F.C.C Enters Cell Phone Fray

The F.C.C today announced it would address the growing debate over cell phone termination fees and "locked" handsets, in response to legislation offered last week by two Democratic Senators.

The senators, Amy Klobuchar of Minnesota and Jay Rockefeller of West Virginia, said their bill, The Cell Phone Consumer Empowerment Act of 2007, is designed to give the public greater freedom to switch cell phone carriers without being hit by early termination fees that can be $200 to $300 or more.

In response, Martin said his agency would go even further and examine early termination fees imposed not just by cell phone companies, but cable and telecom firms as well.

"I think it may be important for the commission to look at the early termination fees across all platforms," Martin told reporters before the F.C.C.'s monthly public meeting.

The Klobuchar-Rockefeller bill would require wireless companies to pro rate termination fees—so if customers wanted to terminate a two-year contract after one year, they would only be charged half the fee. While Verizon currently prorates termination fees, the other major cell phones companies do not.

(Disclosure: Ben Goldfarb, Amy Klobuchar's 2006 campaign manager, is my cousin. He stopped working for her after the campaign and currently has no connection to her Senate office.)

The bill comes against the backdrop of growing pressure on cell phone companies and federal regulators to relax what consumer advocates call the draconian fees and restrictions placed on cell phone users.

The senators are also asking the F.C.C. to look into the issue of cell phone "locking"—which prevents consumers from mixing and matching providers and handsets—and report back to Congress on its effect on consumer behavior and competition.

Consumer groups have lobbied the F.C.C. to allocate a portion of its upcoming 700Mhz wireless spectrum auction for "open access," which would give consumers more flexibility in choosing wireless phones and services.

Gigi Sohn, a cofounder of Public Knowledge, a Washington consumer advocacy group, said consumers are growing fed up with their cell phone providers.

"There is simmering grassroots resentment now against draconian cell phone fees, long contracts and locked handsets that is set to explode," Sohn told Portfolio.com. "Cell phones have become like utilities now, and people expect more flexibility."

Google, which is widely rumored to be launching its own cell phone, has lobbied vigorously in support of this effort, and is preparing to bid on the auction.

Last month, an enterprising New Jersey teen who was frustrated because his new iPhone would only work with AT&T, hacked the device, making it usable on other cell phone networks.

Apple is currently mulling joining the auction itself, according to a report in BusinessWeekthis week.

Eric Schmidt, Google's C.E.O. and an Apple board member, is said to have been displeased by Apple's decision to limit iPhone service to AT&T.

The cell phone industry opposes the proposed bill. In a statement, Steve Largent, C.E.O. of The Wireless Association, and a former Republican Congressman, dismissed the need for regulation and accused the senators of using "incomplete and misleading data."

"Wireless consumers in America enjoy the most affordable service in the free world," Largent said. "The Klobuchar-Rockefeller bill is unnecessary and, if enacted, threatens to increase the cost of wireless service and reduce the number of choices available to American consumers."

Nevertheless, federal regulators are at least making a show of responding to the senators. Earlier today, Rockefeller said the aim of the legislation is to simplify the byzantine array of charges, fees and requirements that make cell phone bills practically incomprehensible to many people.

"It's high time to protect cell phone users from these deceptive billing practices," he said.

by Sam Gustin