Cell battle waged at Capitol

Posted on January 25, 2008 | Type: Press Release
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A campaign has been launched against a measure that would cap cell-phone contracts to one year and make it easier for consumers to cancel a contract.

And a conservative think-tank based in Arizona released a report warning that the legislation would hurt consumers by jacking up prices and limiting choices.

Early this month, Valley residents received a recorded message saying the Arizona Legislature is considering a bill that would create new regulations and would jack up cell-phone rates.

The automated message directed people to the Web site connectedwest.org, where readers are urged to contact their legislators and tell them to vote no on S1010, the cell-phone measure sponsored by Sen. Jim Waring, R-7.

The legislation would permit subscribers to cancel their contract for any reason within the first month without any penalty. It also would permit subscribers to terminate services without any penalty if the provider changes rates or terms of service and the changes will result in a material, adverse change for the subscriber.

Additionally, it would prohibit a service provider from requiring a contract extension to get a replacement phone under warranty. All replacement phones would have to be new.?'a Also under the bill, a subscriber would not have to pay for charges if the phone were stolen and if the subscriber promptly reported the theft to the provider.

But connectedwest.org states that the legislation would stifle competition and innovation in the wireless industry, forcing companies to answer to the government rather than consumers. It went on to say that S1010 may seem like a quick fix to Warings cell-phone woes, but the long-term effects are detrimental to Arizonas wireless future causing consumers to bear the burden of higher prices and dissuading existing and new providers to invest in our state and deploy new technologies.

Lobbyists for the wireless telecommunications industry said they did not know anything about the phone campaign. Katie Hutchinson, executive director of the Coalition for a Connected West, said her group is a consumer organization.

Waring is gearing up for a fight.

This does not breed goodwill. This does not bode well for how is going to go in the future, he said. They are trying to bully me into killing the bill. Do you think Im going to be bullied by some lobbyist into killing a bill? I dont think so.

The Phoenix Republican said its hard to believe that cell-phone companies have nothing to do with the phone campaign.

Some people did as asked, went to the Connected West Web site, and wrote me that they loved the bill, Waring said. Only one sent him a letter opposing the measure, he added.

Warings bill has caught the attention of the national cell-phone industry. The Washington-based CTIA-The Wireless Association said it is closely watching the developments in Arizona.

Meanwhile, the Goldwater Institute cited a study that indicates Warings bill would hurt consumers by bringing higher prices and fewer choices.?'a

Lawmakers should not be in the business of telling consumers what terms of cell-phone service they can or cannot buy, said Solveig Singleton, senior adjunct fellow with the Progress & Freedom Foundations Center for the Study of Digital Property, and author of the report released by the Goldwater Institute.

The government doesnt dictate our gym membership or our Blockbuster contracts, and it shouldnt mandate cell-phone service terms either, Singleton said in a statement.

The full report is available on the Goldwater Institutes Web site www.goldwaterinstitute.org.

Responding to the Goldwater statement, Waring said he has never seen so much lobbying about a bill.

The fact that they feel the need to gather so much organized support from the lobbying and special-interest community, and had such little success getting grassroots support, tells me quite a bit about this issue and how they treat their customers, he said.

The senator said he is being bulled into killing his own measure. The tactic may work in other states, he said. (But) Id like to think that the overwhelming use of lobbyists wont work in the Arizona Legislature, he added.

Many of the provisions in the legislation already have been addressed voluntarily by cell phone companies, according to the Goldwater statement.

Verizon Wireless gives consumers 30 days to cancel contracts while three other companies AT&T, Sprint, and T-Mobile have introduced more flexible contract terms, according to the statement. Companies are prorating termination fees, a point raised by the national wireless industry, which is opposing the pending legislation.

Markets are working well in this industry. There is no reason to change course, Singleton said.

The Goldwater Institute does not take positions on actual legislation, But Starlee Rhoades, vice president of communications for the Goldwater Institute said measures such as the cell-phone bill generally do more damage than help to consumers, and that increased regulation of the cell-phone industry is not necessary to protect consumers.

Joe Farren of CTIA said Warings bill is unnecessary since companies, because of competition, already are responding to consumers concerns.

Farren said companies pro-rate early termination fees and a few carriers have announced that consumers can make changes to existing plans without having to extend contracts. He said if Arizona passes the measure, it would jack up the cost of service. He said a two-year contract lowers monthly payments and allows a company to discount a phone.

If the state of Arizona mandates that contracts cant be more than one year, that would likely result in higher prices for Arizona families, he said.

Farren said the current system gives consumers a host of options, including prepaid service. If Arizona takes away options through legislation, it would be stuck while everyone else in the nation moves forward.

If government starts deciding what wireless service should look like, that would be a massive disruption to the wireless marketplace in Arizona. The losers would be consumers, he said.?'a

But Farren said the national cell-phone association supports a key provision in another bill also sponsored by Waring. That bill, S1034, would allow soldiers set to be deployed for active duty to terminate their contracts without penalty.

We have a board position on that. Certainly, we would support that, Farren said.

S2034 extends this privilege to soldiers spouses, and Farren said his group is still considering that portion of the legislation.

S1010 the Waring legislation that the cell phone industry opposes would limit contracts to no more than 12 months.

Waring said his cell phone stopped working, and when he brought it to a service center, he was told it had water damage. What further irked him was that he was told he could get a new phone if he signed up for another two years, he said.

He said he had heard similar stories from other people, prompting him to file the bill.?

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