U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Publishing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

95–539 PDF 2015

S. HRG. 113–674 

CRAMMING ON WIRELESS PHONE BILLS: 

A REVIEW OF CONSUMER PROTECTION 

PRACTICES AND GAPS 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JULY 30, 2014 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

JOHN E. WALSH, Montana 

JOHN THUNE, South Dakota, Ranking 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

DEAN HELLER, Nevada 

DAN COATS, Indiana 

TIM SCOTT, South Carolina 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

RON JOHNSON, Wisconsin 

ELLEN L. DONESKI, Staff Director 

JOHN WILLIAMS, General Counsel 

DAVID SCHWIETERT, Republican Staff Director 

NICK ROSSI, Republican Deputy Staff Director 

REBECCA SEIDEL, Republican General Counsel and Chief Investigator 

(III) 

C O N T E N T S 

Page 

Hearing held on July 30, 2014 ............................................................................... 1 

Statement of Senator Blumenthal .......................................................................... 1 

Report dated July 30, 2014 entitled, ‘‘Cramming on Mobile Phone Bills: 

A Report on Wireless Billing Practices’’ by the Office of Oversight 

and Investigations Majority Staff ................................................................ 3 

Statement of Senator Thune ................................................................................... 55 

Statement of Senator Johnson ................................................................................ 87 

Statement of Senator Nelson .................................................................................. 89 

Statement of Senator Markey ................................................................................. 91 

Statement of Senator Klobuchar ............................................................................ 94 

WITNESSES

Hon. Terrell McSweeny, Commissioner, Federal Trade Commission ................. 58 

Prepared statement .......................................................................................... 59 

Hon. William H. Sorrell, Attorney General, State of Vermont ............................ 66 

Prepared statement .......................................................................................... 67 

Travis LeBlanc, Acting Chief, Enforcement Bureau, Federal Communications 

Commission ........................................................................................................... 73 

Prepared statement .......................................................................................... 74 

Michael F. Altschul, Senior Vice President and General Counsel, CTIA— 

The Wireless Association® ................................................................................... 79 

Prepared statement .......................................................................................... 81 

APPENDIX

Response to written questions submitted to Hon. Terrell McSweeney by: 

Hon. Cory Booker ............................................................................................. 103 

Hon. John Thune .............................................................................................. 103 

Response to written questions submitted to Travis LeBlanc by: 

Hon. Cory Booker ............................................................................................. 125 

Hon. John Thune .............................................................................................. 125 

Response to written questions submitted to Michael F. Altschul by: 

Hon. Cory Booker ............................................................................................. 127 

Hon. John Thune .............................................................................................. 128 

(1) 

CRAMMING ON WIRELESS PHONE BILLS: 

A REVIEW OF CONSUMER PROTECTION 

PRACTICES AND GAPS 

WEDNESDAY, JULY 30, 2014 

U.S. SENATE, 

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:50 p.m. in room 

SR–253, Russell Senate Office Building, Hon. Richard Blumenthal, 

presiding. 

OPENING STATEMENT OF HON. RICHARD BLUMENTHAL, 

U.S. SENATOR FROM CONNECTICUT 

Senator BLUMENTHAL. This hearing is open. 

And as you know, my name is Richard Blumenthal. I am a Senator from Connecticut, and I am here regretfully in place of Chairman Rockefeller, who has an urgent intel, intelligence matter and 

therefore could not be with us at the opening. I do not think he will 

be able to join us, but his absence is in no way a sign of any lack 

of interest in this subject. In fact, I have talked to him in some detail about this hearing, and I know that he would be here if he 

could be. 

I want to welcome all of our panel here and all of the folks who 

are attending. This subject is one very, very close to my heart as 

a former Attorney General for a couple of decades in Connecticut. 

I had firsthand experience with cramming, both wireless and 

landline, and worked with at least one of the members of this 

panel, Attorney General Sorrell. And I will be introducing him in 

just a moment. 

As many of you know, more than 2 decades ago, the telephone 

industry decided to get into the payment processing business. The 

bright idea was that consumers could charge purchases to their 

phone bills rather than doing it through a credit card or a bank account. At the end of every billing period, consumers would pay for 

their telephone service plus the purchases they had made from 

third-party vendors. 

In theory, using a telephone bill as a way to purchase goods and 

services makes some sense, has a lot of potential, and attracted a 

lot of interest. As several of our witnesses point out in their testimony today—and they do it very well—the so-called direct carrier 

billing method of payment could benefit unbanked customers and 

other people looking for an alternative way to shop or make a charitable contribution. 

2 

But the reality of third-party charges on telephone bills is a 

markedly different story, a profoundly different tale, and the fact 

of the matter is that it has not lived up to its potential. Almost as 

soon as the telephone companies opened up their payment platforms to outside parties, scammers figured out a way to beat the 

system, not surprisingly. They found ways to cram unauthorized 

charges onto consumers’ bills, and they have been absolutely relentless in doing so. 

So today most consumers still do not understand, including some 

of my colleagues, that their phone bills have often contained 

charges for things they never actually bought. What a surprise. 

They are paying for things they never bought. And it is an unwelcome surprise to them, especially when they discover that they 

have trouble getting refunds or that they cannot get their money 

back at all. 

In the 1990s and into the 2000s, most cramming occurred on consumers’ wireline telephone bills, as this committee documented in 

an excellent 2011 hearing and report. American consumers and 

businesses paid billions of dollars for fax, voice mail, celebrity gossip, and other services they did not want and did not order. A few 

days ago, the crammers very predictably turned their attention— 

I should have said a few years ago the crammers very predictably 

turned their attention to the rapidly growing wireless telephone 

market. They figured out a way to rip consumers off who had 

grown accustomed to purchasing music and other content on their 

phones through a text messaging-based system called PSMS, premium short messaging system. 

The Commerce Committee staff—and I really want to thank 

them for their excellent work—has prepared a new report documenting how crammers exploited the weaknesses in the premium 

messaging system to fraudulently charge American consumers literally hundreds of millions of dollars. And I ask unanimous consent 

to put this report and its exhibits in the record of this hearing. 

[The information referred to follows:] 

3 


730COVER1.eps
4 

Table of Contents 

Executive Summary 

I. Background 

A. Initiation of Third-Party Billing on Telephone Bills 

B. Third-Party Charges on Landline Bills 

C. The Emergence of Cramming on Wireless Phone Bills 

D. State and Federal Enforcement and Regulatory Authority 

II. Committee Investigation 

III. Overview of Premium Short Message Service (PSMS) Wireless Billing 

A. The PSMS Third-Party Wireless Billing Process 

B. Voluntary Industry Oversight over Third-Party Wireless Billing Practices 

1. Industry-Wide Oversight 

2. Individual Carrier Policies 

IV. Committee Findings on PSMS Third-Party Wireless Cramming 

A. Carriers Have Profited Tremendously from Third-Party Wireless Billing 

B. Wireless Cramming Has Likely Cost Consumers Hundreds of Millions of 

Dollars 

1. Refund Rates 

2. Consumer Complaint Data 

3. State and Federal Actions 

C. Carriers Were on Notice about Cramming and Other Vendor Problems 

D. Industry Self-Regulation Has Left Gaps In Consumer Protection 

1. The Double Opt-In Safeguard was Porous 

2. Tolerance for High Consumer Refund Rates Raises Questions about Carrier Commitment to Preventing and Addressing Cramming 

a. Carrier Policies on Refund Thresholds 

b. Some Vendors Had Exceedingly High Refund Rates that at Times 

Spanned Several Months 

c. Case Study on Vendor with High Refund Rates: Variation in Carrier 

Response Underscores Broad Latitude Afforded by the Self- Regulatory System 

3. Carriers Placed Questionable Reliance on Billing Aggregators as Oversight Partners 

V. Emerging Third Party Wireless Billing Technologies and Potential Consumer Protection Issues 

Exhibits 

Exhibit A 

Exhibit B 

Exhibit C 

5 

Executive Summary 

For several decades, phone companies have allowed third-party vendors to charge 

consumers on their phone bills for goods and services unrelated to phone service, 

such as photo storage, voice-mail, and faxes. This practice began with landline 

phone bills and continued on wireless phone bills as consumer use of mobile phones 

increased. Throughout this period, the industry has assured the public that its selfregulatory system is effective at protecting consumers from fraudulent third-party 

billing on their phone bills. 

However, this Committee’s 2010–2011 review of third-party billing practices on 

landline phones showed that widespread unauthorized charges—known as ‘‘cramming’’—had been placed on phone bills and had likely cost consumers billions of dollars over the preceding decades. 

In light of these findings, and emerging reports of cramming in the wireless context, the Committee subsequently began reviewing third-party billing practices on 

wireless phone bills. 

This inquiry focused largely on third-party vendor charges placed through a system known as the premium short message service, or ‘‘PSMS,’’ which involves use 

of text messaging charged to consumers at a higher rate than standard text messaging. These types of charges had been the focus of mounting reports of abuses. 

Products charged to consumers through the PSMS system generally have involved 

digital goods used on mobile phones, such as ringtones and cellphone wallpaper, or 

for services such as subscriptions to periodic text message content sent to the subscriber on subjects such as horoscopes or celebrity gossip. 

To assess the nature and scale of wireless cramming, the Committee’s majority 

staff reviewed narrative and documentary information provided by the four major 

wireless carriers, entities known as ‘‘billing aggregators’’ that serve as middlemen 

between vendors and carriers in the billing process, and other sources. 

Unfortunately, the information reviewed by the Committee shows that, just as in 

the landline context, cramming on wireless phone bills has been widespread and has 

caused consumers substantial harm. Specifically, this report finds: 

• Third-party billing on wireless phone bills has been a billion dollar industry 

that has yielded tremendous revenues for carriers. AT&T, Sprint, T-Mobile, and 

Verizon generally retained 30 percent–40 percent of each vendor charge placed. 

• Despite industry assertions that fraudulent third-party wireless billing was a 

‘‘de minimis’’ problem, wireless cramming has been widespread and has likely 

cost consumers hundreds of millions of dollars. 

• The wireless industry was on notice at least as early as 2008 about significant 

wireless cramming concerns and problems with third-party vendor marketing 

tactics, yet carriers’ anti-cramming policies and sometimes lax oversight left 

wide gaps in consumer protection: 

» Consumer billing authorization requirements known as the ‘‘double opt-in’’ 

that were touted as safeguards by industry were porous, and multitudes of 

scammers appeared to have repeatedly skirted them. 

» Some carrier policies allowed vendors to continue billing consumers even 

when the vendors had several months of consecutively high consumer refund 

rates—and documents obtained by the Committee indicate this practice occurred despite vendor refund rates that at times topped 50 percent of monthly 

revenues. 

» Carriers placed questionable reliance on billing aggregators in monitoring conduct of vendors that were charging consumers on carriers’ billing platforms. 

In November 2013, the Attorney General of Texas brought an action alleging that 

Mobile Messenger, one of the major PSMS billing aggregators, had engaged in a deceptive scheme with vendors to cram consumers’ bills. Within weeks—and after 

years of wireless industry attestations about its effective consumer protection practices—AT&T, Sprint, T-Mobile, and Verizon abruptly announced they would virtually eliminate PSMS billing on their platforms. 

Today, while the major carriers have phased out commercial PSMS services, they 

continue to allow third-party charges on consumers’ wireless bills using methods 

that do not involve PSMS. These include methods sometimes labeled ‘‘direct carrier 

billing’’ (DCB) through which vendors using websites and apps connect to carrier 

billing platforms. To date, products and services charged through these non-PSMS 

billing methods have primarily involved digital content, such as music and apps including games with in-app purchasing capabilities. 

Direct carrier billing methods are relatively nascent, and it is not possible at this 

stage to predict the extent to which scammers will find ways to cram charges on 

6 

1Senate Committee on Commerce, Science, and Transportation, Staff Report on Unauthorized 

Third-Party Charges on Telephone Bills, at 1 (July 12, 2011). 2See Senate Committee on Commerce, Science, and Transportation, Staff Report on Unauthorized Third-Party Charges on Telephone Bills, at 22 (July 12, 2011). 3See Fair Credit Billing Act, 15 U.S.C. §§ 1666–1666j; Consumer Credit Protection Act 15 

U.S.C. § 1643; Regulation Z, 12 C.F.R. § 1026.13. 4See Senate Committee on Commerce, Science, and Transportation, Staff Report on Unauthorized Third-Party Charges on Telephone Bills, at 2 (July 12, 2011). 5See Federal Communications Commission, Anti-Cramming Best Practices Guidelines (available at www.fcc.gov/Bureaus/CommonlCarrier/Other/cramming/cramming.html) (accessed 

July 7, 2011). 6Permanent Subcommittee on Investigations of the Senate Committee on Governmental Affairs, Hearing on ‘‘Cramming’’: An Emerging Telephone Billing Fraud, 105th Cong. (July 23, 

1998) (S. Hrg. 105–646). 7See Settlement Agreement, Florida, Office of the Attorney General v. E-mail Discount Network, Fla. 2d Cir. Ct. (No. 2006 CA 2475) (Feb. 15, 2007). 

wireless bills under these non-PSMS systems. As new third-party wireless billing 

methods continue to evolve, it is important that industry and policymakers evaluate 

the consumer protection gaps that have enabled widespread deceptive and fraudulent charges to be placed on consumers’ landline and wireless bills, and to ensure 

that the unfortunate history of cramming on consumer phone bills does not repeat 

yet again. 

Background 

A. Initiation of Third-Party Billing on Telephone Bills 

Third-party billing on consumer phone bills grew out of two regulatory steps that 

occurred in the 1980s: the divestiture of AT&T in 1984 and de-tariffing of telephone 

billing and collection in 1986. Prior to those steps, AT&T had its own billing and 

collection system that encompassed both local and long-distance charges. Following 

the break-up of AT&T, regional bell operating companies, also known as local exchange carriers, were not allowed to offer their own long-distance services, and 

began providing billing collection services to AT&T and other companies that offered 

long-distance services.1

Over time, telephone companies opened these billing platforms to an array of 

other third-party vendors that offered products and services beyond those directly 

related to phone service—from webhosting, to online gaming, online photo storage, 

and roadside assistance.2 Telephone numbers thus became a payment method similar to credit card numbers. However, third-party charges levied on the phone bill 

platform did not receive the same protections as credit card payments. For example, 

with credit card payments, consumers’ liability for unauthorized charges is limited 

to $50, consumers have the right to dispute unauthorized charges, and consumers 

have the right to seek to reverse a charge.3 Further, unlike credit card numbers, 

telephone numbers for landline phones are widely accessible to anyone with a telephone directory.4

B. Third-Party Charges on Landline Phone Bills 

From early on, industry representatives pledged that voluntary industry practices 

would protect consumers from billing scams relating to third-party charges on the 

carrier billing platforms, and carriers agreed upon a set of nonbinding guidelines.5

At a Senate hearing in July 1998, the President of the United States Telephone Association asserted, ‘‘I have a high degree of confidence that these voluntary guidelines will produce an effective means to curb this abuse,’’ that the industry has ‘‘a 

powerful self-interest to correct this problem,’’ and, that the industry was ‘‘working 

overtime’’ to eliminate ‘‘this scourge.’’ 6

However, over the decade that followed, consumers increasingly began to complain that the third-party charges appearing on their wireline—also known as 

‘‘landline’’—telephone bills were unauthorized. This came to be known as ‘‘cramming.’’ State and Federal law enforcement agencies brought dozens of enforcement 

actions against third-party crammers that highlighted problems consumers were encountering. For example: 

• In 2006, the Attorney General of Florida filed a lawsuit against E-mail Discount 

Network for charging 20,000 Florida consumers’ telephone bills for e-mail accounts and coupons they did not request or use;7

• In 2009, the Attorney General of Illinois filed a lawsuit against U.S. Credit Find 

for placing ‘‘unauthorized charges on more than 9,000 Illinois consumers’ phone 

7 

8See Press Release, Madigan Reaches Agreement with U.S. Credit Find to Prevent Phone 

Cramming, The Office of the Illinois Attorney General (June 18, 2009). 9See Federal Trade Commission v. Inc21.com Corp., 745 F.Supp.2d 975, 982–983 (N.D. Cal. 

