One out of six cell phone users suffers from "bill shock"

One out of every six mobile phone users have experienced "bill shock"—an unexpected jump in their monthly service fee that was not prompted by a change in their calling or texting plan. That's 30 million Americans all told, according to a new survey released by the Federal Communications Commission.

These nasty surprises aren't the kind of multi-thousand dollar hikes that have been making headlines in Europe and sometimes here in the United States. "Nevertheless, we know from our consumer call center that for many, many people in this country, a jump of $20 or $30 or $50 on your cell phone bill is a very significant jump," Joel Gurnin, Chair of the FCC's Consumer Task Force told reporters at a Wednesday press conference. "We did find many people who were experiencing bill shock in the range of $50 or $100 or more."

15 percent of these "shocks" cost consumers from $25 to $49 more on their bill, the report says. 14 percent cost from $50 to $99. Another 23 percent cost over $100.

The survey also indicates that half of cell phone users and almost two thirds of home broadband subscribers are lost in the woods when it comes to Early Termination Fees—the price tag for dropping their plan. Bottom line: they often don't know how much their ETF is. In many instances, they don't even know that they have one.

"I think the most striking finding is that so few people know what they are," Gurnin noted.

Did not know

The FCC commissioned Abt/SRBI and Princeton Survey Research Associates to interview 3,005 American adults about these matters from April 19 to May 2, 2010. Among the report's major findings:

  • 17 percent of respondents (one out of every six) said that their cell phone bill suddenly increased, even though they hadn't switched plans.
  • 84 percent of those in the "bill shock" category reported that their mobile service did not contact them, even as they verged on exceeding their call minute, text, or data plan.
  • 88 percent said they received no message from their carrier after the sudden increase.
  • 54 percent of personal cell phone consumers knew that would have to pay an ETF if they quit, but 18 percent disclosed that they did not know about the fee.
  • 21 percent of home broadband customers were aware of an ETF condition attached to their plan, but 38 percent were not.

"Among personal cell phone users who said they were subject to an ETF, 47% did not know what the amount of the fee would be," the study added. "For home broadband users who said they would have to pay an ETF, 64% did not know the amount of the fee."

Major reasons

The survey also suggests that ETFs "may also play a role in consumer behavior" when a subscriber is trying to decide whether to switch plans. 43 percent of respondents who did know about them confided that their ETF represented a "major reason" they stayed with their current carrier. 18 percent said that paying an early fee was a "minor reason" they didn't switch services. Another 3% said the ETF played no role in their decision.

This is all in line with a recent Government Accountability Office report that concluded that 42% of cell phone users don't switch, thanks to fees.

"I think the major take home message from all of this is that people don't know what they should know in order to be able to manage these kind of fees in the best possible way," Gurnin told reporters. "We do know that there are some carriers out there who are beginning to alert their customers when they're heading into bill shock territory. But it is certainly not yet a common practice. We would like to see some of these best practices become universal practices."

Reporters asked the FCC whether all this data would translate into regulations or just attempts to encourage the wireless industry to move into the "best practice" camp.

"We really can't say at this point whether this all will result in a rulemaking or voluntary standards," Gurnin explained. "We have begun some conversations with industry. I think that the importance of this survey is that it gives us a common ground of understanding." And: "We're really confident that we can work in a way that the industry will support that gets out information in a way that is ultimately good for everybody."

Very troubled

Good luck with that, given the wireless industry's response to the report.

"I am very troubled with the current direction the FCC is taking with respect to the wireless industry," Steve Largent of CTIA - The Wireless Association, told us. "It seems the Commission is going to attempt to micromanage what is an incredible array of choices for consumers. From prepaid to postpaid, subsidized handsets to unsubsidized, contracts with ETFs to those without, large, medium or small buckets of minutes and 'all-you-can-use' plans, consumers have an unbelievable range of choices."

"Unfortunately, the Commission's release missed an opportunity to educate consumers," Largent added. "Nowhere mentioned in the documents is there any information for consumers about how they can better manage their wireless usage - information that is readily available from every carrier and that has been submitted to the Commission by CTIA and carriers."

The FCC's materials did come with a tip sheet on dealing with ETFs, but to be fair to CTIA, the trade association may be dealing with "report shock," following the release of the agency's 14th wireless industry competition survey last week. The study very conspicuously noted that over the last five years, concentration in the industry has gone up. The two dominant providers, AT&T and Verizon, now enjoy a 60 percent chunk of revenue and subscribers, "and continue to gain share," the compendium noted. This might result in the FCC pressing some "policy levers" on the wireless industry, the document hinted.

Largent's commentary lamented "the message sent last week in the Mobile Competition Report to today's survey release."

Reporters also asked the FCC whether the agency was going to make any effort to tabulate the size of ETFs and their impact, given AT&T's announcement last Friday that the telco is attaching $325 in early fees to its iPhone.

No go on that, it seems.

"Increases in general . . . I wouldn't want to single out any one company," Gurnin explained. "Different companies adjust their ETFs up or down. It's really an overall issue that we're looking at. Our issue is clarity and disclosure to consumers."

Source: ars technica

Tags: mobile phones

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