The Federal Communications Commission has declared war on the practice of telecom carriers surreptitiously nickel-and-diming their customers through a practice called “cramming.”
This refers to those nagging mystery charges that pop up on many consumers’ telephone bills — some 20 million people all together, the government agency has estimated — that range from 99 US cents to $19.99 or even more.
They are vaguely worded or inconspicuously placed — or both — but the bottom line, no pun intended, is that consumers are charged more than they should be. Telecom providers are usually the culprits, along with third parties that somehow are able to access consumers’ bills to add a charge.
Unclear on Details
How, exactly, the agency will stamp out this practice is unclear. FCC Chairman Julius Genachowski announced in a speech this week that it is working on a set of rules to better protect consumers. However, he did not give much detail about the shape and reach of these rules, other than to say they will focus on transparency and better consumer information for both broadband and wireless.
The current status of the measure is that it has tentatively been placed on the agenda for July 12 for a possible vote, FCC spokesperson Neil Grace told the E-Commerce Times. The item has already been circulated among the other commissioners.
In the Beginning
Ironically, this practice began when the FCC began requiring telecom carriers to break out bills into components so customers could better understand them, telecom industry analyst Jeff Kagan told the E-Commerce Times.
“Twenty years ago, when we got a phone bill, we had an amount due and that was that. When the FCC made the companies break the bill into parts, they eventually got smart and started inventing charges — some of which have to be paid, and some of which don’t. It is up to the customer, however, to identify these fees.”
Some of these charges are legitimate — such as the package of extras companies will offer a new client.
“Sometimes the new client doesn’t use any of it for months and months and eventually forgets he is being billed,” Kagan said. “It is a legitimate charge, but not one the telecom carrier is inclined to point out to the customer.”
Other charges are flat-out illegal, he said. Usually these come about when a customer is contacted by a partner of the carrier and declines what the firm is selling. Yet, somehow, Kagen said, the charge makes its way to the bill.
The carrier is not going to point out those fees either, said Kagan. “Cramming means different things to different people, but it all comes down to the customer getting ripped off and no one looking out for him.”
Even industry watchers who normally frown on any action that hints of overreach by the government are sanguine about this latest move by the FCC — although much will depend on the details.
“There have been cases of genuine abuse,” Ryan Radia, an analyst with the Competitive Enterprise Institute, told the E-Commerce Times, “and the FCC does have authority over pricing with carriers, so it is within its jurisdiction.”
Still, some of the cries of abuse are overblown or overstated, he said.
A class action suit brought by consumers wronged by these actions might be a better approach than FCC regulation, but “I am not sure how effective that would be,” Radia said.
Some action on the part of the government is better than none, Lorrie Thomas Ross, CEO of Web Marketing Therapy, told the E-Commerce Times.
“To date, the main place action has taken place is on the Web,” she noted, “in forums and business ratings by consumers. It’s overdue to get a handle on this.”