2010). 10Senate Committee on Commerce, Science, and Transportation, Staff Report on Unauthorized 

Third-Party Charges on Telephone Bills, at ii–iv (July 12, 2011). 11See Senate Committee on Commerce, Science, and Transportation, Rockefeller Hails Verizon 

Decision to Shut Down Unwanted 3rd-Party Charges on Telephone Bills (Mar. 21, 2012); Senate 

Committee on Commerce, Science, and Transportation, Another Major Phone Company Agrees 

to End Third-Party Billing on Consumer Phone Bills (Mar. 28, 2012); Chairman Rockefeller Introduces Telephone Bill Anti-Cramming Legislation, U.S. Federal News (June 14, 2012). 12 A recently released report by the National Center for Health Statistics showed that two out 

of five U.S. households, or 41 percent, had only wireless phones in the second half of 2013 (July– 

December 2013). Pew Research Center, CDC: Two of Every Five U.S. Households Have Only 

Wireless Phones (July 8, 2014) (online at http://www.pewresearch.org/fact-tank/2014/07/08/ 

two-of-every-five-u-s-households-have-only-wireless-phones/). 13 As of January 2014, 90 percent of American adults had a cell phone and 58 percent had 

a smartphone. Pew Research Center, Cell Phone and Smartphone Ownership Demographics (online at http://www.pewinternet.org/data-trend/mobile/cell-phone-and-smartphone-ownershipdemographics/). 14See What’s Your Sign? It Could Be a Cram, New York Times (Mar. 24, 2012) (reporting on 

a consumer who complained of being billed for horoscope text services not authorized). In the 

Continued 

bills’’ for a purported online tutorial that would ‘‘help consumers fix their credit;’’ 8 and 

• In 2010, a Federal district court awarded the FTC a $37.9 million judgment 

against Inc21.com Corporation and related third-party vendors after learning 

that as few as 3 percent of the defendants’ customer base expressly authorized 

the defendants’ charges on their telephone bills.9

In 2010, Chairman Rockefeller opened an investigation to examine the extent of 

third-party billing on landline telephone bills. This investigation resulted in a majority staff report issued in July 2011 that found: 

(1) third-party billing on wireline telephone bills was a billion-dollar industry, with over $10 billion in charges placed on consumer bills over a five year period; 

(2) a substantial percentage of the charges placed on consumers’ telephone bills 

were likely unauthorized; 

(3) telephone companies profited from cramming, generating over $1 billion in 

revenue from placing third-party charges on customer bills over preceding 

years; 

(4) cramming affected every segment of the landline telephone customer base, 

from individuals to small businesses, non-profits, corporations, government 

agencies, and educational institutions; 

(5) many third-party vendors were illegitimate and created solely to exploit thirdparty billing; 

(6) many telephone customers who were crammed did not receive help from their 

telephone companies; and 

(7) telephone companies were aware that cramming was a major problem on their 

third-party billing systems.10

Following release of the investigation’s findings at a Committee hearing and 

through a majority staff report, in early 2012 the three major telephone companies—Verizon, AT&T, and CenturyLink—agreed to stop placing third-party charges 

for enhanced services on their customers’ wireline telephone bills.11 These and other 

carriers continued, however, to allow third parties to place charges on consumers’ 

wireless telephone bills. 

C. The Emergence of Cramming on Wireless Phone Bills 

Over the past two decades, consumers have migrated from using landline phones 

to relying on mobile phones,12 including Internet-enabled smartphones that today 

represents over half of the mobile phone market.13 As use of wireless phones began 

to increase, reports began to mount that consumers were being ‘‘crammed,’’ or 

charged for text message services for which they had not enrolled, on their wireless 

phone bills. Many of the products that were the subject of consumer complaints 

were charges for subscription services such as celebrity gossip, horoscopes, sports 

scores, love tips, and diet tips, which were similar to many of the services found 

to be fraudulent in the Committee’s 2011 wireline cramming investigation.14

8 

wireline cramming investigation, the Committee found that companies that were charging consumers each month for e-mail accounts that included weekly e-mail messages with ‘‘celebrity 

gossip’’ and ‘‘fashion tips.’’ See Senate Committee on Commerce, Science, and Transportation, 

Staff Report on Unauthorized Third-Party Charges on Telephone Bills, at ii–iii (July 12, 2011); 

See also footnote 16 infra, detailing legal actions concerning various subscription services. 15See FL AG McCollum in Settlement With Sprint Over ‘Free’ Ringtones, Bloomberg (Oct. 8, 

2010) (online at http://www.bloomberg.com/apps/news?pid=21070001&sid=aXwc4FpkupsU); TMobile $600k Settlement with Florida AG Affects All Mobile Content Marketing, Mobile Marketer 

(July 22, 2010) (online at http://www.mobilemarketer.com/cms/news/legal-privacy/6873.html). 

See Part I.D below for discussion of additional state and Federal actions. 16See Texas v. Eye Level Holdings, LLC, et al., Tex. D. Ct., Travis County (No. 1:11–cv–00178) 

(Mar. 11, 2011) (where the Texas Attorney General accused the defendants of engaging in deceptive trade practices by running a text messaging scheme that cost consumers in Texas millions 

in unauthorized wireless charges; and defendants agreed to pay nearly $2 million to settle the 

charges); Federal Trade Commission v. Wise Media, LLC, et al., N.D. Ga. (No. 1:13cv1234) (Apr. 16, 2013) (where the third-party content provider was charged for placing over $10 million on 

consumers’ wireless bills for unauthorized charges for PSMS messages containing horoscopes, 

love and flirting tips, and other information); Federal Trade Commission v. Jesta Digital, LLC, 

also d/b/a JAMSTER, D.D.C. (No. 1:13–CV–01272) (Aug. 20, 2013) (where the third-party content providers were charged with cramming unwanted charges on consumers’ cell phone bills 

for ringtones and other mobile content); Texas v. Mobile Messenger U.S. Inc., et al, Tex. D. Ct., 

Travis County (Nov. 6, 2013) (alleging that defendants, who were a billing aggregator, four content providers, and an online advertising placement business, conspired to enroll consumers in 

PSMS programs for ringtones, horoscopes, celebrity gossip news, and other coupons without consumer consent); and Federal Trade Commission v. Tatto, et al., C.D. Cal (No. 2:13–cv13–8912– 

DSF–FFM) (Dec. 5, 2013) (in which FTC alleged that defendants placed millions of dollars on 

consumers’ wireless phone bills for text messages that consumers did not authorize; and defendants ultimately agreed to surrender over $10 million in assets to settle these charges). Private 

parties also have brought legal actions involving third-party cramming charges. See Tracie 

McFerren v. AT&T Mobility LLC, Sup. Ct. of Ga. (No. 08–cv–151322) (May 30, 2008) (a class 

action suit alleging that AT&T failed to set up controls to stop unauthorized third-party charges 

on consumers’ wireless bills); Gray v. Mobile Messenger Americas, Inc., S.D. Fl. (No. 0:08–cv– 

61089–CMA) (July 11, 2008) (a class action suit charging Mobile Messenger, a billing 

aggregator, with placing unauthorized third-party charges on consumers’ wireless bills); Armer v. OpenMarket, Inc., W.D. of Wash. (No. 08–CV–01731–CMP) (Dec. 1, 2008) (a lawsuit against 

OpenMarket, a billing aggregator, and Sprint concerning alleged unauthorized charges for 

PSMS messages containing content such as ringtones, sports score reports, weather alerts, and 

horoscopes); and Cellco Partnership d/b/a Verizon Wireless v. Jason Hope, Eye Level Holdings, 

LLC, et al., D. Ariz. (No. 2:11–cv–00432–DGC) (Mar. 7, 2011) (in which Verizon charged that 

the third-party content provider collected unauthorized or deceptive charges on consumers’ wireless bills through PSMS messages). 17See Federal Trade Commission v. T-Mobile USA, Inc., W.D. Wash. (No. 2:14–cv–00967) 

(July 1, 2014) (online at ftc.gov/enforcement/cases-proceedings/132–3231/t-mobile-usa-inc). 18FCC, FCC Investigates Cramming Complaints Against T-Mobile (July 1, 2014) (online at 

http://www.fcc.gov/document/fcc-investigates-cramming-complaints-against-t-mobile). 

In recent years, private parties, state Attorneys General, the Federal Trade Commission (FTC), and the Federal Communications Commission (FCC) have brought 

a number of actions highlighting consumer protection vulnerabilities in the wireless 

billing system, particularly with respect to charges placed through a system known 

as premium short message service (PSMS). 

For example, between 2008 and 2010, the Attorney General of Florida reached 

settlements with AT&T Mobility, Verizon, T-Mobile, and Sprint, wherein the companies agreed to issue refunds to customers billed for ringtones, wallpapers, and other 

mobile content that had been advertised on the Internet as free, but resulted in consumers being signed up for monthly text message subscriptions.15 A plethora of 

other actions followed.16

Most recently, the FTC filed its first wireless cramming complaint against a major 

carrier, alleging that T-Mobile placed unauthorized third-party charges on its customers’ wireless bills, including in some cases, for services that had refund rates of 

up to 40 percent in a month. The complaint alleged that T-Mobile knew or should 

have known that these charges were not authorized and that T-Mobile’s billing practices—allegedly burying charges deep into phone bills and without clear descriptions—made it difficult for consumers to find these unauthorized charges on their 

bills. According to the complaint, when consumers found these charges on their bills, 

T-Mobile failed to provide full refunds, and directed consumers to the third-party 

content providers for redress.17 The FCC announced that it is also investigating 

complaints against T-Mobile regarding these same practices.18

D. State and Federal Enforcement and Regulatory Authority 

Agencies at the state and Federal level have enforcement and regulatory authority to protect consumers from cramming. Many states have enacted legislation and 

9 

19See, e.g., Mich. Comp. Laws § 484.2502; Cal. Pub. Util. Code § 2890; 52 Pa. Code § 64.23; 

Tex. Util. Code § 17.151; Va. Code § 56–479.3. In 2011, Vermont became the first state to enact 

legislation prohibiting third-party billing on landline telephone bills, with three limited exceptions: ‘‘(1) billing for goods or services marketed or sold by entities subject to the jurisdiction 

of the Vermont Public Service Board; (2) billing for direct-dial or dial-around services initiated 

from the consumer’s telephone; and (3) operator-assisted telephone calls, collect calls, or telephone services provided to facilitate communication to or from correctional center inmates.’’ 9 

Vt. Stat. § 2466. Illinois enacted similar legislation in 2012. See 815 ILCS 505/2HHH. 20The California Public Utilities Commission adopted rules that (1) established that wireless 

carriers must obtain explicit authorization from consumers before they can be billed for thirdparty charges; (2) establish that the carriers must refund consumers for unauthorized charges 

and investigate any complaints of unauthorized charges; and (3) requires wireless carriers to 

report quarterly the total amount of refunds given to California consumers for unauthorized 

charges and third party vendors that have been suspended or terminated. See Press Release, 

CPUC Strengthens Consumer Protections Against Cramming and Fraud on Telephone Bills, 

California Public Utilities Commission (Oct. 28, 2010). 21See, e.g., cases cited at footnote 16, supra. 22 15 U.S.C. § 45(a). Misrepresentations or deceptive omissions of material fact constitute deceptive acts or practices, and acts or practices are unfair if they cause substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition. Id. 23See, e.g., cases cited at footnote 16, supra. 24See Federal Trade Commission Roundtable, Mobile Cramming, An FTC Roundtable (May 8, 

2013) (online at http://www.ftc.gov/news-events/events-calendar/2013/05/mobile-crammingftc-roundtable). The FCC also held a workshop on wireless cramming. See Federal Communications Commission Workshop, Bill Shock and Cramming (Apr. 17, 2013) (online at http:// 

www.fcc.gov/events/workshop-bill-shock-and-cramming). 25 47 U.S.C. § 201(b). 26See Order, FCC v. Assist 123, LLC, at 3 (EB–TCD–12–00005541) (July 16, 2014) (online at 

http://www.fcc.gov/document/assist-123-pay-13m-resolve-wireless-cramming-investigation). 27 47 C.F.R. §§ 64.4200–64.2401. 28 Empowering Consumers to Prevent and Detect Billing for Unauthorized Charges (‘‘Cramming’’); Consumer Information and Disclosure; Truth-in-Billing and Billing Format, 27 FCC Rcd 

4436 (Apr. 27, 2012). The additional safeguards proposed regarding wireline cramming ‘‘require 

wireline carriers that currently offer blocking of third-party charges to clearly and conspicuously 

notify consumers of this option on their bills and websites, and at the point of sale; to place 

non-carrier third-party charges in a distinct bill section separate from all carrier charges; to provide subtotals in each section of the bill; and to display separate subtotals for carrier and noncarrier charges on the payment page of the bill.’’ Id. 29 Consumer and Governmental Affairs Bureau Announces Comment Deadline for ‘‘Cramming’’ 

Further Notice of Proposed Rulemaking, Public Notice, DA 12–833 (May 25, 2012). 

regulations prohibiting cramming on landline service.19 Further, California has 

adopted regulatory provisions specifically addressing wireless cramming.20 In addition, state Attorneys General have been active in pursuing cases against carriers, 

billing aggregators, and third-party content providers alleged to have crammed consumers on their wireless bills under their state laws prohibiting unfair and deceptive trade practices.21

At the Federal level, both the FTC and the FCC have jurisdiction over cramming. 

