Archives: Phones & Cell Phones

Testimony of

Jeannine Kenney

Senior Policy Analyst

Consumers Union

U.S. Senate Committee on Commerce, Science and Transportation

regarding

Wireless Communications Issues & Spectrum Management Reform

March 14, 2006 

SUMMARY

Consumers Union, Consumer Federation of America, and Free Press appreciate the opportunity to testify on wireless communications issues and spectrum reform. In light of the recently announced acquisition of BellSouth by AT&T, critical questions of market competition and consumer protection are more important than ever.

If the merger is approved, AT&T will have sole control over Cingular Wireless, the largest cellular carrier in the nation that leads all others not just in market dominance, but also in customer dissatisfaction and complaints. AT&T will become far and away the largest provider of phone service and DSL, dominating the market for bundled services in local, long distance and wireless services within its 22-state market stretching coast to coast. As the new company rolls out its multi-channel video service, its market power will dwarf even the largest cable companies. An integrated voice, video, broadband and wireless provider with such sweeping market control will have little incentive to discipline prices or tolerate competition. And competitors unable to offer the full bundle of services within AT&T’s region will have even less incentive and ability to compete for the lower-volume, lower margin customers unable or unwilling to buy the bundle.

The centrality of Cingular to this merger demands full Congressional scrutiny of increasing signs that wireless consolidation is solidifying regional dominance, and leading toward, at best, a duopoly that will undermine robust competition and inflate prices, leaving low and moderate income consumers and underserved communities facing enormous barriers to participation in our digital economy.  As concentration in wireless phone service has increased, competition in broadband is, and will remain, moribund without Congressional action. Last year’s announcement that the newly merged Sprint/Nextel will partner with large cable providers have deflated hopes that the company would emerge as a broadband competitor to DSL and cable modem. And with the Federal Communications Commission’s decision to allow cable and telephone companies to exclude broadband competitors from their wires, most consumers are left with, at best, just those two broadband providers. As a result, wireless broadband provided by new market players unaffiliated with dominant phone and cable companies now offers the only meaningful hope for competition in the broadband marketplace.

In this environment, spectrum policy becomes increasingly important in ensuring that new competitors to dominant broadband and wireless phone providers emerge and that broadband becomes available to those who don’t have access to it or can’t afford it. Advances in technology provide the Committee with new opportunities to make currently unused spectrum within the broadcast band newly available to wireless broadband competitors for unlicensed use.  

In virtually every market in the nation, between 20% and 80% of allocated television channels are unlicensed and unused. They are ripe for transition to broadband technologies and will be essential in expanding the availability and affordability of broadband. Today, the inadequate volume and quality of existing unlicensed spectrum is a significant barrier to expansion of wireless broadband services. With more and better quality unlicensed spectrum, new opportunities emerge for vigorous competition in wireless broadband; for communities to offer affordable broadband service where it has never before been available; and to spur the emergence of wireless broadband as a true competitor to dominant wireline broadband providers. But to ensure that unlicensed spectrum will maximize broadband access for underserved rural and urban consumers, Congress must clarify and protect the rights of localities to offer broadband service. 

Additionally, the reclamation and auction of spectrum in the 700MHz band provides Congress with a new opportunity to enhance competition in wireless phone and broadband. How and to whom spectrum in that band is auctioned will determine whether new competition in broadband and wireless phone service emerges or whether the market position of already dominant wireless providers is solidified. To ensure that wireless broadband emerges as a competitor to cable modem and DSL, it will be critical that at least some spectrum licenses go to providers unaffiliated with wireline broadband providers, preferably new market entrants and smaller market players.

Finally, as concentration in wireless has increased and consumer complaints have grown, the wireless industry has attempted to erode states’ authority to protect consumers from carriers’ deceptive and misleading billing practices; unreasonable, unfair, and anticompetitive contract terms; and inadequate privacy safeguards for customer calling records. States have been the first line of defense for telecommunications consumers, particularly in complaint-ridden cellular services. They’ve identified and taken action against carrier practices that harm wireless consumers. The Federal Communications Commission is ill-positioned to resolve the hundreds of thousands of telecommunications complaints that states receive each year. Congress must either enact strong, enforceable federal consumer protection and privacy laws or protect the ability of the states to safeguard consumers.

As the Committee considers the wireless and spectrum policy issues before it, we offer the following recommendations:

• Provide careful oversight of the proposed AT&T acquisition of BellSouth, particularly with respect to competition in wireless phone service, and urge the Department of Justice and Federal Communications Commission to reject the merger unless wireless assets are divested to ensure head-to-head competition between Cingular Wireless and the wireline company. Urge DOJ and FCC to impose permanent network neutrality conditions to prevent AT&T from discriminating against users and competitors on Internet services.
• Require that, at a minimum, a portion of the spectrum within the 700 MHz band is reserved for new market entrants and designated entities, and that dominant market players Cingular and Verizon are precluded from bidding on licenses in markets where they own significant amounts of spectrum.
• Report and seek final enactment of legislation comparable to S. 2332, the American Broadband for Communities Act sponsored by Senator Stevens, and S. 2327, the Wireless Innovation Act, sponsored by Senator Allen and cosponsored by other Committee members. We strongly support both bills. Each would make new unlicensed spectrum available in the unoccupied channels of the broadcast band while protecting existing broadcasters operating within that band from interference. Action in this area is among the most meaningful the Congress may take to foster development of, competition in, and affordable access to wireless broadband services.  
• Report and seek final enactment of S. 1294, the Community Broadband Act introduced by Senators McCain and Lautenberg, to ensure that communities and the entrepreneurs with whom they partner can take advantage of low-cost, affordable technologies to offer new, innovative and affordable wireless broadband services to local residents.
• Report and seek final enactment of S. 1350, the Wireless 411 Privacy Act, which we strongly support, to ensure that any wireless phone directory that may be created does not trench upon consumers’ right to keep their cell phone numbers private or result in higher costs to consumers from unwanted incoming calls.
• Report and seek final enactment of legislation prohibiting fraudulent practices used to obtain consumers’ detailed and private cell, landline or VOIP phone records; imposing tough penalties on those who engage in fraudulent practices; requiring tough new federal standards for telephone companies’ internal safeguards for consumer phone records; and requiring such providers to seek affirmative consent before private calling records are shared. Regretfully, Consumers Union cannot support the Protecting Consumer Phone Records Act because it preempts the states’ ability to require compliance with tough consumer phone records privacy requirements, while providing no guarantee that federal phone record privacy protections will be strengthened. We look forward to working with the Committee to strengthen the legislation.
• Clarify and confirm the role of the states in regulating terms and conditions for wireless phone services as provided under Section 332 of the Communications Act of 1934, and reject wireless carriers’ attempts to undermine the strong consumer protections against anticompetitive, predatory and unfair practices by wireless carriers.
• Urge FCC to reject the pending wireless industry petition to preempt state regulation of early termination fees and to reconsider its 2005 Order preemption states from regulating line-item billing abuses.