NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
Resolution No. 2008-02
URGING THE FEDERAL GOVERNMENT TO PRESERVE HISTORIC POWERS OF STATES TO PROTECT WIRELESS TELECOMMUNICATIONS CONSUMERS; IF FEDERAL WIRELESS CONSUMER PROTECTION STANDARDS ARE ADOPTED, THEY SHOULD SERVE AS A REGULATORY “FLOOR.”
WHEREAS, The federalist structure of joint federal and state sovereigns established in the United States Constitution “preserves to the people numerous advantages,” such as: (1) “assur
WHEREAS, Consistent with this federalist structure, the telecommunications industry has generally been subject to dual state-federal regulation since enactment of the Federal Communications Act of 1934 (“FCA”), with the Federal Communications Commission (“FCC”) regulating interstate and international telecommunications and states regulating intrastate telecommunications services.[2]
WHEREAS, Likewise consistent with the federalist structure of American government firmly rooted in the Constitution, states have also traditionally retained broad powers to regulate business activities conducted within their borders, both to protect their citizens and to order the state’s economic affairs.
WHEREAS, While Congress amended the FCA in 1996 in order to encourage competition, “[n]either Congress nor the [FCC], however, totally abandoned traditional regulatory requirements [and] . . . the amendments left many traditional requirements and related statutory provisions . . . in place.”[3]
WHEREAS, While Congress revised the dual federal-state regulatory regime for commercial mobile radio telecommunications service (“CMRS” or “wireless”) in 1993 by preempting state regulation over the “entry of” and “rates charged by” CMRS, Congress at the same time expressly and broadly preserved state authority to regulate “other “terms and conditions of” CMRS, in order to ensure that consumers were protected to a greater extent than they were under the prior regulatory regime that differentiated between fully regulated “public mobile services” and unregulated “private land mobile services.”[4]
WHEREAS, The wireless telecommunications industry has grown from a fledgling industry, providing a “luxury” service to a few million users in 1993, to a multibillion dollar industry with over 250 million users.
WHEREAS, CMRS providers have aggressively sought and obtained designation as Eligible Telecommunications Carriers (“ETCs”), under 47 U.S.C. § 214(e), allowing them to receive over $1 billion per year in support from the Federal Universal Service Fund (“USF”) in exchange for assuming service obligations traditionally assumed by incumbent local exchange carriers.
WHEREAS, State agencies, the FCC and other federal agencies, consumer advocate organizations and other groups annually receive many complaints from wireless carriers’ consumers regarding such practices as:
- Failing to clearly or adequately disclose the products and services for which charges are imposed in monthly billing statements or service contracts;
- Failing to provide information allowing consumers to easily compare the costs and attributes of wireless service offered by different providers;
- Failing to provide consumers with clear and concise information regarding service coverage, quality, reliability or other service limitations with the result that consumers often learn that the wireless service to which they have subscribed does not meet their needs only after having signed a lengthy service contract;
- Requiring multi-year service contracts, coupled with early termination fees (“ETFs”) of $150 or more that typically apply to each cell phone, imposed when customers terminate service before the contract’s expiration;
- Extending or modifying service contract terms in response to minor changes in service requested by consumers; and
- Including adhesionary provisions in service contracts that limit or exclude legal rights and remedies to which customers would ordinarily be entitled.
WHEREAS, State agencies and courts have long been in the forefront of efforts to protect Americans from unreasonable or unfair business practices by wireless carriers in the same fashion that Americans are protected from unreasonable or unfair business practices in other industries.
WHEREAS, Consistent with their constitutionally-recognized powers, nearly all states have enacted, or sought to enact, both generally applicable laws regulating unfair, unreasonable or deceptive trade practices and industry-specific laws regulating telecommunications carriers generally, some of which directly address “other terms and conditions” of wireless service.
