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Industry and Consumers Clash at FCC Over Cell Phone Fees

June 12 – Industry and consumer groups butted heads at the Federal Communications Commission on Thursday over early termination fees, or charges imposed on the customers of communications services prior to the expiration of their contract.

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By William G. Korver, Reporter, BroadbandCensus.com

WASHINGTON, June 12 – Industry and consumer groups butted heads at the Federal Communications Commission on Thursday over early termination fees, or charges imposed on the customers of communications services prior to the expiration of their contract.

Such fees are a source of “diminished” competition and should be abolished, said Anne Boyle, chair of the Nebraska Public Service Commission. Such fees have been the source of more than 3,700 complaints to the FCC, which held an unusual “open meeting” to hear the views of state commissioners, academics, consumer groups, individual consumers, and corporations.

Boyle said that since more than 200 million individuals now own a cellphone, 1992 legislation authorizing wireless providers in included fees in customer contracts was no longer necessary – having already served its purpose. The fees should also be done away with because it limit consumers’ ability to move from carrier to carrier.

John Murphy, senior vice president, controller and chief accounting officer for DirecTV, and Thomas Tauke, executive vice president for public affairs, policy and communication for Verizon Communications, objected to Boyle’s assertion that early termination fees should be made illegal. Doing so would decrease the amount of people who can afford cellular service, they said.

Contract balances that include such fees that may be paid over a longer period of time, allowing lower-income individuals a better opportunity of owning a cell phone, they said. The fees allow wireless companies and the satellite company to offer bundled server at lower costs. The fees also allow companies to better anticipate revenue .

Nonetheless, Lee Selwyn, president and founder of Economics and Technology Inc., a telecom consulting firm, said that wireless companies only lose an average of nine dollars per customer that terminates his or her contract early. Selywn said that the average Sprint customer does not terminate his or her contract until after 60 months of service.

Boyle also noted that companies conduct credit checks prior to offering wireless services, which she said would seem adequate to provide low-income individuals with the ability to obtain wireless contracts without early termination fees.

Harold Schroer, an individual consumer testifying at the hearing, said that he was charged an exorbitant fee for attempting to revert to his original wireless plan – after discovering that he was having to pay more for services that he didn’t want. His carrier, Verizon Wireless, said he couldn’t revert to his old plan without paying the fee. Schroer refused to pay, and he said he received harassing calls and letters from Verizon, as well as a lower credit rating.

Consumer Molly White, like Schroer, also dubbed such fees “illegal.” White said she was not allowed to use her Cingular phone on the AT&T network after AT&T purchased Cingular. Instead, White was forced to enter into a long-term contract with AT&T.

Questioned by Commissioner Michael Copps, Tauke said that, if a customer makes a contract with a third-party reselling, like Qwest, that has an agreement with Verizon, the customer should not expect pro-rating, a policy that was recently adopted by Verizon.

While several of the panelists applauded Verizon and other wireless companies for deciding to pro-rate, Boyle and Patrick Pearlman, of the National Association of State Utility Consumer Advocates, called it merely the first step in the right direction.

The hearing began with Sen. Amy Klobuchar, D-Minn., calling it the government’s responsibility to ensure that consumers are given choice and adequate information by wireless providers. Klobuchar is currently co-sponsoring a bill, the Cell Phone Empowerment Act, with Jay Rockefeller, D-W.V., an attempt to require better disclosure of such fees.

Thomas Hazlett, professor of law and economics at George Mason University, said that liberalization and deregulation are the actual reasons for cheaper rates in the wireless industry, not state regulation.

Daniel Brenner, senior vice president for law and regulatory policy for the National Cable and Telecommunications Association, urged the wireless industry to adopt stratagies similar to those of the cable companies, which allow customers the option of paying on a monthly basis.

Expert Opinion

Adrianne Furniss: Lifeline Needs A Lifeline

The FCC should hit the pause button on a current plan to zero out support for voice-only services.

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The author of this Expert Opinion is Adrianne Furniss, Executive Director of the Benton Institute for Broadband and Society

In less than three months, nearly 800,000 low-income people who receive telephone subsidies through the Universal Service Fund’s Lifeline program will be negatively impacted by changes scheduled to go into effect at the Federal Communications Commission on December 1. That is one of the most troubling — and pressing — conclusions of an independent evaluation of the FCC’s Lifeline program conducted by Grant Thornton. As the COVID-19 pandemic rages on, the FCC must act now to ensure people can retain essential communications services.

