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Sprint PCS, PacBell Wireless Are Sued Over Pricing Pitches

November 23, 1998|JENNIFER OLDHAM

Two Los Angeles-area lawyers have filed suit against two cellular carriers, claiming that per-minute pricing promises they made in numerous newspaper and magazine ads don't ring true.

Pasadena attorney Michael Linfield and Los Angeles attorney Steve Lathrop filed separate suits against Sprint PCS and PacBell Wireless in Superior Court in Los Angeles on behalf of Los Angeles resident Ann Marie Braco. The suits charge that Sprint's "A dime any time from anywhere" and PacBell's "Hey, it's your nickel" slogans deceive consumers because the actual per-minute cost of most calls are rarely this low.

In promoting several pricing plans, the carriers use "deceptive and misleading advertising," a violation of California's unfair-competition laws, Linfield said. Both suits are seeking a preliminary injunction to halt the advertising practice.

The lawsuits represent the latest attack on billing practices of cellular carriers. Earlier this year, San Diego attorney J. David Franklin filed a suit in Sacramento Superior Court accusing 25 of the state's wireless firms of fraud and deceptive advertising in their practice of billing customers by rounding up to the next higher full minute.

"Carriers get 25% of their revenue from rounding up," Franklin said.

The judge dismissed the suit last week on the grounds that state courts don't have jurisdiction over rates charged by wireless carriers. Franklin said he plans to appeal.

The California Public Utilities Commission, which regulates state utilities, has seen an increase in complaints from wireless customers who say they were billed at a rate that was higher than the one originally offered, said Larry McNeely, deputy director of the PUC's Consumer Services Division.

Because the PUC doesn't have jurisdiction to regulate rates charged by wireless carriers, it has tried to resolve these complaints by talking with district attorneys about filing cases against carriers who misrepresent their rates, McNeely said.

The Sprint suit calls into question a pricing plan that charges $50 a month for 500 "free" minutes. Under this plan, the user pays a rate of $50 for 500 minutes of calling time. Additional minutes cost 25 cents per minute. If the user does not make 500 minutes worth of calls, he would still pay the $50 a month.

"On this pricing plan, it's virtually certain that Sprint customers will pay substantially more than 10 cents a minute," the suit says. "If a customer makes 100 minutes of calls per month, the customer will be paying 50 cents a minute for each call. If a customer makes 300 minutes of calls per month, the customer will be paying 16.6 cents a minute for each call."

Customers won't pay exactly 10 cents a minute unless they use exactly 500 minutes allotted to them each month, Linfield said.

The suit against PacBell Wireless challenges a pricing plan offering 500 "free" weekend minutes and 20 "free" any-time minutes for $19.95 per month. Calls not included in these categories are billed at 49 cents a minute. The PacBell suit also names Affordable Portables, a retailer that sells PacBell's wireless service, as a defendant.

"On this pricing plan," the suit says, "virtually all PacBell and Affordable Portables customers will pay substantially more than 5 cents a minute for their calls."

The suit also calls into question a PacBell pricing plan that costs $9.95 a month for 500 "free" weekend minutes and 20 "free any-time minutes." Additional time under this plan is 49 cents a minute. The company falsely advertises this plan as "less than 2 cents a minute" for calls, the suit says.

PacBell said it hasn't received the lawsuit and could not comment on the allegations or on its pricing plans.

Sprint relies on calling plans that feature a set number--or "bundle"--of minutes for a set fee. Under these plans, unused minutes cannot be carried over from month to month.

"The bundled-minutes plan is straightforward and easy for people to understand," said Andrew J. Sukawaty, chief executive of Sprint PCS. "I don't think that it is in any way, shape or form deceptive to consumers."

Sukawaty said that users can switch plans at any time to adjust to their needs because Sprint doesn't require its customers to sign contracts. Analysts say that Sprint consumers use an average of 300 minutes per month--almost 2 1/2 times higher than the industry average.

Although the lawsuits may cause carriers to word their advertisements more carefully, they are unlikely to force carriers to change their pricing plans, said Mark Lowenstein, an analyst with Yankee Group, a Boston-based market research firm.

Wording on the Sprint PCS Web site advertises the dime-a-minute plan by saying, "For a monthly service charge of $50, you'll get: 500 minutes any time. That's as little as 10 cents a minute." This wording, Lowenstein said, shows the company isn't intentionally trying to mislead customers.

It's no coincidence that the suits are filed against the companies that most recently entered Southern California's wireless market. Sprint introduced service a year ago, joining carriers L.A. Cellular and AirTouch Communications. PacBell Wireless debuted here in the summer of 1997. The newcomers were forced to aggressively price their services to lure customers away from the incumbent carriers and to attract new customers to cellular service, Lowenstein said.

"We picked on PacBell and Sprint because their ads were the most egregious," Linfield said.

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Times staff writer Jennifer Oldham can be reached via e-mail at jennifer.oldham@latimes.com.

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