WHEREAS, State legislatures or administrative agencies have taken, or have considered, a variety of measures to ensure that wireless consumers are protected from unfair business practices and receive adequate wireless service, including such efforts as:
- In 2008, the Illinois commission’s adoption of comprehensive service quality standards for wireless carriers that have been designated as Eligible Telecommunications Carriers and therefore are entitled to received federal USF subsidies.[5]
- In 2004, the California commission compelled Cingular (now AT&T Mobility) to reverse its practice of aggressively marketing service in areas where it lacked adequate facilities and then imposing ETFs when consumers sought to obtain adequate service from another carrier, by fining Cingular $12 million and ordering the issuance of up to $18.5 million in customer refunds.[6]
WHEREAS, Attorneys general in numerous states have also taken an active role in enforcing state laws of general applicability to protect consumers against unfair wireless business practices, including:
- In 2004, the threat of litigation by attorneys general of thirty-three (33) states compelled the three larges wireless carriers (i.e., Cingular, Sprint and Verizon Wireless) to enter into settlements (“Assurance of Voluntary Compliance”) addressing wireless carriers’ advertising and marketing practices, resulting in substantial changes to the carriers’ practices while the settlements were effective, and requiring payment of $1.7 million by each carrier.[7]
- At least eighteen states’ attorneys general (Alaska, Arizona, California, Colorado, Florida, Idaho, Iowa, Maryland, Missouri, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Utah, Vermont, Washington and Wisconsin) have brought suit or made public an investigation of one or more wireless providers pursuant to state laws prohibiting false and misleading advertising or unfair business practices, resulting in settlements that have included individual payments of damages ranging up to $3,750,000.
WHEREAS, Consumers in at least twenty states have brought actions in state courts, both in individual and class action lawsuits, challenging a wide range of wireless carrier business practices under both state statutes and common law based on misrepresentation, false advertising, or otherwise unfair or unconscionable business practices, or breach of warranty or contract with respect to service quality regarding such matters as:
- Wireless carriers’ failure to disclose gaps in coverage area and service limitations;
- Wireless carriers’ charging for “rounding up” and non-communication time; and
- Wireless carriers’ failure to inform customers that cell phones could not work on another network.
WHEREAS, States have historically been recognized as the “laboratories” of democracy in America, providing for state-by-state experimentation that has often, particularly in telecommunications, proven much less risky than a single federal policy, particularly one that gets “gridlocked” in interminable lobbying battles and legal challenges, because state regulation allows for a continuous and low-risk iterative process of field experimentation, testing, and fine tuning of business strategies and public policies before irrevocable, major investment bets are placed on a national level.[8]
WHEREAS, Longstanding experience in the telecommunications industry as a whole, and the wireless market in particular, demonstrates that market forces do not adequately constrain anti-consumer and/or anti-competitive carrier practices and further confirms that both state and federal action has been vital in addressing such practices.
WHEREAS, Exclusive reliance on federal standards or remedies for consumer protection would deprive consumers of enforcement of state standards and remedies that are often more effective in stopping unfair carrier practices in the telecommunications industry.
WHEREAS, Even an increasingly deregulated and competitive marketplace, far from providing a basis for displacing state laws to protect consumers, by necessity creates a much larger role for state contract and consumer protection laws.
WHEREAS, Requiring a distinction between industry-specific and generally applicable state laws denies states the ability to develop and implement narrowly tailored laws to address unfair wireless carrier practices, and there is no compelling federal interest in dictating to states whether their consumer-protection laws should be generally applicable or industry-specific.
WHEREAS, Authorizing the FCC or other federal agencies to delay or halt pending state enforcement proceedings against wireless carriers on grounds of federal preemption would unquestionably chill or interfere with state efforts to constrain or unfair wireless carrier practices.
WHEREAS, The FCC currently has pending before it proceedings in which the wireless industry is advocating for federal preemption of state regulatory authority over wireless ETFs or other billing and related practices.[9]
WHEREAS, Congress is currently considering whether to direct the FCC to establish federal consumer protection standards for wireless consumers across the nation and perhaps modifying the continued role of state agencies and courts in protecting their citizens from wireless carriers’ business practices, and the wireless industry is again urging broad preemption of state authority over such practices in favor of a “one size fits all” set of federal standards.[10]
WHEREAS, Lingering uncertainty regarding federal preemption of state industry-specific laws and laws of general applicability, as applied to wireless carriers, has had a “chilling” effect both on states’ efforts to effectively apply and enforce their current laws and to adopt new laws to better address widely-perceived problems in the wireless industry.
NOW THEREFORE, BE IT RESOLVED, that NASUCA opposes any proposal that would preempt states’ historic and constitutionally-established powers to protect telecommunications consumers and regulate carriers’ business activities within their borders including, but not limited to, regulation of wireless telecommunications services and business practices.
