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Dial M for Misleading?

Complaints and lawsuits against wireless phone companies are climbing, with users unhappy about everything from billing practices to substandard service.

October 19, 2000|ELIZABETH DOUGLASS | TIMES STAFF WRITER

Mobile phone companies are moving at warp speed these days, signing up record numbers of customers, lowering prices, and unveiling gee-whiz phones that let users retrieve e-mail, buy gifts and play games with the touch of a few buttons.

But as service options grow, so do consumer complaints. There is mounting discontent among the industry's 101 million domestic subscribers. Complaints and lawsuits have climbed steadily nationwide about everything from billing practices and hidden restrictions to substandard service and coverage.

For the most part, unhappy consumers have been left to fend for themselves against the industry. Deregulation put an end to pricing rules, and legislative exemptions have helped wireless companies deflect claims under state consumer protection laws.

"They have been saying, 'Take a hike, we've got limited liability, we're free and exempt from all those things,' " said Carl Hilliard, president of the Wireless Consumers Alliance, an independent group devoted to protecting wireless customers.

Now, however, the momentum is beginning to shift. In August, the Federal Communications Commission ruled unanimously that states can award monetary damages against wireless phone companies in cases involving false advertising, unfair business practices and other forms of fraud.

A wireless industry trade group, the Cellular Telecommunications Industry Assn., points out that the FCC decision is advisory and not binding on U.S. courts, and does not open the floodgates to more litigation.

"The important thing to draw from the FCC ruling is that every case has to be looked at on a case-by-case basis," said Michael Altschul, CTIA's general counsel.

Still, many believe that the FCC's stance gives new strength to efforts to step-up oversight of the industry.

"We're viewing this as a tremendous victory," said Daniel Spitzer, an attorney representing Shlomo "Sam" Gonen in a case against AirTouch Cellular (now called Verizon Wireless). Gonen sued the company for extending his service contracts without his knowledge and then charging him $600 in early termination fees when he canceled service on four out of 10 AirTouch phones used at his business.

At the time, AirTouch was promoting a "no regrets" policy that the company said allows customers to "easily switch from one pricing plan to another at any time without incurring an early-disconnection fee and without extending your service agreement period."

According to the lawsuit, Gonen changed plans when an AirTouch salesman called him to suggest an alternative. The company later told Gonen the switch triggered an automatic extension of his two-year agreements, in turn making him subject to early-termination charges when he halted service at the original two-year mark.

"The [FCC ruling] now puts the onus on the companies to improve their service and live up to the promises they make," Spitzer said. If they don't, he added, "there will be many, many more lawsuits to come."

Earlier this year, California Atty. Gen. Bill Lockyer teamed with a Bay Area district attorney and the Los Angeles City attorney in a lawsuit accusing AirTouch Cellular and Tandy Corp. of false, misleading and unfair business practices in the sale of AirTouch service through Radio Shack stores.

The suit--which closely mirrors the Gonen case--alleges that the companies illegally enforced two-year oral contracts, misled customers into believing they could change plans without extending their service contracts, and improperly imposed early termination fees. The prosecutors seek an estimated $20 million in penalties.

Officials at Verizon declined to comment on the pending cases involving AirTouch.

State and national consumer groups say similar claims could be brought against nearly all the wireless carriers, most of whom have engaged in similar practices involving early-termination fees for canceled service. In California, for example, regulators have said that one-quarter of all complaints about wireless carriers involve early termination fees.

"I'm very concerned because our complaint rate is rising substantially every year," said Helen Mac Murray, chief of the consumer protection section in the Ohio attorney general's office. "Some of that is because there are more cell phone users out there, but there's so much misinformation out there, that even an educated person has a hard time trying to figure out what these services give you or don't give you."

One issue headed for renewed attention is the industry's insistence on billing customers for phone calls using whole-minute increments even though the carriers are capable of clocking calls down to the second--as Nextel Communications already does.

Wireless Consumers Alliance contends that billing in one-minute increments amounts to shortchanging customers. "If you buy a plan that comes with 100 minutes of use, the reasonable expectation is that you're going to get 100 minutes of use, not something less than that because of rounding up," Hilliard said.

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