It was a little-noticed policy shift this past week by the CTIA, the association that represents wireless providers that serve 97% of U.S. consumers. CTIA announced that its member companies would commit to alerting their customers to impending overage charges in an effort to alleviate “bill shock.”
The industry’s adoption of the “Wireless Consumer Usage Notification Guidelines” serves as the perfect example of how Washington -- with its industry advocacy associations, Congress, and federal regulators -- is supposed to work. It’s a triumph for the concept of “regulation by raised eyebrow,” where the threat of government intervention in an industry’s practice results in self-imposed commitments that serve consumer good.
The wireless industry’s approach is in stark contrast to the banking industry, which is fighting tooth-and-nail against regulation of an industry that nearly self-imploded save for government intervention and billions in taxpayer support, while at the same time its coffers swell.
The horror stories of “bill shock” are well-documented. A mobile phone user unknowingly hits their usage limits or roams and then two weeks later gets the eye-popping bill. At its most egregious, those bills can be in the thousands of dollars.
Just this past week it came out that two deaf and mute brothers who use their phones to communicate with one other received a $201,000 monthly bill from two weeks in Canada (they did not have the international plan). In fact, one of six cell phone users -- about 30 million customers -- has experienced some form of “bill shock,” according to a FCC survey last year.
The FCC survey was prompted by customer complaints about the industry practice of letting customers unwittingly run up egregious overage charges, kind of like the outlawed banking practice of arranging bank withdrawals to maximize the number of overdrafts and their accompanying fees.
The FCC last year started the process of drafting regulations to curtail cell phone bill shock.
The thinking was pretty simple. If the wireless industry could automatically inform you via text that your bill was due, and inform you of a payment 30 seconds after it was made, certainly it could inform its customers that they were reaching their limits or subject to additional charges.
In typical association fashion, CTIA reflexively decried the encroachment of government regulation. “It goes without saying that the carriers are opposed to anyone mingling in their affairs,” the CTIA told the FCC in a filing.
From an association advocate’s position, they could foresee the costs of implementing government-mandated regulations and the costs of challenging the enforcement of those regulations. Also, more cynically “bill shock” practices were a huge cash cow for the industry, one they were reluctant to forsake.
The FCC was unimpressed and began to move forward. CTIA, seeing the writing on the wall, launched an internal initiative to draft guidelines to head off FCC regulation. The simple plan is for CTIA members to provide free alerts to its customers “before and after subscribers reach monthly limits on voice, data and text. In addition, the plan includes notification to inform consumers of international roaming charges,” the CTIA release read.
“We appreciate the interest and guidance of the [FCC] in highlighting the need to harness technology to help empower consumers,” said CTIA president (and Seattle Seahawk Hall of Famer) Steve Largent. “Today’s initiative is a perfect example of how government agencies and industries they regulate can work together.”
What’s the stick to guarantee that the wireless industry abides by its own commitments? The FCC comes down on them like a ton of bricks with adoption of regulations that would include severe financial penalties. It’s the perfect invite for the regulator to say, we let you try it on your own, you said you’d do it, and you just spat in our face. God hath no fury like a pissed off regulator.
The financial services and banking industry could take a page from the wireless industry’s playbook. After bringing the country to the brink of economic ruin and taking hundreds of billions in taxpayer-funded TARP bailouts to save their skin, they continue to bemoan the infringement upon their businesses from new regulations such as the Dodd-Franks Act and the CARD Act. Both sought to rein in their own recklessness and abusive practices that precipitated the crises.
Listening to them, you’d think they’re still on the brink of calamity because of “egregious regulations.” Not if you read the quarterly earnings reports this week from two of the nation’s largest banks.
Wells Fargo reported a 21% increase in quarterly net income from last year’s third quarter of $4.1 billion on revenue of $19.6 billion, which actually dropped by $800 million. So, Wells Fargo made 20% profit on $800 million less in revenues. This, after borrowing $25 billion from American taxpapers.
Meanwhile, Citigroup reported 3Q net income of $3.8 billion compared to 2010 3Q net income of $2.2 billion on revenues of $20.8 billion. This, after borrowing $20 billion from American taxpapers. “We are very well-positioned as we help our clients navigate the world’s current trends and key opportunities,” CitiGroup CEO Vikram Pandit told Wall Street, while his K Street lobbyists tell Washington how bad the regs are hurting them and how they “restrict capital distribution” to boost the ailing economy.
It’s enough to encourage even the most hardened capitalist to send dinner to the Occupy Wall Street protests.