BE IT FURTHER RESOLVED, that NASUCA opposes any proposal that would preempt states’ traditional powers to protect their citizens through targeted, industry-specific laws, including but not limited to, the terms and conditions of wireless telecommunications service.
BE IT FURTHER RESOLVED, that NASUCA opposes any proposal that the FCC or any other federal agency should be authorized to halt, delay or otherwise interfere with pending state judicial or administrative consumer protection proceedings.
BE IT FURTHER RESOLVED, That, notwithstanding the foregoing, NASUCA is not opposed to, and generally supports, efforts to establish federal standards providing for increased protection of consumers of telecommunications services, including but not limited to wireless telecommunications service, and urges the allocation of sufficient financial and other resources to the FCC or other responsible federal agency, in order to permit adequate enforcement of such standards in coordination with states.
BE IT FURTHER RESOLVED, That notwithstanding the foregoing, such federal standards must be a regulatory “floor,” and not a “ceiling” prohibiting states from adopting or enforcing more stringent standards or standards for which there is no federal analogue, and further that the any decision adopting federal standards should expressly disavow any assertion of field preemption.
BE IT FURTHER RESOLVED, that the broad principles and positions set forth herein apply with equal force in the broader context of telecommunications service and consumer protection generally.
BE IT FURTHER RESOLVED, that NASUCA’s President forward a copy of this resolution to the following bodies and to encourage such bodies’ members to support positions consistent with this resolution: the National Association of Regulatory Utility Commissioners (“NARUC”); the National Association of Attorneys General (“NAAG”); the National Governors’ Association (“NGA”); the National Conference of State Legislatures (“NCSL”); and such other national associations of state and local governments as NASUCA’s President deems appropriate in achieving the goals of this resolution.
BE IT FURTHER RESOLVED, that the Telecommunications and Consumer Protection Committees of NASUCA, with the approval of the Executive Committee of NASUCA, are authorized to take all steps consistent with this Resolution in order to secure its implementation.
Passed by the membership (Massachusetts abstaining)
June 24, 2008
Salt Lake City, Utah
[1] Gregory v. Ashcroft, 501 U.S. 452, 458 (1991), citing McConnell, “Federalism: Evaluating the Founders’ Design,” 54 U. Chi. L. Rev. 1484, 1491-1511 (1987); Merritt, “The Guarantee Clause and State Autonomy: Federalism for a Third Century,” 88 Colum. L. Rev. 1, 3-10 (1988).
[2] See, e.g., 47 U.S.C. §§ 151and 152(b); see also 47 U.S.C. § 414.
[3] Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc., 127 S.Ct. 1513, 1517 (2007).
[4] H.R. Rep. No. 103-111, 103rd Cong., 1st Sess. (1993) reprinted in 1993 U.S.C.C.A.N. 378, 586-87.
[5] Re Establishment of Rules Regarding Service Quality and Customer Protection Applicable to Wireless Carriers Operating as Eligible Telecommunications Carriers, Docket 06-0468, Order (Ill. Commerce Comm’n, April 9, 2008).
[6]Investigation on the Commission’s Own Motion into the Operations, Practices, and Conduct of Pacific Bell Wireless, LLC d/b/a Cingular Wireless, 2004 Cal. PUC Lexis 453 (2004).
[7] See, e.g., In re Cellco Partnership d/b/a Verizon Wireless, “Assurance of Voluntary Compliance” (June 25, 2004).
[8] Prepared Testimony of Mr. Robert C. Atkinson, Director of Policy Research-CITI, Columbia University, “Health of the Telecommunications Sector: A Perspective from Investors and Economists,” House Committee on Energy and Commerce, Subcommittee on Telecommunications and the Internet (Feb. 5, 2003).
[9] In re CTIA’s Petition for Declaratory Ruling Regarding Early Termination Fees in Wireless Service Contracts, Public Notice, WT Docket No. 05-194 (May 20, 2005); In re Truth-in-Billing and Billing Format, 2nd Further Notice of Proposed Rulemaking, CC Docket No. 98-170 (March 18, 2005).
[10] See, e.g., “Cell Phone Consumer Empowerment Act of 2007,” S. 2033 (Introduced Sept. 7, 2007); “Uniform Wireless Consumer Protection Act,” S. 2171 (Introduced Oct. 16, 2007); “Wireless Consumer
Protection and Community Broadband Empowerment Act of 2008,” H.R. ____ (Staff Discussion Draft, May 12, 2008).