United States: FCC Extends Truth-in-Billing Rules to Wireless Carriers

On March 18, 2005, the U.S. Federal Communications Commission (FCC) released a Second Report and Order, Declaratory Ruling and Second Further Notice of Proposed Rulemaking (CC Docket No. 98-170, CG Docket No. 04-208) applying its truth-in-billing rules to commercial mobile radio service (CMRS) providers requiring that billing descriptions be brief, clear, non-misleading and in plain language. As a result, wireless carriers will still be able to recover legitimate line item charges so long as they comply with the FCC’s specific truth-in-billing guidelines. At the same time, the FCC has sent a strong signal that it may take more aggressive enforcement actions against wireless carriers that engage in unclear or misleading billing practices.

Although the FCC had previously applied basic truth-in-billing principles to wireless carriers, the FCC had left it up to the carriers to determine exactly how to comply in a manner that would best fit their specific needs and those of their customers. However, the FCC decided to remove the regulatory exemption for wireless carriers in light of the fact that it had received over 18,000 complaints regarding wireless carriers’ billing, marketing and advertising practices in 2004, a significant increase from only a few dozen complaints in 1999.

The most controversial and contentious aspect of the truth-in-billing Second Report and Order was the FCC’s 3-2 vote to preempt state regulations requiring or prohibiting the use of certain line item charges. The FCC determined that such state regulation of line item charges constitute impermissible state "rate regulation" under Section 332(c)(3)(A) of the Communications Act. The majority explained that federal preemption was necessary to ensure a comprehensive and consistent national regulatory billing framework for all wireless providers, particularly because most wireless providers market their services based on national rate plans. Nevertheless, the majority stated that federal preemption would not limit states’ ability to enforce generally applicable contractual and consumer fraud laws, nor interfere with states’ ability to require wireless carriers to contribute to state universal service support mechanisms or impose other regulatory fees or taxes. However, in dissent, Commissioners Copps and Adelstein asserted that federal preemption would undermine states’ efforts regarding E911 funding laws, consumer billing protection measures and traditional telephone billing practices.

The FCC expressed concern that certain wireless carriers may be disguising rate increases in the form of separate line item charges thereby implying that such charges are actually required by the government. For this reason, the FCC provided the following guidance on whether certain practices may be considered unreasonable or misleading under its truth-in-billing rules:

• It is misleading for carriers to suggest that discretionary line item charges are in any way taxes or charges required by the government. Thus, it is misleading for carriers to state or imply that a charge is required by the government when it is the carriers’ business decision as to whether and how much of such costs they choose to recover directly from consumers through a separate line item charge.

• It is misleading for carriers to include administrative and other costs as part of "regulatory fees," "universal service charges" or similar line item labels that imply government mandated charges. Therefore, a regulatory line item charge should never exceed any maximum amount established by the FCC.

• If a carrier elects to recover a regulatory fee through a separate line item, the burden rests upon the carrier to demonstrate that the charge imposed on the customer accurately reflects that specific governmental program fee it purports to recover.

In the Second Further Notice, the FCC requested comment on the following proposals to strengthen or clarify its truth-in-billing rules:

• Point-of-Sale Disclosure: Wireless carriers must disclose the full rate, including any non-mandated line items and a reasonable estimate of government mandated surcharges, to the consumer at the point-of-sale before the consumer signs a contract. The FCC solicited comment on what should constitute a reasonable estimate of government mandated surcharges and whether states should be allowed to enforce federal regulations regarding point-of-sale disclosures.

• Billing of Government Mandated Charges: Where carriers choose to list separate line items on their customers’ bills, government mandated charges must be placed in a section of the bill separate from all other charges. The FCC requested comment on the possible methods for distinguishing between government mandated and non-mandated charges, such as whether government mandated charges should include authorized fees that a carrier has the discretion to pass on to the customer or whether it should be limited to fees that a carrier is required to collect from the customer. Additionally, the FCC requested comment on whether it is misleading for carriers to include expenses such as property taxes, regulatory compliance costs and billing expenses in line items labeled as "regulatory assessment fees" or "universal connectivity charges."

• Preemption of Inconsistent Regulation: States may not enact and enforce more specific truth-in-billing rules beyond the requirements adopted by the FCC. However, the FCC declared that states may enact requirements that are consistent with the federal truth-in-billing rules and requested comment on how it should define permissible state regulation or whether if states should be able to enforce the FCC’s regulations.

• Combining Federal Regulatory Charges in Line Items: It is unreasonable under Section 201(b) of the Communications Act for line items to combine federal regulatory charges. The FCC expressed concern that carriers could hide costs from consumers by combining them into a lump sum figure and requested comment on whether carriers should be able to combine two or more federal regulatory charges into a single line item.

Comments are due 30 days after publication of the FCC’s truth-in-billing Second Further Notice in the Federal Register. Reply comments are due 60 days after Federal Register publication, which has not yet occurred.

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