As of June 20, 2021, approximately 6.9 million subscribers were enrolled in the Lifeline program; most (approximately 94 percent) are enrolled in supported wireless plans. Voice service remains a desired service for both Lifeline subscribers and the general American consumer. Only 1 percent of surveyed American adults live in a home with neither fixed nor mobile voice service, and mobile-only voice subscribers comprise more than 60 percent of U.S. households.

In 2016, the FCC adopted a comprehensive reform and modernization of the Lifeline program. For the first time, the FCC included broadband as a supported service in the program. Lifeline program rules allowed support for stand-alone mobile (think cell phone) or fixed broadband Internet access service (think home broadband service delivered over a wire), as well as bundles including fixed or mobile voice and broadband. The 2016 decision also set in motion a plan to zero-out support for voice-only services.

In its February 2021 report, Thornton found that the phase-down and ultimate phase-out of voice services by December 1, 2021 may negatively impact 797,454 Lifeline consumers (that’s over 10 percent of all Lifeline enrollees) who use voice-only services for fundamental needs. So that’s nearly 800,000 households that could face being disconnected from phone service this winter.

The FCC needs to change course and help more Americans keep connected to communications services that are essential to navigate the ongoing public health and economic crisis.

And it needs to act before December 1.

Most importantly, the FCC should act swiftly and hit the pause button on the 2016 plan to zero-out support for voice-only services. During the pandemic, the stakes are just too high for anyone to be disconnected from essential communications networks.

Then the FCC should launch a new effort to reform and further modernize the Lifeline program, informed by what we’ve witnessed during COVID, and the findings in Thornton’s and the FCC’s own recent review of the Lifeline program.

First, Lifeline needs to have foundational governance documents—such as strategic plans, performance objectives, and an integrated communications plan—to assist in the longitudinal success and guidance of the program.

Second, the FCC has to consider raising Lifeline’s monthly subsidy, $9.25, so it can make more meaningful services affordable for low-income families. Home-broadband prices (both for fixed and wireless service) remain disproportionately high when compared to the Lifeline program subsidy. The FCC should evaluate minimum service standards in relation to the average cost of wireless, wireline, and broadband data plans and determine if the subsidy will cover all, or even the majority of costs to provide Lifeline services.

Third, the FCC must adopt changes in the program so it better benefits the people it was created to connect.

  • The FCC should seek to understand the composition of Lifeline households and what services various members need (i.e., school-aged children, telecommuters, etc.). The minimum services supported by Lifeline should address the needs of the entire household.
  • Just 25 percent of the people eligible to participate in the Lifeline program actually enroll. The FCC must understand why and should consider ways to improve awareness of the Lifeline program. One idea is to partner with other federal benefit programs, and the state agencies that administer those programs, to not only increase outreach about Lifeline, but ideally to integrate Lifeline’s application processes into those program applications.
  • The FCC should adopt program rules that incorporate Lifeline consumer feedback to ensure the program works for the most vulnerable people in society.

Fourth, changes in the Lifeline program should encourage all telecommunications and broadband service providers to compete to serve low-income households in their service areas.

Finally, the FCC should also consider revising its measure of affordability of broadband for low-income consumers. Currently, the FCC considers “affordable service” as 2 percent of disposable income of those below 135 percent of the federal poverty level. Instead, the FCC should consider affordability in the context of a subscriber’s purchasing power in a geographic location and balanced with availability of services and choice of providers. The FCC should evaluate the pricing packages of voice and broadband services offered by Lifeline carriers and provide assurance that packages offered are in the reasonable standard of affordability for low-income consumers. And the FCC should institute a structured process to regularly review the Lifeline program’s pricing packages and incorporate measures of both the subsidy rate and service standards for similar programs (like the Emergency Broadband Benefit), income statistics of current consumers, and the percentage of Lifeline subscribers who pay out of pocket for services.

The commitment to connecting people with low incomes to essential communications services is not new. But the past 18 months have offered stark reminders of the importance of universal service. We need the FCC to act now to keep everyone connected. And we need the FCC to update the Lifeline program so everyone can rely on a basic level of connectivity no matter how much income they have.