The FTC enforces Section 5(a) of the FTC Act, which prohibits ‘‘unfair or deceptive 

acts or practices in or affecting commerce.’’ 22 The FTC has pursued enforcement actions against third-party content providers, billing aggregators, and carriers based 

on this authority, finding that cramming charges onto phone bills is both an unfair 

and deceptive practice.23

In addition to these enforcement actions, the FTC has held a workshop regarding 

wireless cramming and explored the possibility of Federal regulations.24

The FCC has pursued cramming cases under Section 201(b) of the Communications Act of 1934, which states in pertinent part: ‘‘[a]ll charges, practices, classifications, and regulations for and in connection with [interstate or foreign] communication service [by wire or radio], shall be just and reasonable, and any such charge, 

practice, classification, or regulation that is unjust or unreasonable is declared to 

be unlawful. . . .’’ 25 The FCC has found ‘‘cramming’’ to be an ‘‘unjust and unreasonable’’ practice.26

Current FCC regulations also contain ‘‘truth-in-billing’’ rules regarding both 

wireline and wireless phone bills.27 Further, on April 27, 2012, the FCC issued a 

Further Notice of Proposed Rulemaking (FNPRM) seeking comments on additional 

measures to prevent wireline cramming and on possible regulatory and non-regulatory measures to address wireless cramming.28 The comment period closed in July 

2012.29

In joint comments made to the FCC in 2012, consumer advocates including the 

Consumers’ Union, Consumer Federation of America, and National Consumer 

10 

30The comments were also joined by the National Consumer Law Center, Consumer Action, 

and the Center for Media Justice. Comments of Center for Media Justice, Consumer Action, Consumer Federation of America, Consumers Union, National Consumer Law Center—On Behalf of 

its Low-Income Clients, and National Consumer League, Federal Communications Commission, 

CG Docket No. 11–116, CG Docket No. 09–158, & CG Docket No. 98–170 (June 25, 2012). 31 Id. at 18. 32 Id. at 20. 33 Id. at 20–21. 34 Id. at 21–22. 35 Comments of CTIA-The Wireless Association, Federal Communications Commission, CG 

Docket No. 11–116, CG Docket No. 09–158, & CG Docket No. 98–170 (June 25, 2012). 36 Consumer and Governmental Affairs Bureau Seeks to Refresh the Record Regarding ‘‘Cramming,’’ CG Docket No. 11–116, CG Docket No 09–158, & CC Docket No. 98–170, Public Notice, 

DA 13–1807 (rel. Aug. 27, 2013). Issues on which FCC sought comment included the extent of 

cramming for consumers of wireline and wireless services, the need for an opt-in requirement 

and the mechanics of an opt-in process for wireline and wireless services, the details and efficacy 

of any other industry efforts to combat wireline and wireless cramming, whether different measures to combat cramming are appropriate for small and rural wireless carriers and other wireless carriers, and whether additional measures to combat wireline and wireless cramming are 

appropriate. Id. at 2–3. 37Senate Committee on Commerce, Science, and Transportation, Rockefeller Asks Wireless 

Carriers for Information on Third-Party Charges (June 12, 2012). 38Senate Committee on Commerce, Science, and Transportation, Rockefeller Vows to Avert 

Wireless Cramming Scams on Consumers (Mar. 1, 2013). 39Senate Committee on Commerce, Science, and Transportation, Rockefeller Questions Billing 

Aggregators on Wireless Cramming (Mar. 22, 2013). 40Senate Committee on Commerce, Science, and Transportation, Senators Introduce Legislation to Stop Cramming on Telephone Bills (June 12, 2013). 

League,30 pressed the agency to adopt rules that would, among other things: (1) prohibit third party charges on wireless accounts except for charitable or political giving;31 (2) for recurring charges (such as subscriptions), require authorization every 

time a charge is placed on the consumer’s account;32 (3) require carriers to report 

wireless cramming complaints on a regular basis;33 and establish a clear dispute 

resolution process when consumers complain of unauthorized charges on their wireless bills that includes consumer protections such as the right to withhold payment 

for the charge while the dispute resolution process takes place.34 Industry representatives, on the other hand, submitted comments arguing that, at the time, 

wireless cramming was not ‘‘a prevalent consumer issue,’’ that voluntary industry 

measures would ensure that it did not become a significant consumer issue, and 

that the FCC lacked authority to issue wireless cramming rules.35

On August 27, 2013, the FCC released a Public Notice seeking to refresh the 

record on cramming ‘‘in light of developments and additional evidence’’ 36 related to 

both wireline and wireless cramming. The FCC rulemaking remains pending. 

II. Committee Investigation 

In June 2012, Chairman Rockefeller followed up on his wireline cramming investigation to open an inquiry into the scope of unauthorized third-party charges in the 

wireless context and what steps carriers had undertaken to protect consumers from 

cramming. He launched this investigation with letters to the four major U.S. wireless phone companies—Sprint, T-Mobile, Verizon Wireless, and AT&T37—requesting 

information regarding the companies’ relationships with third-party vendors and 

billing aggregators and their practices to prevent cramming on consumer wireless 

bills. 

As evidence of wireless cramming continued to mount, Chairman Rockefeller followed up with additional letters to the same four carriers in March 2013 requesting 

billing data the companies had provided to the California Public Utilities Commission (CPUC) under California’s law requiring disclosures relating to wireless billing.38 Also in March 2013, the Chairman requested information from five major billing aggregators—Ericsson, mBlox, Mobile Messenger, Motricity, and OpenMarket— 

relating to their practices in facilitating third-party wireless billing and steps they 

were taking to prevent abuses.39

In June 2013, Chairman Rockefeller wrote the four major carriers to request additional information on questions that had emerged regarding how carriers were monitoring consumer authorizations of third-party billing and following up on consumer 

concerns.40

In November 2013, the Attorney General of Texas filed a complaint against Mobile Messenger, one of the major wireless billing aggregators, alleging that the company had engaged in a deceptive scheme with third-party vendors to cram conVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
11 

41Plaintiff’s Original Petition, Texas v. Mobile Messenger U.S. Inc., et al, Tex. D. Ct., Travis 

County (Nov. 6, 2013). 42Letter from Chairman Rockefeller to Michael L. Iaccarino, Chief Executive Officer, Mobile 

Messenger (Nov. 26, 2013). 43 Verizon Wireless, Premium Messaging FAQs (accessed July 27, 2014) (available at http:// 

www.verizonwireless.com/support/faqs/PremiumlTXTlandlMMS/faqlpremiumltxtland 

lmms.html). 44See, e.g., Letter from Chief Executive Officer, mBlox, to Senator John D. Rockefeller IV 

(Apr. 23, 2013); VT. AG: 3 Firms End Extra Cellphone Bill Charges, Associated Press (Nov. 21, 

2013). See also AT&T Mobility, Sprint and T-Mobile Will No Longer. . . ., Communications 

Daily (Nov. 25, 2013) (quoting Verizon General Counsel as saying that Verizon had ‘‘previously 

decided to exit the premium messaging business’’). PSMS use continues for charitable giving and 

political contributions. Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority Staff (June 3, 2014); Briefing by Sprint Nextel to Senate Commerce Committee 

Majority Staff (July 16, 2014). 45See, e.g., Master Services Agreement provided by Mobile Messenger to Senate Commerce 

Committee (AG–MM–COMM–001908–001911). 

sumers.41 These allegations raised questions regarding representations Mobile Messenger had made to the Committee about the company’s commitment to consumer 

protection and the assurances major carriers had given the Committee that 

aggregators worked with carriers to promote consumer protections in the third-party 

wireless billing process. In late November, Chairman Rockefeller wrote to Mobile 

Messenger seeking additional information concerning a subset of vendors whose conduct had raised concerns and pressing for production of previously requested information.42

When Mobile Messenger refused to provide key information requested in the 

Chairman’s March 2013 and November 2013 letters, the Committee on March 14, 

2014, issued a subpoena to the company, and Mobile Messenger was responsive to 

the subpoena. 

Over the course of the Committee’s investigation, Committee majority staff reviewed thousands of pages of narrative and documentary materials produced by 

wireless carriers and billing aggregators, and conducted interviews of carrier and 

aggregator representatives as well as other experts. An association for the wireless 

industry, CTIA—The Wireless Association (CTIA), also provided the Committee documentary and narrative information about the third-party wireless billing system. 

III. Overview of Premium Short Message Service (PSMS) Wireless Billing 

From the early days of third-party wireless billing, major carriers allowed thirdparty vendors to charge for their goods and services on customers’ wireless accounts. 

One system that became prevalent is known as the premium short message service 

(PSMS) whereby consumers would be charged at a higher rate for one-time content 

or subscriptions received via text message as compared to the standard messaging 

rate.43 PSMS charges, along with other third-party charges, are billed to the consumers’ wireless account and appear on their billing statement. Over the past few 

years, use of PSMS has been waning and major carriers ultimately stopped most 

commercial PSMS billing early in 2014.44 At the same time, use of other methods 

that do not involve PSMS for placing third-party charges on consumers’ wireless 

bills has been increasing. 

This section of the report provides an overview of the billing process associated 

with PSMS and the self-regulation regime that the wireless industry developed to 

oversee marketing and billing under the PSMS system. Section V of the report addresses alternative third-party billing methods that have been emerging amid the 

recent decrease in PSMS billing. 

A. The PSMS Third-Party Wireless Billing Process 

Third-party PSMS billing generally has involved three types of companies: vendors (often known as content providers), wireless carriers, and middlemen known 

as ‘‘billing aggregators’’ who have provided technology to link content providers and 

wireless carriers. Under this system, vendors contract with billing aggregators to facilitate placement of charges for goods and services—often referred to as ‘‘programs’’—on consumers’ wireless accounts. Billing aggregators in turn contract directly with the wireless carriers, which control access to the consumers’ wireless 

bills. Each party in this process has retained a portion of the charges paid by consumers.45

12 

46 Common shortcodes can also be used to allow consumers to make charitable donations and 

political contributions via text messaging. The Committee’s inquiry focused on commercial 

shortcode charges. 47See Common Short Code Administration, About Short Codes Frequently Asked Questions— 

CTIA Vetting (online at http://www.usshortcodes.com/about-sms-short-codes/sms-marketingfaqs.php#.U8l0L6ggZss). 48See, e.g., Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John 

D. Rockefeller IV, at 5 (July 11, 2012); Letter from General Counsel, Verizon Wireless, to Chairman John D. Rockefeller IV, at 5 (July 11, 2012); Letter from Vice President, Federal Legislative 

Affairs, T-Mobile USA, to Chairman John D. Rockefeller IV, at 1 (July 11, 2012). 49Mobile Marketing Association, Global Code of Conduct; Mobile Marketing Association, U.S. 

Consumer Best Practices for Messaging, Version 7.0 (Oct. 16, 2012) (online at: http:// 

www.mmaglobal.com/files/bestpractices.pdf). 50 Id. 51 Id. 

FIGURE I: PARTIES IN THE PSMS BILLING PROCESS 

In order for a content provider to send commercial premium text messages, the 

provider first has to obtain authorization to use a five or six-digit code known as 

a ‘‘common shortcode’’ (CSC).46 CTIA-The Wireless Association has managed and 

controlled issuance of CSCs.47 Once a content provider has been granted a 

shortcode, they also must apply to individual wireless carriers to obtain access to 

the carrier’s billing platform to charge consumers for specific content—or ‘‘campaigns’’—associated with the shortcode.48

From a consumer’s perspective, the PSMS purchase process as prescribed by industry guidelines has worked as follows. Using an authorization process known as 

the ‘‘double opt-in,’’ consumers must take two affirmative acts when purchasing 

goods or services with their mobile phone: one to initiate the purchase and one to 

confirm the purchase.49 At least one of these actions must be performed using the 

mobile device associated with the wireless account to be charged. 

Industry guidelines also have required content providers to provide information 

and disclosures to consumers before completing the PSMS charge including the 

identity of the content provider, contact details for the content provider, a short description of the program, pricing, and terms under which consumers could opt out 

of the subscription, among other requirements.50

In addition, content providers must provide a confirmation message after affirmative consumer acceptance, including disclosures about the premium charge billed or 

deducted from the user’s account.51

Following is an example of what the prescribed authorization process looks like 

from a consumer’s perspective: a consumer would see an advertisement online, on 

television, or in-store, for downloading a song. The advertisement denotes the advertisement’s sponsor, a description of the service or good being offered, its cost, the 

frequency of the service—which in this case was one song—information regarding 

customer support, opt-out information, and information regarding any additional 

carrier costs. 


730FIG1.eps
13 

52Graphic was provided to the Committee by the company Boku. 53Mobile Marketing Association, Global Code of Conduct (July 15, 2008); Mobile Marketing 

Association, U.S. Consumer Best Practices for Messaging, Version 7.0 (Oct. 16, 2012); and 

CTIA—The Wireless Association, Mobile Commerce Compliance Handbook, Version 1.0 (June 4, 

2012). 54Mobile Marketing Association, Global Code of Conduct at 1 (July 15, 2008); Mobile Marketing Association, U.S. Consumer Best Practices for Messaging, Version 7.0 (Oct. 16, 2012). 

MMA defines ‘‘application provider’’ as an organization that offers network based software solutions. Mobile Marketing Association, MMA Glossary—Application Provider (2014) (online at 

http://mmaglobal.com/wiki/application-provider). ‘‘Publisher’’ is defined as a company that 

provides WAP sites [a website that is specifically designed and formatted for display on a mobile 

device] and/or facilitates the delivery of advertising via one or more WAP sites; also, as a pubContinued 

FIGURE II: STEPS IN PRESCRIBED PSMS BILLING PROCESS52

The advertisement would tell the consumer to send a text to the shortcode 

‘‘12345’’ with the message ‘‘music’’ to buy the song list in the ad. The consumer 

would take this step, then receive a message confirming the content ordered, which 

would reiterate much of the information provided in the original advertisement, including program sponsor, price, frequency of product, how to ask for help with the 

product purchase, and any additional carrier costs. After confirming this content 

was accurate, the consumer was to authorize the purchase by sending an affirmative message, in this case ‘‘Yes,’’ to the ‘‘12345’’ shortcode. The consumer would then 

receive a link to the product purchased. 

B. Voluntary Industry Oversight Over Third-Party Wireless Billing Practices 

With respect to third-party billing via PSMS, the U.S. wireless industry developed 

industry-wide consumer protection standards. Industry-based member organizations 

created guidelines and recommendations for mobile marketers including parties involved in the marketing and sale of products consumers charge to the wireless 

phone bills through the PSMS system. Further, carriers developed their own individual policies for oversight of these charges. The following is a description of industry policies concerning the placement of third-party charges on consumer wireless 

bills. 

