comment on them.

The proposed rules would require mobile carriers to send warnings -- such as voice or text alerts -- to customers when they're about to go over their monthly limits, similar to a requirement for carriers operating in the European Union. The rules would also require carriers to notify customers when they're about to incur international or other roaming charges not covered by their monthly plans.

The FCC would also require carriers to provide clear disclosure of any tools they offer to help customers manage their accounts. The NPRM also seeks comment on whether the agency should require carriers to offer customers the option of capping their own accounts.

Genachowski said an executive with a company that provides text alerts when a customer's parking meter is about to expire encouraged him to move forward with the bill shock rules.

"I know how easy it is to send a consumer a text message ... we do it numerous times a day," Genachowski quoted the unnamed executive as saying. "The only reason not to do it is if you're trying to take advantage of a customer."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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