Adrianne Furniss is the Executive Director of the Benton Institute for Broadband and Society. She manages the institute’s staff and relationships with Benton experts, partners, and supporters in service to Benton’s mission and in consultation with Benton’s Trustees and Board of Directors. Previously, she held management positions at both non-profit and for-profit content creation companies, focused on program development, marketing, and distribution. This piece was originally published in the Benton Institute’s Digital Beat, and is reprinted with permission. © Benton Institute for Broadband & Society 2021. Redistribution of this publication – both internally and externally – is encouraged if it includes this copyright statement.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Universal Service

Experts Concerned About Connectivity After Emergency Broadband Benefit Fund Runs Dry

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Screenshot taken from CCA event

April 1, 2021 – Experts are concerns about the long-term implications of the $3.2-billion Emergency Broadband Benefit program (EBB) running out of money without a plan for what happens after.

The fund, created by Congress in December, provides up to $50 in a monthly internet discount for families and $75 for tribal lands to access broadband internet. The fund will cease when all the money is used up or within six months, whichever happens sooner.

Clare Liedquist Andonov, principal at Herman and Whiteaker, LLC, said Wednesday during the CCA mobile carriers show that if all people on Lifeline — an older FCC program that provides monthly discounts for eligible low-income subscribers for internet and telephone services – subscribe to the fund, the money will “be exhausted within about four months.”

John Nakahata, partner at Harris, Wiltshire and Grannis LLP, said both the EBB and Emergency Connectivity programs are simply short-term stimulus plans that are not designed to last long.

Andonov said she is concerned about what happens after such funding ceases to exist. “What happens after four months?” she asked. “Do you disconnect those people?” She said the infrastructure built to connect people online in the first place would go to waste if the EBB program ceased operations in a matter of months, alongside the administrative costs to run the program.

To combat the expenditure of EBB funding in the mere four months projected by Andonov, Senator Amy Klobuchar, D-MN), co-chair of the Senate Broadband Caucus, and House Majority Whip James Clyburn, D-SC, introduced comprehensive bicameral broadband infrastructure legislation on March 12 to expand access to affordable high-speed internet for all Americans.

“In 2021, we should be able to bring high-speed internet to every family in America — regardless of their zip code,” said a press release from Klobuchar’s office. “This legislation will help bridge the digital divide once and for all.” If passed, Cole said it would allow the EBB program to last for an entire year; but even then, one year is not enough, they say, as broadband should be accessible for people indefinitely.

To address this challenge, there is some $100 billion set for recently-introduced broadband infrastructure bills being considered in Congress. That money is spread between three bills that would change the nation’s definition of served and unserved people with broadband by dramatically upping the threshold for broadband speeds.

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Education

Sen. Ed Markey Celebrates Telecom Act as Telecom Lawyers Tell Congress to Be Specific

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Photo of Sen. Ed Markey by NASA

February 2, 2021 – Democratic Sen. Ed Markey’s communications policy focus this Congress will be on net neutrality, children and climate change, the long-serving Massachusetts lawmaker said at a Federal Communications Bar Association event Tuesday to celebrate the 25th anniversary of the Telecommunications Act.

Reminiscing on the 1996 landmark legislation during his keynote, Markey focused on broadband accessibility and affordability, especially for children. He praised the Federal Communications Commission’s E-rate program, which subsidizes broadband access for schools and libraries.

But Markey also linked broadband to concern about climate change, highlighting the concern about how miles of broadband cable conceivably could be under the sea due to receding coastlines.

Most of all, he pushed on net neutrality. He said it was a major issue, and much-needed to prevent big companies from stifling smaller competition or consumers’ access to the internet.

Senator Markey’s remarks led into a panel discussion about the impact of the Telecommunications Act since it became law.

During that discussion, former FCC Commissioner Michael O’Rielly said that Congress needed to be more specific about what it does or doesn’t want the FCC to do. Too little specificity can lead the FCC to write bad rules that Congress doesn’t like.

John Nakahata, who worked for FCC Chairman Reed Hundt at time of the Telecom Act’s passage, agreed. Too much ambiguity by legislators has caused huge headaches for the FCC. For example, the very issue of net neutrality exists because of uncertainty about whether broadband should be classified as a Title II telecommunication service: It wasn’t, and then it was under former president Barack Obama, and then it wasn’t again.

O’Rielly said that more leeway was granted to the FCC in the past because Congress had faith in their ability to enact legislation. But legislators’ trust in the FCC has eroded.

Randolph May, president of the Free State Foundation, said that FCC regulation should look like antitrust law. He said it should be through incentives that competition is promoted, rather than through Title II regulation.

Former FCC chief of staff Ruth Milkman expressed desire to see funding for FCC programs, such as the E-rate program, used to maximum benefit where they are needed most.

The panelists agreed that legislation needs to address where technology is headed, rather than looking backward to solve past problems.

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