1. Industry-Wide Oversight 

The Mobile Marketing Association (MMA) and CTIA—The Wireless Association 

(CTIA) spearheaded a number of industry initiatives that were widely adopted 

throughout the industry for PSMS billing.53 MMA drafted the Global Code of Conduct and the U.S. Consumer Best Practices for Messaging to provide advertisers, 

aggregators, application providers, carriers, content providers, and publishers with 

guidelines for implementing shortcode programs.54 The guidelines provide detailed 


730FIG2.eps
14 

lisher of mobile content, such as games and personalization products. Mobile Marketing Association, MMA Glossary—Publisher (2014) (online at http://mmaglobal.com/wiki/publisher). 55 CTIA—The Wireless Association, Consumer Bill of Rights (July 1, 2013). 56 CTIA has been screening all applicants for shortcodes by requiring basic identity and program information, such as the company name, corporate registration, and legal history. See 

Common Short Code Administration, About Short Codes Frequently Asked Questions—CTIA Vetting (online at http://www.usshortcodes.com/about-sms-short-codes/sms-marketing-faqs.php# 

.U8l0L6ggZss). CTIA has worked with Aegis Mobile and WMC Global to conduct the vetting 

process. See id.; Aegis Mobile, CTIA Vetting FAQ (online at http://www.aegismobile.com/resources/industry-documents/ctia-vetting-faq/). 57 Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority Staff 

(June 3, 2014); Mobile Marketing Association, U.S. Consumer Best Practices for Messaging, 

Version 7.0 at 23–24 (Oct. 16, 2012); CTIA—The Wireless Association, Mobile Commerce Compliance Handbook, Version 1.0 at 3–4 (June 4, 2012). CTIA also included the same provisions in 

its updated Handbook. See CTIA—The Wireless Association, Mobile Commerce Compliance 

Handbook, Version 1.2 at 5, 7 (Aug.1, 2013). 58See CTIA—The Wireless Association Launches Common Short Codes Media Monitoring 

Process, Business Wire (June 15, 2009) (online at http://www.businesswire.com/news/home/ 

20090615005802/en/CTIA%E2%80%93The-Wireless-Association-Launches-Common-Short-Codes 

#.U8VyB6ggZss); WMC Global, Frequently Asked Questions (online at http://www 

.wmcglobal.com/faq.html); CTIA, CTIA In-Market Monitoring Portal User Guide (online at 

http://www.wmcglobal.com/assets/ctialimmlportalluserlguide.pdf); Briefing by CTIA— 

The Wireless Association to Senate Commerce Committee Majority Staff (June 3, 2014). 59 Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority Staff 

(June 3, 2014); CTIA—The Wireless Association, Mobile Commerce Compliance Handbook, 

Version 1.0, at 6–7 (June 4, 2012). 

requirements for advertising and notice to consumers, along with the appropriate 

methods for authenticating consumer PSMS purchases. 

CTIA—in its Mobile Commerce Compliance Handbook—provides ‘‘a unified standard of compliance for mobile carrier billing.’’ The guidelines set forth principles for 

acceptable program content, opt-in procedures, and cancellation. Many of these are 

highlighted in the ‘‘Consumer Bill of Rights,’’ which provide: 

• Programs must use a two-factor authentication for all opt-ins. 

• After opt-in, users should receive purchase confirmation of their purchase, either on an additional screen or via a text message. 

• All offers must display clear, legible pricing information adjacent to the call-toaction. Pricing information must appear on all screens in the purchase flow. 

• Billing frequency information should appear with pricing information, and subscriptions should be labeled clearly as such. 

• Clear opt-out instructions must be provided before the purchase is completed 

and before renewal billing each month. 

• All offers must include customer care contact information in the form of a tollfree phone number or an e-mail address. Contact information should function 

and result in actual user help. 

• All offers must supply privacy policy access. 

• Purchase flows should include clear descriptions of products offered, and products marketed must match products delivered. 

• Product descriptions on customers’ wireless bills must reflect accurately the 

product purchased. Descriptions should include the billing shortcode and the 

program name.55

CTIA in conjunction with an outside auditor would vet content providers that 

were seeking to lease shortcodes to market and charge products to consumers.56

Content providers that passed CTIA screening through the Common Short Code Administration could lease a shortcode from CTIA consistent with terms of a user 

agreement requiring compliance with industry best practices and standards, such as 

whether the vendor makes clear disclosures to the consumer about how to authorize 

purchases, or whether the consumer is signing up for a one-shot versus a recurring 

charge.57

Content providers that are permitted to charge consumers via the PSMS system 

have been subject to ongoing CTIA monitoring for compliance with industry standards surrounding program content, as well as opt-in and cancellation procedures.58

In 2010, CTIA began providing carriers and billing aggregators access to an online 

portal that provided the results of these reviews—or audits—in reports that detailed 

why and how guidelines were violated and that assigned a severity level to each 

failure. Under this system, each carrier has been responsible for determining what 

follow-up they would conduct with the violating vendor.59 In addition, carriers reVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
15 

60 Id. 61 Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority Staff 

(June 3, 2014). 62See, e.g., WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update 

January 2011, at 6 (Jan. 2011). 63Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. 

Rockefeller IV, at 4 (July 11, 2012); Letter from General Counsel, Verizon Wireless, to Chairman 

John D. Rockefeller IV, at 6 (July 11, 2012); Letter from Vice President—Government Affairs, 

Sprint Nextel, to Chairman John D. Rockefeller IV, at 2 (July 11, 2012); Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John D. Rockefeller IV, at 6 (July 

11, 2012). 64See, e.g., Sample Advanced Messaging Agreement for Marketing Messaging Hubs provided 

by mBlox to the Senate Commerce Committee (stating ‘‘At a minimum, programs shall be run 

in a manner that is congruous with the letter and spirit of the MMA Code of Conduct for Mobile 

Marketing’’) (000360). 65Letter from Assistant General Counsel, Verizon Wireless, to Senate Commerce Committee 

Majority Counsel, at 1–5 (July 12, 2013); Letter from Vice President—Government Affairs, 

Sprint Nextel, to Chairman John D. Rockefeller IV, at 3 (Mar. 22, 2013); Letter from Executive 

Vice President, Federal Relations, AT&T, to Chairman John D. Rockefeller IV, at 4–5 (July 11, 

2012); Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John 

D. Rockefeller IV, at 3 (July 11, 2012). 66Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. 

Rockefeller IV, at 5 (July 11, 2012); Letter from General Counsel, Verizon Wireless, to Chairman 

John D. Rockefeller IV, Attachment A, at 6 (July 11, 2012); Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. Rockefeller IV, at 7 (July 11, 2012); Letter 

from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John D. Rockefeller IV, at 5 (July 11, 2012). 67One carrier stated that such audits are done ‘‘randomly’’ (Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. Rockefeller IV, at 8 (June 28, 2013)); while 

another stated they are done on at least a monthly basis (Letter from Assistant General Counsel, Verizon Wireless, to Senate Commerce Committee Majority Counsel, at 5–6 (July 12, 2013)). 68Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. 

Rockefeller IV, at 5–6 (June 28, 2013); Letter from Vice President, Federal Legislative Affairs, 

T-Mobile USA, to Chairman John D. Rockefeller IV, at 4–5 (June 28, 2013); Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. Rockefeller IV, at 4–5 (July 

2, 2013); Letter from Assistant General Counsel, Verizon Wireless, to Senate Commerce Committee Majority Counsel, at 8 (July 12, 2013). 69Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John 

D. Rockefeller IV, at 6 (July 11, 2012); Letter from Vice President—Government Affairs, Sprint 

Nextel, to Chairman John D. Rockefeller IV, at 4 (June 28, 2013); Letter from Executive Vice 

President, Federal Relations, AT&T, to Chairman John D. Rockefeller IV, at 7 (July 2, 2013); 

Letter from Assistant General Counsel, Verizon Wireless, to Senate Commerce Committee Majority Counsel, at 1 (July 12, 2013). Consumers are often made aware of these options at the 

time of purchase of a wireless plan, during customer service calls regarding the appearance of 

unauthorized charges on a bill, and on the carriers’ websites. 

ceive e-mail notification of new audit findings 60 and weekly reports aggregating the 

audit failures across the mobile content market.61 These weekly reports have been 

compiled into monthly reports to the carriers, which also identify the PSMS billing 

aggregators that hosted content with the most failures.62

2. Individual Carrier Policies 

In responses to Committee inquiries, the four major carriers all reported that they 

comply with CTIA and MMA guidelines for third-party wireless billing, 63 and contractually require the same from their billing aggregators and vendors.64 All carriers also highlighted several key components of their oversight policies: 

• Vetting of third-party vendors and their services beyond the CTIA vetting process; 65

• The two-step authentication process known as the ‘‘double-opt-in’’ required for 

consumer approval of third-party services charged on wireless bills 66 (see discussion above in part III.A); 

• Monitoring of third-party vendor opt-in and opt-out functionality as well as how 

they market to consumers; 67

• Monitoring of third-party vendors through consumer complaint and refund 

thresholds; 68 and 

• Offering consumers the option to block third-party purchases that, when implemented, restrict the purchase of any third-party content billed to a customers’ 

mobile device.69

16 

70Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. 

Rockefeller IV, at 4 (June 28, 2013); Letter from Assistant General Counsel, Verizon Wireless, 

to Senate Commerce Committee Majority Counsel, at 6 (July 12, 2013); Update from AT&T, to 

Chairman John D. Rockefeller IV, at 2 (Mar. 11, 2013). 71Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John 

D. Rockefeller IV, at 3 (July 11, 2012). 72Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. 

Rockefeller IV, at 1 (July 11, 2012). 73Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. 

Rockefeller IV, at 2 (July, 11 2012). 74Letter from General Counsel, Verizon Wireless, to Chairman John D. Rockefeller IV, at 1 

(July 11, 2012). 75Letter from Assistant General Counsel, Verizon Wireless, to Senate Commerce Committee 

Majority Counsel, at 10–12 (July 12, 2013); Letter from Vice President—Government Affairs, 

Sprint Nextel, to Chairman John D. Rockefeller IV, at 6–8 (June 28, 2013); Letter from Vice 

President, Federal Legislative Affairs, T-Mobile USA, to Chairman John D. Rockefeller IV, at 

6–7 (June 28, 2013); and Letter from Executive Vice President, Federal Relations, AT&T, to 

Chairman John D. Rockefeller IV, at 7–11 (July 2, 2013). 76See, e.g., Comments of CTIA—The Wireless Association, Federal Communications Commission, CC Docket No. 98–170 (June 25, 2012); Commentary of Mike Altschul, General Counsel, 

CTIA—The Wireless Association, Federal Trade Commission, Mobile Cramming, An FTC 

Roundtable (May 8, 2013). 77 Comments of CTIA—The Wireless Association, Federal Communications Commission, CC 

Docket No. 98–170, at 1–2 (June 25, 2012). 78 Commentary of Cara Frey, General Counsel, Mobile Marketing Association, Federal Trade 

Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013). 79 Commentary of Jim Greenwell, Chief Executive Officer and President, BilltoMobile, Federal 

Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013) (estimating the volume of such billing to be between $2 to $3 billion). 80Letters from Carrier Representatives to Chairman John D. Rockefeller IV (July 2012). 

Three of the four carriers said they also have used ‘‘first call’’ resolution of consumer cramming complaints, in which the consumer is generally refunded their 

money on the first complaint call.70

IV. Committee Findings on PSMS Third-party Wireless Cramming 

Similar to telecom industry assurances about self-regulation of landline billing, 

from the outset of the Committee’s review of cramming on wireless bills, the four 

major wireless carriers—AT&T, T-Mobile, Verizon, and Sprint—told the Committee 

that their procedures and practices effectively insulate consumers from cramming 

on charges incurred through the PSMS system. In July 2012 letters to the Committee, carriers characterized this voluntary system as a ‘‘robust process designed 

to protect customers from unscrupulous actors,’’ 71 asserting that it provides consumers ‘‘simplicity and security,’’ 72 that the outcome has been a ‘‘consistent, secure, 

and reliable experience’’ for the consumer,73 and that carriers have ‘‘every incentive 

to avoid losing a customer due to unauthorized third-party charges.’’ 74 In July 2013 

letters to the Chairman, all four carriers asserted that they had only strengthened 

their anti-cramming practices.75

Over this same time period, major industry associations echoed these assurances.76 In June 2012 comments to the Federal Communications Commission, 

CTIA-The Wireless Association said that ‘‘the wireless industry is already successfully engaged in voluntary initiatives to prevent cramming,’’ calling unauthorized 

third-party wireless billing a ‘‘de minimis’’ problem.77 Similarly, the Mobile Marketing Association asserted in May 2013 that the CTIA and MMA rules ‘‘are very 

effective.’’ 78

However, documents and other information the Committee obtained and reviewed 

over the course of its inquiry indicate that—just as with landline cramming—industry has gained substantial profits from third-party wireless billing while providing 

consumers inadequate protections against deceptive and fraudulent charges on their 

wireless bills. This section details the findings of the Committee majority staff. 

A. Carriers Have Profited Tremendously from Third-Party Wireless Billing 

It has been estimated that third-party wireless billing activities likely constitute 

a multi-billion dollar industry.79 The evidence reviewed by the Committee staff for 

a sample time frame between 2011 and 2013 supports that analysis. 

For example, one carrier reported that nearly $250 million worth of PSMS 

charges were charged to its customers’ accounts in 2011 alone, while another reported over $375 million in total charges for the same year.80 In addition, information provided by billing aggregators to the Committee shows that the combined revenues of content providers that had relationships with four top aggregators over 

17 

81Four out of five aggregators provided revenues of content providers to the Committee. Letter from Head of Corporate Affairs and Communications, Ericsson Inc., to Chairman John D. 

Rockefeller IV (Apr. 19, 2013); Letter from Chief Administrative Officer and General Counsel, 

Motricity, Inc., to Chairman John D. Rockefeller IV (May 25, 2013); Letter from Attorney, Mobile Messenger, to Chairman John D. Rockefeller IV (Apr. 21, 2014); mBlox Response to Chairman John D. Rockefeller IV (Apr. 21, 2014). 82 Response letters from carriers listed many aggregators. Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. Rockefeller IV, at 3 (July 11, 2012); Letter 

from General Counsel, Verizon Wireless, to Chairman John D. Rockefeller IV, at Attachment 

A (July 11, 2012); Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman 

John D. Rockefeller IV, at 4 (July 11, 2012); Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John D. Rockefeller IV, at 1 (July 11, 2012). 83See, e.g., Commentaries of Jim Greenwell, Chief Executive Officer and President, 

BilltoMobile, and Martine Niejadlik, Compliance Officer and Vice President of Customer Support, Boku, Federal Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013). 84 Comments of California Public Utilities Commission, Federal Communications Commission, 

CC Docket No. 98–170, at 20 (Nov. 18, 2013). 85 Committee staff reviewed a number of contracts between billing aggregators and wireless 

carriers that outlined the payment arrangements. 86Sample aggregator contract provided to the Senate Commerce Committee (000179). 87Sample aggregator contract provided to the Senate Commerce Committee (000066–000067). 88 Between 2011 and 2013, carriers reported refunding $60,037,906 out of $495,134,687 in 

total wireless charges, including $25,095,834 in 2011, $23,250,885 in 2012, and $11,691,187 in 

2013, with total billed, including $173,644,442 in 2011, $191,302,355 in 2012, and $130,187,888 

in 2013. Comments of California Public Utilities Commission, Federal Communications Commission, CC Docket No. 98–170 (Nov. 18, 2013) and e-mail from CPUC Representatives to Senate 

Commerce Committee Majority Counsel (Apr. 23, 2014). 

2011–2013 totaled over $1.2 billion.81 This amount—while substantial—does not reflect the entirety of the third-party wireless billing market, as multiple other 

aggregators were operating in the PSMS market during this time period,82 and 

other non-PSMS third-party billing mechanisms were emerging as well.83

Further, information provided by the California Public Utility Commission 

(CPUC) shows that in 2012, over $191 million worth of third-party charges were 

placed on consumers’ wireless bills in California alone—and California has been estimated to constitute about 10 percent of the wireless market in the United States. 

