Group wants truth in cell phone billing

Wireless firms bill clients $937 million for 'federal recovery fees'

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 Updated:

An organization of state-designated consumer advocates wants federal regulators to force cellular telephone providers to clear up their billing practices.

The National Association of State Utility Consumer Advocates is a group of 44 government officials and consumer advocates in 42 states and the District of Columbia with statutory authority to represent the interests of utility consumers before state and federal regulators and courts.

NASUCA filed a petition with the Federal Communications Commission on March 30, 2004 demanding the FCC to take a more active role in regulating misleading line item charges on monthly wireless bills.

At issue are so-called "federal recovery fees" which are used primarily to pay for costs associated with allowing customers to change providers while keeping their phone numbers. But wireless companies have used the line item to cover all manner of expenses, including marketing and advertising costs.

NASUCA's petition cites a study by the Center for Public Integrity released in October 2003 which detailed the practice. The Center reported that wireless companies had collected $629 million starting in January 2002 for number portability, a service not offered until Nov. 24, 2003.

Since the Center's last report, wireless providers have collected another $308 million, bringing total collections for number portability to $937 million.

New totals show that all the major cell phone providers combined are collecting $94 million per month for number portability – but neither the FCC nor the companies themselves will say how many people have taken advantage of the service.

While most consumer groups concede the fact that offering portability costs money, the real objection has been related to how the fee for the service is collected.

Typically wireless phone companies lump the cost of portability along with other charges like "number pooling" into a single line item on subscribers' bills under a generic name like "federal recovery fee." Exactly how much of that fee is going toward number portability is difficult to say.

But FCC filings and interviews with company officials indicate number portability is being used to justify the collection of hundreds of millions of dollars from subscribers.

The FCC is relying on the companies to come up with their own estimates on what portability will cost and does not require the companies to make that information public. Some advocates for more transparency wonder where the oversight is.

"Who is out there to police these fees? The FCC will not regulate the carriers but they can at least do their job and investigate how much number portability really costs so that consumers know if they are being bilked a billion dollars in the process," said Chris Murray, legislative counsel for Consumers Union in Washington, D.C.

Higher charges, hidden purposes

Wireless companies have come up with a host of different names for the fees they charge to consumers for federally mandated services they provide like number portability. Here is a list of what each company calls these fees, how much they charge for them now, and what they charged in November 2003.

CompanyLine Item on BillMonthly Fee as of Nov. 2003Current Monthly FeeFees Collected Per Month*
ALLTELRegulatory Cost Recovery Fee and Telecom Connectivity Fee **$0.41$1.00$7.6 Million
AT&T WirelessRegulatory Programs Fee$1.75$1.75***$12.3 Million
Cingular WirelessRegulatory Cost Recovery Fee$0.32-$0.75$0.32-$0.75$7 Million
Leap WirelessRegulatory Recovery Fee$0.45$0.45$680,000
NextelFederal Programs Cost Recovery Fee$1.55$1.55$16.4 Million
Sprint PCSFederal Wireless Number Pooling and Portability and Federal E911$1.50$1.50$22.1 Million
T-Mobile USARegulatory Programs Fee$0.00$0.86+$8.5 Million
US CellularRegulatory Cost Recovery Charges$0.55$0.55$2.3 Million
Verizon WirelessRegulatory Charge$0.05$0.45++$14.6 Million
Western WirelessRegulatory and Administrative Surcharge$0.97$1.70+++$2 Million

* Calculated using number of subscribers multiplied by monthly fee.
** Telecom Connectivity Fee recovers cost incurred when connecting calls to other carriers.
*** AT&T Wireless was only charging about one third of its customers a recovery fee, as of April 2004.
+ As of March 2004 went from $0.00 to $0.86.
++ As of March 2004 went from $0.05 to $0.45.
+++ As of January 20, 2004 went from $0.97 to $1.70.

Source: Individual company interviews and FCC filings

Since November, four of the top ten wireless service providers have raised the monthly line item fee to cover the costs of number portability. Two of the companies, Verizon Wireless and T-Mobile USA, Inc., have begun charging fees.

NASUCA filed its petition with the FCC requesting that wireless companies be "prohibited from imposing line items unless those charges are expressly mandated by federal, state or local regulatory action." (Emphasis in original.)

The organization is also demanding that the line items coincide with a cost assessment by the FCC.

The FCC expects that the competitive wireless market will regulate itself. If wireless companies are "over-billing on a line item and misnaming it or whatever….the market will sort itself out," said John Muleta, chief of the Wireless Telecommunications Bureau at the FCC in an October 2003 interview with the Center.

With little oversight from the FCC, cell phone companies can continue to collect these fees for as long as they want.

"[The] FCC has exercised no review whatsoever on the size or the length of the fee; it is totally at the discretion of the provider," said Billy Jack Gregg, Director of the West Virginia Consumer Advocate Division.

The FCC will assign a new docket number to the petition and put it out for public comment.

Although wireless companies are banking more than $1 billion a year to provide number portability, they will not disclose how many customers are actually taking advantage of the service.

However, according to Roger Enter of the telecommunications consulting firm Yankee Group, 4 million consumers have ported their number since November 2003. To date less than 4 percent of all subscribers have taken advantage of the service they have been paying for.

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