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Hung up on phone company's fine print

DAVID LAZARUS / CONSUMER CONFIDENTIAL

September 14, 2008|DAVID LAZARUS

AT&T has sent customers an 8,000-word service agreement that, among other things, says people will be given 30-day notice of price increases only when "commercially reasonable" and that you can't sue the company.

Oh, and if you don't like AT&T's terms -- providing you can make your way through the company's 2,500-page "guidebook" -- your only recourse is to cancel service.

State regulators aren't happy about this and are looking into whether the AT&T service agreement violates the law and unfairly limits the rights of customers.

Meanwhile, the California Public Utilities Commission's Division of Ratepayer Advocates is preparing to protest an attempt by AT&T to remove numerous services from regulatory scrutiny before they're offered to customers.

The developments are contained in commission documents and e-mails that made their way to my hands.

Chris Witteman, a staff attorney for the PUC who also represents the Division of Ratepayer Advocates, confirmed that staffers recently reviewed AT&T's service agreement and that some believe regulatory action is needed to protect consumers.

"We want AT&T to be required to revisit and reformulate the agreement so it doesn't violate the law," he said.

H. Gordon Diamond, an AT&T spokesman, defended the agreement, saying it "provides customers with more direct information on their rights and . . . information on the services they purchase from us."

However, because the agreement serves as a contract between the firm and its customers, he acknowledged that "it was unavoidable to include some legal terminology."

Two years ago, regulators voted to give phone companies more freedom in pricing and marketing decisions -- thus opening the door to AT&T's new agreement. The rationale was that this would create a more competitive marketplace, which would benefit consumers.

However, the Division of Ratepayer Advocates concluded in a recent report that "significant rate increases" have occurred since the market was deregulated.

Witteman said a key problem with AT&T's service agreement is that the company doesn't list all the terms and conditions that apply to customers. Rather, AT&T says customers must review a separate "guidebook."

That guidebook is available only online, Witteman said, and runs about 2,500 pages. "What consumer is going to slog through that?" he asked.

Moreover, the service agreement says AT&T will "generally" provide written notice of price increases at least 30 days in advance, except when such notice isn't "commercially reasonable."

Witteman said the online guidebook and ambiguous notification policy appear to violate a California statute requiring that consumers "be given sufficient information to make informed choices."

AT&T's service agreement is written in dense legalese and essentially gives the company as much latitude as possible -- while limiting customers' ability to seek redress.

"If you do not agree with the provisions of this agreement, your sole option is to cancel your services . . . within 30 days after receipt of this agreement," it says.

An analysis of the agreement prepared for PUC staffers found fault with a variety of AT&T's provisions, including this one: "You also agree to pay for all charges for services provided under this agreement even if such calls were not authorized by you."

The analysis said this "is in direct violation to cramming laws," which protect consumers from having unauthorized charges placed on their bills.

Under the provision, the analysis concluded, "AT&T, or any other billing agents, could impose unauthorized phone calls on a consumer's bill." It said consumers would have "little chance in both avoiding and fighting against this type of fraud."

AT&T's Diamond said that the company complies with state cramming laws and that "customers have always been responsible for paying the charges that appear on their bills." He added, though, that "if customers believe they are not liable for the charges, we will be happy to discuss that with them."

The analysis was prepared by a PUC intern but was regarded by senior staffers as an accurate overview of problems with the AT&T document.

Verizon Communications Inc. is also preparing to inform regulators of services it wants to remove from regulatory oversight before offering them to customers. The company started mailing out its own service agreement last week.

That agreement is much easier to understand than AT&T's, although it too steers customers to an online "product guide" that runs hundreds of pages. According to Jon Davies, a Verizon spokesman, the guidebook will be posted sometime next month.

One of the biggest differences between the AT&T and Verizon agreements is that AT&T's includes a provision that says customers are "waiving the right to a trial by jury and to participate in a class action" and may resolve grievances only by arbitration.

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