Extrapolating and applying the California data across all 50 states, over a span of 

years, it is likely these numbers would climb into the billions.84

Information provided to the Committee by individual carriers indicates that major 

carriers reaped hundreds of millions of dollars annually from their role in placing 

third-party charges on wireless phone bills. Contracts reviewed by the Committee 

show that the carriers generally collected 30 percent to 40 percent of the total value 

of the charges placed.85 Individual charges are generally small—most often ranging 

from $1 to $20, with frequent reports of a $9.99 recurring monthly charge. However, 

the high volume of these charges yields substantial cumulative revenues. For example, one carrier reported processing over 120 million individual third-party transactions on consumer wireless bills in 2011. 

In addition to the carriers’ revenue shares, contracts reviewed by Committee staff 

show that certain carriers have collected additional fees that could also add to their 

profits. For example, one carrier also collected ‘‘Excessive Premium Campaign Refund Rate Fees.’’ These additional fees allow the carrier to charge $10.00 per customer care call once a content provider’s refund rate exceeded 15 percent per 

month.86 Another carrier has imposed fees ranging from $25,000 to $100,000 where 

providers experience billing issues which include high levels of refunds.87

B. Wireless Cramming has Likely Cost Consumers Hundreds of Millions of Dollars 

The evidence reviewed by Committee staff indicates that wireless cramming has 

likely cost consumers hundreds of millions dollars over the past several years. This 

assessment is based on a review of data regarding refund rates, consumer complaint 

information provided by carriers and billing aggregators regarding unauthorized 

third-party charges, and a number of studies and law enforcement actions that have 

quantified the extent of wireless cramming. 

1. Refund Rates 

Beginning in 2011, the California Public Utilities Commission (CPUC) required 

wireless carriers to provide data about refunds made directly to consumers. Numbers provided by CPUC show that between 2011 and 2013, carriers returned over 

$60 million in refunds to customers out of $495 million in total third-party wireless 

charges, just with respect to California wireless consumers.88 While industry argues 

that refund rates are a ‘‘flawed metric’’ because refunds can be made for reasons 

18 

89See Reply Comments of CTIA—The Wireless Association, Federal Communications Commission, CC Docket No. 98–170, at 5 (Dec. 16, 2013) (arguing that ‘‘refund amounts and refund 

rates are flawed metrics for assessing instances of unauthorized charges on wireless bills. Carriers have consumer-friendly refund policies that cover a variety of situations and transactions— 

much more than just unauthorized third-party charges.’’). 90 Commentary of Chris Witteman, Senior Staff Counsel, California Public Utilities Commission, Federal Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013). 91Letter from Consumer Affairs Branch, California Public Utilities Commission, to Senate 

Commerce Committee Majority Counsel (Jan. 31, 2013). 92 Calculation of this percentage was based on the total number of wireless subscriber connections in California (34 million), and the United States (326.4 million) in 2012, as reported by 

CPUC and CTIA respectively. California Public Utilities Commission, 2012 Annual Report 

(Feb. 1, 2013); CTIA—The Wireless Association, Wireless Quick Facts (last updated June 2014) 

(online at http://www.ctia.org/your-wireless-life/how-wireless-works/annual-wireless-industrysurvey). Committee staff was unable to compare California and national wireless subscriber 

numbers for 2013, as CPUC’s 2013 Annual Report did not include the number of wireless subscriber connections in California. 93Letter from T-Mobile USA, to Chairman John D. Rockefeller IV, at 5 (June 28, 2013). 94 mBlox Response to Senate Commerce Committee (Mar. 25, 2014) (chart titled ‘‘U.S. Cases 

(Jan-1-2012–March-31-2013)’’). 95Federal Trade Commission, Consumer Sentinel Network Data Book for January—December 

2012, at 84 (Feb. 2013) (showing 784 complaints for mobile unauthorized charges in 2010); Federal Trade Commission, Consumer Sentinel Network Data Book for January–December 2013, at 

84 (Feb. 2014) (showing complaints for mobile unauthorized charges was 626 in 2011, 714 in 

2012, and 363 in 2013). 96 Center for Rural Studies at the University of Vermont, Mobile Phone Third-Party Charge 

Authorization Study (May 5, 2013). Following the release of survey results, CTIA engaged an 

expert to conduct an analysis of the Vermont Study. The analysis highlighted concerns with the 

other than cramming,89 CPUC explained its rationale for using this measure as follows: 

[W]e use refunds as a proxy for complaints because when we had complaint reporting, we would end up in endless semantic digressions around the meaning 

of the word complaint. So refund is something a little more tangible and we assume that in most cases refunds are not made out of the blue but in relation 

to some expression of dissatisfaction by the customer.90

CPUC also notes that this approach addresses concerns carriers have expressed that 

‘‘tallying subscriber complaints of unauthorized charges would be excessively burdensome.’’ 91

As noted earlier, the CPUC numbers concern activity on wireless accounts solely 

in California, which reflects approximately 10 percent of the total U.S. wireless market.92 If the rate of refunds and total charges billed reported to the CPUC were applied nationwide, the total refunds would likely have been well over $200 million 

out of $1.9 billion in 2012 alone. Even assuming that a portion of the refunds reported to the CPUC are not related to cramming, these numbers provide substantial 

evidence that cramming on wireless bills has been a serious problem. 

Industry argues that numbers of refunds is not an accurate tool to assess the incidence of cramming due to the carriers very liberal refund policies. However, one carrier was able to provide a rough breakdown of refunds specifically attributable to 

complaints that charges were unauthorized—a category they titled ‘‘Authorization 

of Charge Disputed’’—and the results are still high. This carrier reported that 28.1 

percent of total refunds issued in 2012 constituted the ‘‘Authorization of Charge Disputed’’ category.93 If this percentage were applied to the $200 million figure estimated above to reflect total nationwide wireless refunds for 2012, refunds attributable to cramming for that year would top $50 million nationwide in one year 

alone. Based on this analysis, over time, wireless cramming has likely cost American consumers hundreds of millions of dollars. 

2. Consumer Complaint Data 

Consumers also reported on wireless cramming via complaints to Federal and 

state law enforcement as well as to carriers and billing aggregators. One billing 

aggregator reported receiving over 7,000 contacts from consumers in 2012 alone, 

over 30 percent of which involved requests for refunds.94 A FTC review of complaints from the Consumer Sentinel database, one of the major national resources 

for compiling local, state, and Federal consumer complaints, showed over 2,000 complaints of unauthorized charges on wireless bills between 2010 and 2013.95

In addition, in a 2013 survey conducted by the Office of the Attorney General of 

Vermont, 60 percent of respondents reported that the third-party charges found on 

their wireless telephone bills were unauthorized.96

19 

methodology used for the study. The analysis was submitted to the Federal Trade Commission 

by CTIA on June 24, 2013. 97See, e.g., Federal Communications Commission, CC Docket No. 98–170, Comments filed by 

AT&T, Inc. (July 20, 2012), (Dec. 16, 2013); T-Mobile USA Reply Comments (July 20, 2012); and 

Verizon Wireless (June 25, 2012). 98Opening Remarks by Commissioner Maureen Ohlhausen, Federal Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013). 99Sprint Nextel Response to Chairman John D. Rockefeller IV (Mar. 22, 2013). 100 Complaint for Permanent Injunction and Other Equitable Relief, Federal Trade Commission v. T-Mobile USA, Inc., W.D. Wa., at 4–9 (No. 2:14-cv-00967) (July 1, 2014). 101 Id. at 5–6. 

Industry representatives have argued that complaint numbers were low and that 

the incidence of cramming on wireless bills was insignificant.97 However, consumer 

complaint tallies likely reflect numbers far lower than actual cramming occurrences. 

Evidence shows that consumers are frequently unaware that third-party charges are 

appearing on their telephone bills. FTC Commissioner Maureen Ohlhausen elaborated on this point as follows: 

Indeed, we are aware of thousands of consumer complaints about unauthorized 

charges on wireless bills. And we believe that these complaints may well under 

represent the problem or under report the problem. From surveys done in the 

landline cramming context, we know that many consumers are unaware that 

third parties can place charges on their phone bills. We also know that consumers often fail to spot unauthorized charges on their bills. They may simply 

look at the overall bill amount and pay in full without doing a line-by-line review; or they may read the bill and fail to spot the charges because they’re buried deeply within the bill or listed in generic sounding categories, such as premium services.98

Committee staff review of consumer complaints substantiates this viewpoint. Individual consumers often reported only finding the charges after paying them for extensive periods of time. For example, one consumer complained, ‘‘I was billed for 18 

months for $9.99 ($10.76 after taxes) for something I had no clue about and up till 

[sic] today when I reviewed my bill I noticed these charges.’’ Another consumer reported, ‘‘Having automatically paid my bills for one year, I unfortunately just 

learned I was paying for unsolicited text messages for over a year.’’ 99

Indeed, the complaint filed by the FTC against T-Mobile alleges that the bill 

statements received by customers did not adequately disclose PSMS charges.100

Customers reviewing their bill online allegedly could not see these charges by viewing a summary of the charges; only by clicking a series of links could they find premium service charges.101 Figure III below is a graphic from the FTC complaint in 

this case illustrating how the charges allegedly were shown on the consumers’ paper 

statements. 

20 

102 Id. T-Mobile recently represented to Committee majority staff that the company has 

changed the way these charges are depicted in their wireless bills. Briefing by T-Mobile USA 

to Senate Commerce Majority Staff (July 17, 2014). 103FTC v. T-Mobile, supra note 100, at 6–9. 

FIGURE III: T-MOBILE BILL SUMMARY 102

Premium charges were not individually listed in the summary section of the bill. 

Though they were itemized in a ‘‘Premium Services’’ section several pages into the 

bill, the information was presented in a way that did not adequately explain that 

the charge was for a recurring subscription service authorized by the consumer.103

If these allegations are true, it is entirely possible that many consumers over a 

number of years had paid for third-party charges they did not authorize. 

3. State and Federal Actions 

The charges detailed in numerous state and Federal law enforcement actions also 

underscore the broad consumer impact of wireless cramming. These cases have 

charged that consumers have been victims of cramming schemes costing them hundreds of millions of dollars. For example: 


730FIG3.eps
21 

104Plaintiff’s Original Verified Petition and Application for Ex Parte Temporary Restraining 

Order, Temporary Injunction, and Permanent Injunction, Texas v. Eye Level Holdings, LLC, et 

al., Tex. D. Ct., Travis County (No. 1:11–cv–00178) (Mar. 11, 2011). 105Press Release, Mobile Crammers Settle FTC Charges of Unauthorized Billing, Federal 

Trade Commission (Nov. 21, 2013) (online at http://www.ftc.gov/news-events/press-releases/ 

2013/11/mobile-crammers-settle-ftc-charges-unauthorized-billing). 106Press Release, Operators of Massive Mobile Cramming Scheme Will Surrender More than $10 M in Assets in FTC Settlement, Federal Trade Commission (June 13, 2014) (online at: 

http://www.ftc.gov/news-events/press-releases/2014/06/operators-massive-mobile-crammingscheme-will-surrender-more-10m). The judgment was partially suspended based on defendants’ 

inability to pay the full amount. 107 Complaint for Permanent Injunction and Other Equitable Relief, Federal Trade Commission v. T-Mobile USA, Inc., W.D. Wa. (No. 2:14–cv–00967) (July 1, 2014). 108Defendants named in state and Federal enforcement action include: Jesta Digital, 

Bullroarer, Mobile Media Products, Bune, Wise Media, Tatto, Eye Level Holdings, Anacapa 

Media LLC, Tendenci Media, Bear Communications LLC, MDK Media, Mundo Media, SE Ventures, GMK Communications, MindKontrol Industries LLC, and Network One Commerce Inc. 

Federal Trade Commission v. Jesta Digital, LLC, also d/b/a JAMSTER, D.D.C. (No. 1:13–CV– 

01272) (Aug. 20, 2013); Federal Trade Commission v. Tatto, et al., C.D. Cal (No. 2:13–cv13– 

8912–DSF–FFM) (Dec. 5, 2013); Federal Trade Commission v. Wise Media, LLC, et al., N.D. Ga. 

(No. 1:13cv1234) (Apr. 16, 2013); Texas v. Eye Level Holdings, LLC, et al., Tex. D. Ct., Travis 

County (No. 1:11–cv–00178) (Mar. 11, 2011); Texas v. Mobile Messenger U.S. Inc., et al, Tex. 

D. Ct., Travis County (Nov. 6, 2013); Federal Trade Commission v. MDK Media, Inc., et al., C.D. 

Cal (No. 2:14–cv–05099–JFW–SH) (July 3, 2014). 109 AT&T Settles with Florida AG Over Mobile Content Ads, Mobile Marketer (Mar. 3, 2008); 

T-Mobile $600k Settlement with Florida AG Affects All Mobile Content Marketing, Mobile Marketer (July 22, 2010); Sprint Settles Cell Phone Cramming Charges in Florida, Consumer Affairs 

(Oct. 8, 2010). 110See, e.g., Verizon Settlement with Florida AG Affects All Marketing of Mobile Content, Mobile Marketer (June 29, 2009); In the Matter of Verizon Wireless LLC and Alltel Communications, LLC, Assurance of Voluntary Compliance at 5–13 (June 16, 2009). Specifically, the settlements resulting from the Florida actions require that certain provisions be included in the contracts between the carriers and any companies that ‘‘advertise, aggregate billing for, offer and/ 

Continued 

• In 2011, the Attorney General of Texas filed a lawsuit against Eye Level Holdings, LLC, alleging that the defendants collected millions of dollars through the 

placement of unauthorized charges on the wireless telephone bills of thousands 

of Texas residents.104

• In 2013, Wise Media and its owners agreed to settle FTC allegations that they 

caused more than $10 million in consumer harm by placing unauthorized recurring $9.99 monthly fees on consumers’ wireless bills.105

• In June 2014, a district court issued a stipulated order for a monetary judgment 

totaling over $150 million in a case brought by FTC alleging defendants used 

deceptive websites to cram consumer’s wireless bills.106

• In July 2014, the FTC charged T-Mobile with placing third-party charges on 

consumers’ wireless bills despite clear warnings that the charges were unauthorized, and engaging in billing practices that made it difficult for consumers’ 

to discern fraudulent charges, alleging that these practices cost consumer millions of dollars in injury.107

Indeed, review of 2011–2013 data provided to the Committee by major billing 

aggregators regarding revenue generated by content provider clients shows that 

many of the top revenue generators in this time frame were ultimately the subject 

of state or Federal enforcement actions. According to this data, the subjects of enforcement actions generated approximately 23.5 percent of total revenue reported to 

the Committee for this time period—$289,037,831 of $1.2 billion.108

In short, the cumulative evidence revealed by enforcement actions, consumer complaints, refund rates, and studies, indicates that hundreds of millions of dollars in 

crammed charges have been placed on consumers’ wireless bills over the past several years. 

C. Carriers Were on Notice about Cramming and Other Vendor Problems 

Carriers should have known at least as early as 2008 that consumers were complaining of cramming on their wireless bills. Beginning in 2008, the Florida Attorney General entered into enforcement settlements with Cingular (AT&T), Verizon, 

Sprint, and T-Mobile over allegations that unauthorized charges had been placed on 

their consumers’ bills.109 These settlements created a ‘‘best practices’’ regime intended to ensure that consumers were receiving clear and conspicuous prices and 

terms of the content being purchased before such charges could be placed on a consumer’s wireless bill.110

22 

or sell mobile content.’’ These include: (1) a prohibition on using words like ‘‘free,’’ ‘‘complimentary,’’ ‘‘without charge’’ or other similar terms without clear and conspicuous disclosure that the 

consumer will have to pay for a subscription in order to receive the content; (2) specifications 

for font size and color on all consumer disclosures for web-based advertising for mobile content; 

and (3) certain price and billing disclosures must be made ‘‘above the fold’’ on the mobile ‘‘submit’’ and ‘‘PIN submit’’ pages. In addition to these best practices, the settlements also required 

the carriers to establish monetary compensation programs for consumers who had experienced 

unauthorized third-party billing charges. Id. at 4–10, 13–14. 111 Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority 

Staff (June 3, 2014). 112See Part III.B.1, supra. 113WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update January 

2011, at 2 (Jan. 2011). According to the report, 18,304 offers were tested. Id. at 3. A copy of 

this report is attached as Exhibit A. In May 2011, the monthly in-market auditing reports began 

including specific breakdowns of premium messaging testing results and standard rate testing 

results, but the January 2011 report does not provide that breakdown. CTIA has represented 

to the Committee that the PSMS testing in January 2011 had a failure rate of 97 percent. 114The January 2011 In-Market Monitoring Update showed that 99.57 percent of interceptions failed at severity level 1. Id. at 3. 115 CTIA—The Wireless Association, Mobile Commerce Compliance Handbook, Version 1.0, at 

6 (June 4, 2012). For example, the most common of the January 2011 violations concerned the 

‘‘no account holder authorization disclosure’’ requirement concerning how to disclose that the account holder must authorize purchases. In-Market Monitoring Update January 2011, at 2 (Jan. 

2011); CTIA—The Wireless Association, Mobile Commerce Compliance Handbook, Version 1.0 at 

8 (June 4, 2012) (describing standards). 116 According to the September 2011 report, 49 percent of the interceptions failed while 51 percent passed. WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update 

September 2011, at 3 (Sept. 2011). 117WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update January 

2012, at 3 (Jan. 2012). 118See, e.g., WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update 

September 2012, at 3 (Sept. 2012) (showing 96 percent of interceptions passed); WMC Global 

for CTIA—The Wireless Association, In-Market Monitoring Update October 2012, at 3 (Oct. 

2012) (showing 97 percent of interceptions passed), WMC Global for CTIA—The Wireless Association, In-Market Monitoring Update December 2012, at 3 (Dec. 2012) (showing 98 percent of 

interceptions passed). Copies of relevant portions of the January 2012 and December 2012 reports are attached at Exhibit A. 119For example, similar to the policies described above, for third-party billing on landline 

phones, phone companies instituted policies providing for screening of vendors, the option for 

consumers to block third-party billing, and customer complaint thresholds that trigger corrective 

action. For a detailed discussion of industry self-regulation initiatives to address cramming on 

wireline phone bills see Senate Committee on Commerce, Science, and Transportation, Staff Report on Unauthorized Third-Party Charges on Telephone Bills, at 30–33 (July 12, 2011). 120 Id. at 4–5. 

According to CTIA, shortly after the last settlement was signed in October 

2010,111 this best practice regime was incorporated into the mobile billing standards 

against which the industry audited vendors for compliance.112 The CTIA audit reports that followed indicated that, three years after the Florida enforcement cases 

sounded the alarm about wireless cramming, the overwhelming majority of vendors 

allowed to charge consumers on wireless billing platforms were not meeting basic 

standards. 

For example, with respect to the monthly reports CTIA provided carriers summarizing in-market auditing, the January 2011 report showed a failure rate of nearly 

100 percent for marketing offers tested—or ‘‘intercepted’’—by the auditors.113 Virtually all of the failures 114 were for violations classified by CTIA as ‘‘severity level 

one,’’ meaning ‘‘serious consumer harm.’’ 115 While monthly industry audit reports 

after January 2011 showed declining numbers of compliance failures, it was not 

until September 2011 that more interceptions were reported to have passed than 

failed.116 And in January 2012, audits still showed a 25 percent failure rate.117

After August 2012, the reports indicated passage rates of 95 percent or higher, 

meaning that 95 percent of offers tested complied with CTIA guidelines.118

D. Industry Self-Regulation Has Left Gaps In Consumer Protection 

1. The Double Opt-In Safeguard Was Porous 

Many of the voluntary policies and practices industry instituted to protect against 

cramming in the PSMS system are similar to those industry touted in the landline 

context.119 However, as with law enforcement actions in the 2000s involving 

landline cramming,120 a series of recent state and Federal law enforcement cases 

concerning wireless cramming have highlighted potential vulnerabilities with industry’s voluntary consumer protection system. In particular, recent actions raise concerns regarding the effectiveness of the double opt-in authorization. 

23 

121 Comments of CTIA—The Wireless Association, Federal Communications Commission, CC 

Docket No. 98–170, at 2 (June 25, 2012); Letter from General Counsel, Verizon Wireless, to 

Chairman John D. Rockefeller IV, at 2 (July 11, 2012) (noting there is no analogue to the double 

opt-in in the wireline billing context). 122 Commentary of Mike Altschul, General Counsel, CTIA—The Wireless Association, Federal 

Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013). 123 Complaint for Permanent Injunction and Other Equitable Relief, Federal Trade Commission v. Tatto, et al., C.D. Cal (No. 2:13–cv13–8912–DSF–FFM) (Dec. 5, 2013). 124 Complaint for Permanent Injunction and Other Equitable Relief and Exhibits, Federal 

Trade Commission v. Wise Media, LLC, et al., N.D. Ga. (No. 1:13cv1234) (Apr. 16, 2013). 125Plaintiff’s Original Verified Petition and Application for Ex Parte Temporary Restraining 

Order, Temporary Injunction, and Permanent Injunction, Texas v. Eye Level Holdings, LLC, et 

al., Tex. D. Ct., Travis County (No. 1:11–cv–00178) (Mar. 11, 2011). The case settled in 2012. 126Plaintiff’s Original Petition, Texas v. Mobile Messenger U.S. Inc., et al., Tex. D. Ct., Travis 

County, at 12 (Nov. 6, 2013). 127 Id. 

As discussed above, industry representatives have argued that a key protection 

against wireless cramming that was not present in the landline context is the ‘‘double opt-in’’ requirement,121 as it involves affirmative steps by the consumer that are 

‘‘immediate,’’ ‘‘current,’’ and ‘‘actionable’’ before billing can be activated.122 However, 

several cases brought at the state and Federal level in the last few years have detailed multiple ways content providers have circumvented the double opt-in. For example: 

• According to an FTC action brought in December 2013, content providers operated a scam in which they billed consumers for services that were not authorized through the use of misleading websites. The complaint cites as an example 

a website that offered to sign up consumers for Justin Bieber concert tickets if 

consumers provided their phone number, and alleges defendants likely used 

that phone information to sign up the consumer for services without their 

knowledge.123

• According to the complaint in a separate FTC action brought in April 2013, consumers received unsolicited text messages from a third-party vendor and were 

charged on their wireless bills for the vendors’ services regardless of whether 

the consumers had ignored the text message or had responded via text message 

that they did not want the services.124

• A complaint brought by the Attorney General of Texas in 2011 claimed that the 

defendants used deceptive websites to entice consumers to enter their wireless 

telephone numbers. According to the complaint, defendants’ websites would 

come up as prominent sponsored links when consumers entered generic search 

queries for information on topics such as ‘‘song lyrics.’’ Defendants’ link would 

not mention subscriptions or costs, and if consumers clicked on the link they 

would be taken to a page where they were encouraged to enter their phone 

number with prominent instructions such as ‘‘enter your cell phone number to 

access the lyrics’’ without any clear and conspicuous disclosures that consumers 

were in fact signing up for paid subscription services. The complaint further alleged that, to conceal this flawed enrollment process from regulators, carriers, 

and consumers re-visiting the site, defendants created ‘‘dummy’’ websites that 

included larger, brighter, and clearer disclosures on the service cost and subscription nature.125

In another case brought by the Attorney General of Texas, defendants allegedly 

worked around the ‘‘double opt-in’’ requirement through the following process depicted with the accompanying graphics reproduced in Figure IV below.126 An online 

search for Olive Garden coupons would turn up a link for a 50 percent discount coupon, without disclosures regarding any fees or subscriptions charged for enrolling.127

24 

128 Id. at 14–15. 129 Id. at 15. 

FIGURE IV: INTERNET SEARCH PRODUCING PSMS WEBSITE 

Consumers who tried to download the coupon were required to enter their personal information including mobile phone number (see depiction of this screen in 

Figure V below). The complaint alleged that, by entering their mobile phone numbers, consumers unknowingly authorized a $9.99 per month subscription service 

providing monthly horoscopes.128 Consumers were not provided clear disclosures regarding the actual offer of the subscription service or its relevant terms and conditions unless consumers scrolled down.129

FIGURE V: WEBSITE DRAWING CONSUMERS INTO PSMS CAMPAIGN 

In this case, the Texas Attorney General also alleged that content providers lured 

unknowing consumers to subscribe for deceptive PSMS campaigns through the use 

of website addresses that contained common typos and misspellings of the addresses 


730FIG4.eps 730FIG5.eps
25 

130 Id. at 18–22. 131See, e.g., Commentary of Mike Altschul, General Counsel, CTIA—The Wireless Association, 

Federal Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013) (stating that 

the negative option, where companies would instruct the consumer to reply ‘‘stop’’ or be charged, 

in the double opt-in process, which was utilized by many of the subjects in law enforcement proceedings, was ‘‘not compliant with the industry best practices’’ and use of this negative option 

was ‘‘not playing by the rules’’). See also Commentary of John Bruner, Chief Operating Officer, 

Aegis Mobile, Federal Trade Commission, Mobile Cramming, An FTC Roundtable (May 8, 2013) 

(stating, ‘‘[W]hat we see in the market is not a violation of the double opt-in where it’s being 

skipped necessarily. What we usually see is that consumers are either, through stacked marketing or deceptive advertising, double opting in and not realizing that they had purchased 

something. And, so, you know, the process, the physical process itself seems to be a very sound 

process for purchase. It’s more the method leading up to getting a consumer to perform that 

function.’’). 132See Section IV.B.1 for discussion of industry and consumer advocate views on the significance of refund rates. 133Mobile Messenger Subpoena Response to Chairman John D. Rockefeller IV (Mar. 31, 2013), 

(Apr. 21, 2014), (Apr. 22, 2014). Because documents produced to the Committee concerned a 

small number of vendors, findings of this review provide a sample rather than a comprehensive 

review of carrier practices, and a review of communications relating to other vendors would be 

necessary to draw broad conclusions about an individual carrier’s practices generally. 134Letter from Assistant General Counsel of Verizon Wireless, to Senate Commerce Committee Majority Counsel, at 8 (July 12, 2013). 135 E-mail from Mobile Messenger Sales Employee to Mobile Messenger Account Manager 

(May 30, 2013) (with subject line: ‘‘05/29/2013 Refund Report for AT&T/Sprint/T-Mobile/VZW 

(Anacapa)’’) (AG–MM–COMM–043461–043464). 136 Id. 137Letter from Executive Vice President, AT&T, to Chairman John D. Rockefeller IV, at 4 

(July 2, 2013). 

of legitimate websites. These websites would encourage consumers to share personal 

information including their phone numbers in exchange for a promised gift card.130

Industry representatives have underscored that wireless cramming enforcement 

cases have involved conduct that circumvents consent mechanisms, and that generally the double-opt in mechanism was sound.131 However, conduct described in the 

above cases allegedly continued for time periods as long as several years, indicating 

substantial weaknesses in the wireless industry’s ability to root out abuses of consumer authorization requirements. 

2. Tolerance for High Consumer Refund Rates Raises Questions about Carrier 

Commitment to Preventing and Addressing Cramming 

All four major carriers cited consumer refund thresholds as a tool for spotting potential vendor misconduct. However, the thresholds and response actions triggered 

by breach of these thresholds varied widely in the policies carriers described to the 

Committee.132 Documents produced to the Committee by billing aggregator Mobile 

Messenger regarding a subset of its vendors provided a further window into the role 

that refund threshold policies played in the industry’s oversight of the PSMS billing 

system.133 Review of these documents revealed that carriers saw extremely high refund rates and high monthly refund totals for some vendors and were not consistent 

in how they followed up on red flags concerning vendor misconduct. 

a. Carrier Policies on Refund Thresholds 

Verizon Wireless, AT&T, Sprint, and T-Mobile established different refund threshold levels for triggering additional vendor review, and their policies also varied regarding specific prescribed follow-up steps. For example, Verizon Wireless’s policy 

provided that if the refund rate for any one program in any month is between 5 

percent and 7.99 percent, all PSMS campaigns managed by that vendor would be 

suspended, and if the refund rate exceeded 8 percent, all PSMS campaigns of the 

vendor would be terminated.134 Billing aggregator documents indicate that the policy applied to shortcodes on Verizon’s network was that suspension for refunds between 5 percent and 7.99 percent meant a bar on acquiring new subscribers for a 

period of 90 days.135 The policy applicable once refunds exceeded 8 percent involved 

both a bar on new subscribers and a requirement that existing subscribers be 

unsubscribed for shortcodes with subscriptions that brought in an average revenue 

of at least $5000 over the previous three months.136

AT&T, on the other hand, stated that it did not have a static threshold for refund 

rates but rather it adjusted the threshold ‘‘over time to account for changes in the 

overall refund rate as observed.’’ 137 The company further stated it had a general 

disciplinary policy that could involve ‘‘suspending or de-provisioning the short code, 

and/or terminating the content provider’’ from the carrier’s network, but these steps 

26 

138 Id. 139 E-mail from Mobile Messenger Sales Employee to Mobile Messenger Account Manager 

(May 30, 2013) (with subject line: ‘‘05/29/2013 Refund Report for AT&T/Sprint/T-Mobile/VZW 

(Anacapa)’’) (AG–MM–COMM–043461–043464). 140Letter from Vice President, Government Affairs, Sprint Nextel, to Chairman John D. 

Rockefeller IV, at 5 (June 28, 2013). 141 E-mail from Mobile Messenger Sales Employee to Mobile Messenger Account Manager 

(May 30, 2013) (with subject line: ‘‘05/29/2013 Refund Report for AT&T/Sprint/T-Mobile/VZW 

(Anacapa)’’) (AG–MM–COMM–043461–043464). 142Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John 

D. Rockefeller IV, at 5 (June 28, 2013). 143 E-mail from Mobile Messenger Sales Employee to Mobile Messenger Account Manager 

(May 30, 2013) (with subject line: ‘‘05/29/2013 Refund Report for AT&T/Sprint/T-Mobile/VZW 

(Anacapa)’’) (AG–MM–COMM–043461–043464). 144 E-mail from Mobile Messenger Account Manager to Vendor Employee (Aug. 4, 2011) (with 

subject line: ‘‘FW: Client Alert—Carrier Alert: T-Mobile—Modifications to Their Refund Performance Improvement Plan’’) (AG–MM–COMM–016777–016779). 145 Id. 146 Briefing by VISA Representatives to Senate Commerce Committee Majority Staff (July 10, 

2014). 147See, e.g., Letter from Verizon Wireless Director to Mobile Messenger Compliance & Consumer Protection Employee (Oct. 20, 2011) (AG–MM–COMM–030220–22) (describing that Ontario Corp. had ‘‘repeatedly violated the requirements applicable to premium messaging campaigns’’ and ‘‘given the repeated and serious nature of the violations, Verizon Wireless ha[d] decided that all premium messaging campaigns managed by the content provider must be terminated’’); Spreadsheet created by Mobile Messenger listing status on several shortcodes of Sprint 

were not tied to specific threshold violations.138 Billing aggregator documents indicate that as of May 2013, the policy applied to shortcodes on AT&T’s network was 

to ‘‘enforce a 30-day suspension on any shortcode with a combination of a failed 

audit and a refund rate of 18 percent.’’ 139

Sprint reported that its policy provided for a ‘‘combination of metrics’’ including 

refund rates to assess noncompliance, and was penalizing with ‘‘lower revenue 

share’’ those aggregators that work with vendors demonstrating noncompliance or 

a refund rate greater than 10 percent.140 According to billing aggregator documents 

from May 2013, the policy applied to shortcodes on Sprint’s network was that a refund rate between 0 percent and 7 percent meant incentives and bonuses might 

apply; refunds between 7.01 percent and 12 percent merited a ‘‘normal payout;’’ and 

refunds greater than 12.01 percent meant Sprint would apply a ‘‘25 percent penalty 

on the average monthly retail revenue . . . for the three-month period and risk of 

code termination.’’ 141

Finally, T-Mobile stated that its refund threshold was 15 percent, at which point 

aggregator partners and vendors would be ‘‘penalized financially in accordance with 

the terms of the aggregator’s contract.’’ 142 Additional detail provided by billing 

aggregator documents indicates that the policy applied to shortcodes on T-Mobile’s 

network was that T-Mobile would charge a vendor $10 for each refund/customer 

care call after refund rate surpassed 15 percent;143 in addition, T-Mobile would 

apply a multi-step ‘‘Refund Performance Improvement Plan’’ (PIP) if a vendor’s refund rate exceeded 15 percent and involved at least $10,000 in ‘‘excessive refund 

fees.’’ 

The documents indicate that the PIP program involved placing the vendor on a 

‘‘watch list’’ for 12 months for remediation steps before T-Mobile would terminate 

the campaign.144 Once on the watch list, the vendor had three months to address 

the high refund rate or else in month four, new subscribers would be suspended for 

a one-month period. The vendor could resume new subscriptions in month five after 

this suspension, and had three additional months to address the refund rate. If, 

after month seven, the vendor still qualified for the ‘‘watch list,’’ the PIP program 

applied a two-month suspension of new subscribers in months eight and nine. The 

vendor could resume new subscriptions in month 10, but the campaign at issue 

would be terminated after month 12 if the vendor still met PIP criteria.145

It is worth noting that even the lowest stated refund threshold rates of 5 percent7.99 percent that were set forth in policies carriers described to the Committee are 

substantially higher than the threshold used for chargebacks levels on consumer 

credit card bills as a trigger for follow-up with the merchant whose chargebacks are 

at issue. For example, under VISA’s chargeback policy, merchants will receive a notification and request for explanation if the ratio of transactions charged back to 

total transactions exceeds 1 percent, where the merchant has had over 100 transactions and 100 chargebacks in that month.146

Documents received by the Committee from Mobile Messenger included a number 

of examples demonstrating the follow up actions taken by carriers after adverse 

audit findings or other red flags regarding particular shortcodes.147 However, docuVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
27 

(last saved Aug. 10, 2011) (AG–MM–COMM–021051) (noting 5 terminated codes and several 

codes that were temporarily suspended); E-mail from AT&T Senior Account Manager to Mobile 

Messenger Employees (Jan. 14, 2013) (AG–MM–COMM–125203–4) (noting AT&T termination of 

all short codes associated with AVL marketing); E-mail from T-Mobile Compliance to Mobile 

Messenger Employees (Oct. 4, 2013) (AG–MM–COMM–143991) (noting 3 shortcodes that received 3 strikes under T-Mobile’s PIP policy and directing Mobile Messenger employees to ‘‘immediately terminate all billing and related services currently operating’’ and the short codes). 148 E-mail from WMC Global AT&T Account Manager to Mobile Messenger Employees 

(Oct. 15, 2013) (AG–MM–COMM–057077–057080). This document is attached at Exhibit B. 149 E-mail from AT&T Mobility Marketing Manager to Mobile Messenger Employees (Oct. 16, 

2013) (AG–MM–COMM–056884–056885). 150 Id. 151 Id. 152 E-mail from Mobile Messenger Compliance & Analytics to NeoImage Employees (July 5, 2011) (AG–MM–COMM–112226–112227) (the 11 shortcode refunds totaled $457,252.29). A copy 

of this e-mail is attached at Exhibit C. As indicated by this e-mail and other Mobile Messenger 

documents, NeoImage personnel had e-mail addresses at ‘‘mundomedia.com.’’ See also Mobile 

Messenger Spreadsheet Response to Subpoena Item 2a and 2c (AG–MM–COMM–001128) (Apr. 

21, 2014) (listing company directors with e-mail addresses, including NeoImage personnel with 

mundomedia.com addresses). 153 E-mail from Mobile Messenger Account Management Employee to NeoImage Employees 

(Oct. 9, 2012) (AG–MM–COMM–585462–585463) (the 11 shortcode refunds totaled $594,479). 

This e-mail is attached at Exhibit C. 154See, e.g., E-mail notification from Mobile Messenger Compliance & Analytics to NeoImage 

Employees (Oct. 4, 2011) (AG–MM–COMM–024918–024919) (noting that 8 of their shortcodes 

violated Sprint’s threshold, with the highest rate at 28.79 percent and the refunds for all 8 totaling over $600,000 for the three-month period); E-mail from Mobile Messenger Compliance & 

Analytics to NeoImage Employees (June 7, 2011) (AG–MM–COMM–099369) (indicating that 6 

shortcodes had refund rates exceeding Verizon’s thresholds in May, with the highest rate reContinued 

ments also indicated there were instances where carriers were lax in overseeing or 

enforcing their own stated policies. This issue is illustrated in an e-mail chain between AT&T and Mobile Messenger in October 2013 when AT&T sent Mobile Messenger a notice of termination for content provider Anacapa, a client of Mobile Messenger, due to ‘‘excessive CTIA Sev 1 [severity 1] audit failures.’’ 148

In the course of the e-mail chain, an AT&T representative gives more explanation 

for the termination. He begins by noting that when Anacapa requested access to 

AT&T’s billing platform in November 2012, Anacapa ‘‘did not pass our internal vetting process, . . . and we rejected them from running PSMS campaigns.’’ 149 However, AT&T nonetheless let one of the Anacapa shortcode campaigns have access to 

the AT&T billing platform, as in fact AT&T had ‘‘failed to reject’’ that shortcode. 

Anacapa was able to bill consumers on AT&T’s platform well into 2013, despite two 

AT&T suspensions of the Anacapa shortcode in the first part of 2013. Further, in 

May 2013 AT&T ‘‘drafted’’ a termination notice but again ‘‘failed to deliver’’ it.150

The October 2013 e-mail summary also noted that AT&T had found that Anacapa 

had received twenty severity 1—‘‘serious consumer harm’’—audit findings across 

several of its shortcodes from October 2012 to October 2013, including two Severity 

1 findings on the shortcode that was apparently erroneously allowed to use the 

AT&T network.151

b. Some Vendors Had Exceedingly High Refund Rates that at Times Spanned 

Several Months 

Documents reviewed by the Committee regarding a subset of vendors who contracted with billing aggregator Mobile Messenger indicate that some vendors experienced high monthly refund rates that in some cases topped 50 percent of monthly 

revenues and amounted to hundreds of thousands of dollars in refunds in a single 

month. For example, in a July 2011 Mobile Messenger e-mail to vendor representatives, Mobile Messenger employees reported violations of T-Mobile thresholds on 11 

different shortcodes for the preceding month, including one shortcode with a 50.5 

percent refund rate and $55,974 in refunds for the month, and others with 43.7 percent, 38.4 percent, and 36.1 percent rates. The refunds for the 11 listed shortcodes 

totaled over $450,000 that month.152

A similar Mobile Messenger e-mail notification to vendor representatives in October 2012 notes that 11 shortcodes had exceeded AT&T’s 18 percent refund threshold 

in the preceding month, including one shortcode with a refund ratio of 56.8 percent 

and $124,759 in refunds for the month, another with a ratio of 31.4 percent and 

$100,949 in refunds. The 11 shortcode refunds that month together totaled nearly 

$600,000.153 Documents indicate that other carriers also had high refund rates and 

high refund totals.154

28 

ported as 22.23 percent and refunds for all 6 totaling over $340,000). These e-mails are attached 

at Exhibit C. 155 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Mar. 9, 

2012) (AG–MM–COMM–590211–590212). 156 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Apr. 2, 

2012) (AG–MM–COMM–584986–584987). 157 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (June 5, 

2012) (AG–MM–COMM–568009–568010). The Mobile Messenger document production did not 

appear to include an AT&T excess refund rate notification for the month of April 2012. 158 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Jan. 11, 

2011) (AG–MM–COMM–060591). 159 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Mar. 3, 

2011) (AG–MM–COMM–146312–146313). 160 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Apr. 4, 

2011) (AG–MM–COMM–220607–220608). 161Letter from Verizon Wireless Director to Mobile Messenger Compliance & Consumer Protection Employee (Oct. 20, 2011) (AG–MM–COMM–032198–032199) (listing shortcodes 91097, 

33999, 72449, 40684, 25692, 89147, 88922, 21500, 86358, 56255, 53405, and 62131). 162 E-mail from Mobile Messenger Compliance & Analytics to NeoImage Employees, Subject: 

Notice: AT&T Refund Ratio Exceeded (Mar. 2, 2011) (AG–MM–COMM–145222–145223) (showing shortcode 89147 February refund rate was 45.52 percent); E-mail from Mobile Messenger 

Compliance & Analytics to NeoImage Employees, Subject: Notice: AT&T Refund Ratio Exceeded 

(Apr. 4, 2011) (AG–MM–COMM–220637–220638) (showing shortcode 91097 March refund rate 

was 50.65 percent); E-mail from Mobile Messenger Compliance & Analytics to NeoImage Employees, Subject: Notice: Sprint Refund Ratio Exceeded (Aug. 1, 2011) (AG–MM–COMM–012239) 

(noting shortcode 53405 April 2011-June 2011 refund ratio was 31.67 percent and 56255 was 

15.95 percent); E-mail from Mobile Messenger Compliance & Analytics to NeoImage Employees, 

Subject: Notice: Verizon Refund Ratio Exceeded—June 2011 (July 5, 2011) (AG–MM–COMM– 

112223–112224) (noting June refund rate for 56255 was 10.74 percent, 33999 was 15.52 percent, 

86358 was 11.8 percent, and 88922 was 11.15 percent); E-mail from Mobile Messenger Compliance & Analytics to NeoImage Employees, Subject: Notice: T-Mobile Refund Ratio Exceeded 

(Sept. 2, 2011) (AG–MM–COMM–290976–290977) (noting shortcode 33999 August refund rate 

was 19.05 percent). 163Letter from Verizon Wireless Director to Mobile Messenger Compliance & Consumer Protection Employee (Oct. 20, 2011) (AG–MM–COMM–032198–032199). 164 Id. 165See, e.g., Mobile Messenger, Settlement Statement for NeoImage December 1, 2011–December 31, 2011, at 10 (Jan. 2012) (showing a $11.25 balance due for Verizon Wireless); Mobile Messenger, Settlement Statement for NeoImage January 1, 2012–January 31, 2012, at 10 (Feb. 2012) 

(showing a $10.75 due for Verizon Wireless); Mobile Messenger, Settlement Statement for 

NeoImage March 1, 2012–March 31, 2012, at 7 (Apr. 2012) (Verizon does not appear on the 

statement). 

Documents also show that refund rates on the same shortcode at times exceeded 

carrier thresholds for a number of months at a time. For example, Mobile Messenger sent e-mails to vendor representatives notifying them that refunds on 

shortcode 67145 exceeded AT&T’s threshold in February 2012 (with a 33.9 percent 

refund rate);155 March 2012 (40.6 percent);156 and May 2012 (18.1 percent).157 Mobile Messenger sent similar notification e-mails that refunds on shortcode 85820 exceeded T-Mobile’s threshold in December 2010 (20.06 percent);158 February 2011 

(34.13 percent);159 and March 2011 (31.13 percent).160

c. Case Study on Vendor with High Refund Rates: Variation in Carrier Response 

Underscores Broad Latitude Afforded by the Self-Regulatory System 

Documents indicate that different carriers employed different practices regarding 

follow-up on red flags such as high refund rates and adverse audit findings associated with shortcodes. For example, in October 2011, Verizon wrote to Mobile Messenger regarding several shortcodes used by Mobile Messenger client NeoImage.161

This group of shortcodes also included certain shortcodes that appeared on high refund rate notices sent by Mobile Messenger to vendor employees concerning all four 

major carriers in 2011.162

Verizon’s October 2011 letter requested that, because of ‘‘the repeated and serious 

nature’’ of content provider violations of requirements concerning premium messaging campaigns, ‘‘all of the premium messaging campaigns managed by the content provider must be terminated,’’ and Verizon Wireless ‘‘will not consider reactivation of the shortcodes, or any new campaigns from the content provider.’’ 163 The 

Verizon letter required the content provider to block all new subscriptions to the 

code and opt-out enrolled customers on a rolling basis ‘‘at the time their subscriptions otherwise would be renewed.’’ 164

Consistent with this letter, billing statements for Mobile Messenger client 

NeoImage indicate that Verizon ceased allowing NeoImage shortcodes to bill on its 

platform starting in late 2011.165 However, the billing statements also indicate that 

29 

166Mobile Messenger, Settlement Statement for NeoImage Jan. 1, 2012–Jan. 31, 2012 (Feb. 

2012) (AG–MM–042772–042781); Mobile Messenger, Settlement Statement for NeoImage Mar. 1, 

2012–Mar. 31, 2012 (Apr. 2012) (AG–MM–585109–585115); Mobile Messenger, Settlement Statement for NeoImage Apr. 1, 2012–Apr. 31, 2012 (May. 2012) (AG–MM–562235–562241); Mobile 

Messenger, Settlement Statement for NeoImage May 1, 2012–May 31, 2012 (June. 2012) (AG– 

MM–568311–568318); Mobile Messenger, Settlement Statement for NeoImage June 1, 2012–June 

31, 2012 (July. 2012) (AG–MM–563935–563941); Mobile Messenger, Settlement Statement for 

NeoImage July 1, 2012–Aug. 31, 2012 (Sept. 2012) (AG–MM–588084–588098); Mobile Messenger, Settlement Statement for NeoImage Sept. 1, 2012–Sept. 31, 2012 (Oct. 2012) (AG–MM– 

192132–102137); Mobile Messenger, Settlement Statement for NeoImage Dec. 1, 2012–Dec. 31, 

2012 (Jan. 2013) (AG–MM–591730–591735) (Mobile Messenger’s production to Committee staff 

was missing settlement statements for several months for 2012 so NeoImage’s total charge of 

$10 million is a conservative total). 167Mobile Messenger, Settlement Statement for NeoImage Jan. 1, 2012–Jan. 31, 2012, at 3, 

5, 7 (Feb. 2012). 168Mobile Messenger, Settlement Statement for NeoImage Mar. 1, 2012–Mar. 31, 2012, at 2, 

3, 4 (Apr. 2012). 169 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Feb. 2, 

2012) (with subject line: Notice: T-Mobile Refund Ratio Exceeded) (AG–MM–COMM–040764– 

040765). 170 E-mail from Mobile Messenger Compliance Analytics to NeoImage Employees (Feb. 2, 

2012) (with subject line: Notice: AT&T Refund Ratio Exceeded) (AG–MM–COMM–040831– 

040832). 171Letter from Vice President—Government Affairs, Sprint Nextel, to Chairman John D. 

Rockefeller IV, at 7 (July 11, 2012). 172Letter from Executive Vice President, Federal Relations, AT&T, to Chairman John D. 

Rockefeller IV, at 7 (July 2, 2013). 173Letter from Vice President, Federal Legislative Affairs, T-Mobile USA, to Chairman John 

D. Rockefeller IV, at 3 (June 28, 2013). 174Mobile Messenger Narrative Response to Chairman John D. Rockefeller IV (May 24, 2013) 

(MM Confidential 000004, 000050). 

the three other major carriers and many others continued to allow NeoImage to 

charge their customers through March 2013, the last date of statements provided 

to the Committee for NeoImage. In 2012, NeoImage charged a total of over $10 million to consumers’ wireless bills across different carrier platforms.166

The billing statements produced by Mobile Messenger indicate that a number of 

carriers also continued to allow NeoImage to charge on their platforms for activity 

on several of the specific shortcodes that Verizon terminated in October 2011. For 

example, the statement for January 2012 shows that, with respect to campaigns on 

shortcode 89147, $107,000 in charges were placed with AT&T, $33,800 with T-Mobile, and $21,700 with Sprint.167 With respect to the same shortcode, the March 

2012 billing statement showed $81,100 in charges placed with AT&T, $20,600 with 

T-Mobile, and $16,300 with Sprint.168 Documents also indicate that in January 2012 

refunds on this same shortcode exceeded refund thresholds for both T-Mobile and 

AT&T, with a 15.7 percent refund ratio for T-Mobile,169 and a 19.01 percent refund 

rate for AT&T.170

This example regarding NeoImage shortcodes illustrates that carriers had wide 

discretion in responding to indicia of vendor problems such as high refund rates. 

3. Carriers Placed Questionable Reliance on Billing Aggregators as Oversight 

Partners 

In submissions to the Committee in 2012 and 2013, a number of major carriers 

emphasized the important and reliable role that billing aggregators played in ensuring that vendors comply with consumer authorization requirements and other industry standards. Sprint noted that in its experience, the company’s ‘‘reward/penalty 

system influences aggregators to work only with reputable content providers and to 

ferret out non-compliant PSMS campaigns.’’ 171 AT&T assured the Committee that 

‘‘in November 2012 the double opt-in procedures of all then existing Billing 

Aggregators were reviewed and certified’’ as compliant with the company’s consent 

management program.172 And T-Mobile asserted last June that ‘‘we are aware of no 

information that aggregator partners have played any role in cramming or otherwise facilitating improper third-party billing.’’ 173

Major billing aggregators contacted in the Committee’s inquiry also attested to 

their role in the industry’s compliance system. For example, Mobile Messenger, one 

of the leading aggregators, underscored that it is ‘‘committed to consumer protection,’’ with a ‘‘dedicated compliance team’’ to review and test vendor campaigns,174

and that the company has spent ‘‘considerable resources’’ to ensure that the subVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
30 

175Mobile Messenger Narrative Response to Chairman John D. Rockefeller IV (May 24, 2013) 

(MM Confidential 000050). 176Plaintiff’s Original Petition, Texas v. Mobile Messenger U.S. Inc., et al., Tex. D. Ct., Travis 

County (Nov. 6, 2013). This case remains open at the time of this report. 177 Id. 178See, e.g., E-mail from Mobile Messenger Account Manager to NeoImages Employees (Aug. 

24, 2011) (AG–MM–COMM–022790–022795) and E-mail from Mobile Messenger Sales Employee 

to Mobile Messenger Account Manager (May 30, 2013) (AG–MM–COMM–043461–043464) (cataloguing refund rates across major carriers for different vendors); Letter from Verizon Wireless 

Director to Mobile Messenger Compliance & Consumer Protection Employee, Re: Urgent Resolution of Violations (Oct. 20, 2011). 179See discussion supra at Section IV.D.2.c; see also Assignment of Rights and Amendment 

Among Neo Images, Inc., and Subscriber Management Services, LLC and Mobile Messenger US, 

Inc. (signed March 19, 2012) (AG–MM–COMM 001964–2031). 180Some carriers still support PSMS billing for charitable donations and political contributions. Briefing by Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 

2014); Briefing by Sprint Nextel to Senate Commerce Committee Majority Staff (July 16, 2014); 

Briefing by T-Mobile USA to Senate Commerce Majority Staff (July 17, 2014). 181 Comments of CTIA—The Wireless Association, Federal Communications Commission, CC 

Docket No. 98–170, at 4 (Nov. 18, 2013). 182 Id. at 3 (citing Study: Popularity of Direct Carrier Billing on the Rise, Mobile Payments 

Today (Sept. 4, 2012). 183 Id. at 4–5. 184 Briefing by Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 

2014). 

scription and billing process and the company’s content provider and advertiser clients abide by the ‘‘robust’’ industry guidelines.175

However, the allegations in the November 2013 action by the Texas Attorney General 176 raise serious questions about the effectiveness of aggregators as partners to 

carriers in combatting cramming as well as how closely carriers were scrutinizing 

aggregator practices. As noted above, in this action, the Texas AG alleged that Mobile Messenger was part of a ‘‘deceptive scheme’’ to trick consumers into signing up 

for unwanted ‘‘services’’ including ringtones, weekly text messages containing horoscopes and celebrity gossip, and coupons. According to the complaint, Mobile Messenger actively assisted content providers with circumventing consumer protections 

that carriers implemented, including the double opt-in and thresholds relating to 

consumer complaints and audit reports.177

In addition, Mobile Messenger documents reviewed by Committee staff about a 

subset of Mobile Messenger vendors underscore that the company was in a position 

to see red flags about worrisome shortcodes and vendors from both the industrywide audits as well as from reports of individual carrier refund rates and vendor 

penalties.178 And yet, in the case study discussed above, after one of the major carriers in October 2011 cut off all business with a vendor that had raised non-compliance concerns and been the subject of high refund rates across major carriers, Mobile Messenger continued doing business with the same vendor through 2013.179

Such actions raise questions about whether Mobile Messenger served as a rigorous 

oversight partner with carriers in weeding out vendors with records of non-compliance with industry standards. 

V. Emerging Third-party Wireless Billing Technologies and Potential 

Consumer Protection Issues 

Though commercial PSMS billing has now virtually ended among the major carriers,180 it is still possible for consumers to buy digital content online and bill those 

purchases to their wireless phone accounts. This is generally called the ‘‘direct carrier billing’’ payment option. Direct carrier billing is now offered by a variety of U.S. 

companies for music, applications, games, movies, and television shows, from retailers such as Sony, Facebook, Skype, and Rhapsody.181

Direct carrier billing for social media and gaming purchases increased 30 percent 

year-over-year from 2009–2012.182 This option could become even more widely available in the future, for goods and services outside of digital content. According to 

CTIA, additional entities ‘‘currently using or planning to adopt’’ third-party billing 

include ‘‘major news organizations, companies offering video streaming, gaming 

companies, parking services, and even pizza delivery services.’’ 183

In discussions with Committee majority staff, carriers have differentiated between 

two methods of direct carrier billing: the ‘‘storefront’’ approach and the ‘‘billing 

aggregator’’ approach. In the ‘‘storefront’’ approach, consumers are given the option 

of billing their wireless account when making a purchase from a digital distribution 

platform that offers applications, music, movies, and games created by any number 

of vendors.184 Under this billing model, the carriers rely on the company offering 

the digital distribution platform to vet the vendors who create the digital content 

31 

185 Briefing by Google to Senate Commerce Committee Majority Staff (July 11, 2014); Briefing 

by Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 2014); Briefing by 

Sprint Nextel to Senate Commerce Committee Majority Staff (July 16, 2014); Briefing by T-Mobile USA to Senate Commerce Committee Majority Staff (July 17, 2014). 186 Briefing by Google to Senate Commerce Committee Majority Staff (July 11, 2014). 187 Briefing by Boku to Senate Commerce Committee Majority Staff (June 23, 2014); Briefing 

by BilltoMobile to Senate Commerce Committee Majority Staff (Feb. 24, 2014); Briefing by 

Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 2014); Briefing by 

Sprint Nextel to Senate Commerce Committee Majority Staff (July 16, 2014); Briefing by T-Mobile USA to Senate Commerce Committee Majority Staff (July 17, 2014). 188 Examples include, among others, Boku, a San Francisco-based company, and BilltoMobile, 

a San Jose-based company, both of which contract with major U.S. wireless carriers. See 

BilltoMobile, Home Page (online at http://www.billtomobile.com/); Briefing by BilltoMobile to 

Senate Commerce Committee Majority Staff (Feb. 24, 2014); Boku, Home Page (online at http:// 

www.boku.com/); Briefing by Boku to Senate Commerce Committee Majority Staff (June 23, 

2014). 189 Briefing by CTIA—The Wireless Association to Senate Commerce Committee Majority 

Staff (June 3, 2014); Briefing by Sprint Nextel to Senate Commerce Committee Majority Staff 

(July 16, 2014); Briefing by Verizon Wireless to Senate Commerce Committee Majority Staff 

(July 16, 2014); Briefing by T-Mobile USA to Senate Commerce Committee Majority Staff 

(July 17, 2014). 190 Briefing by Sprint Nextel to Senate Commerce Committee Majority Staff (July 16, 2014); 

Briefing by Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 2014). 191 Briefing by Boku to Senate Commerce Committee Majority Staff (June 23, 2014); Briefing 

by Federal Reserve Bank to Senate Commerce Committee Majority Staff (July 18, 2014). 192See n. 181, supra. 193 Briefing by Boku to Senate Commerce Committee Majority Staff (June 23, 2014); Briefing 

by Federal Reserve Bank to Senate Commerce Committee Majority Staff (July 18, 2014). 194 Briefing by Sprint Nextel to Senate Commerce Committee Majority Staff (July 16, 2014); 

Briefing by Verizon Wireless to Senate Commerce Committee Majority Staff (July 16, 2014); 

Briefing by T-Mobile USA to Senate Commerce Committee Majority Staff (July 17, 2014). 

offered in their store.185 One example of the ‘‘storefront’’ billing method is the 

Google Play store. Since 2011, consumers have been able to make purchases from 

the Google Play store and bill them to their wireless account.186

Outside of the storefront approach, direct carrier billing is also an option for a 

number of additional vendors who utilize billing aggregators in order to place the 

charges on consumers’ wireless accounts. In this model, both the carriers and 

aggregators vet each vendor before the vendor is permitted to bill consumers on 

their wireless accounts.187 A handful of these billing aggregators have emerged to 

act as middlemen between vendors and wireless carriers.188

With respect to direct carrier billing, to date there are no industry-wide best practices or central monitoring similar to what was in place for PSMS. Instead, oversight of direct carrier billing occurs at the individual carrier level.189 Policies described by several major carriers in briefings to Committee majority staff include 

the following features, among others: 

• Clear disclosures by the content provider to the consumer regarding the terms 

of purchase; 

• Clear designation of third-party vendor purchases on consumers’ phone bills; 

and 

• Carrier monitoring of refund rates and consumer complaints. 

Some carriers also said they place caps on third-party purchases from $25 to $80 

per month, and for consumers that have more than one wireless line on their plan 

these caps apply per line.190

As of now, direct carrier billing is primarily an option for digital content and only 

represents a small fraction of purchases made via computers and smartphones.191

However, as noted by the CTIA in comments to the FCC, U.S. companies are increasingly offering direct carrier billing for purchases.192 Direct carrier billing is a 

more widely utilized form of purchase internationally 193 and with the continued 

growth in the unbanked and underbanked population in the United States, it is conceivable that direct carrier billing could become a more widely utilized payment option in the future. 

Currently, major carriers assert that they are seeing minimal indicia of consumer 

complaints involving direct carrier billing, including very few consumer complaints 

and refund rates around 1 percent–1.5 percent.194 However, in light of the extensive 

evidence of cramming that has occurred to date in both the landline and wireless 

contexts, and the potential that a growing number of consumers may use this payment option in the future, this staff report recommends that industry and policymakers: 

32 

• Vigilantly monitor evolving third-party billing practices to make sure that bad 

actors do not find ways to penetrate barriers to cramming on these new systems; and 

• Evaluate consumer protection gaps that occurred in the landline and PSMS contexts to establish consistent policies going forward that will provide consumers 

with appropriate transparency in the third-party billing process and a clear avenue of recourse where unauthorized charges occur. 

33 

EXHIBIT A 


730EXHA1.eps 730EXHA2.eps
34 


730EXHA3.eps 730EXHA4.eps
35 


730EXHA5.eps 730EXHA6.eps
36 


730EXHA7.eps 730EXHA8.eps
37 


730EXHA9.eps 730EXHA10.eps
38 


730EXHA11.eps 730EXHA12.eps
39 


730EXHA13.eps 730EXHA14.eps
40 


730EXHA15.eps 730EXHA16.eps
41 


730EXHA17.eps 730EXHA18.eps
42 


730EXHA19.eps
43 

EXUIBIT B 


730EXHB1.eps
44 


730EXHB2.eps
45 


730EXHB3.eps
46 


730EXHB4.eps
47 

EXHIBIT C 


730EXHC1.eps
48 


730EXHC2.eps
49 


730EXHC3.eps
50 


730EXHC4.eps
51 


730EXHC5.eps
52 


730EXHC6.eps
53 


730EXHC7.eps
54 


730EXHC8.eps
55 

Senator BLUMENTHAL. Both this report and the Committee’s earlier report on landline cramming make it abundantly clear that 

telephone carriers were not doing enough to protect their consumers from fraud. The key question is whether they are doing 

enough now. The carriers gave third-party access to their customers’ bills, collected their cut, and then failed to make sure that 

the third parties were acting honestly. The massive fraud we have 

documented in these reports happened right under the telephone 

companies’ noses. In the cases of both wireline and wireless cramming, the telephone companies had plenty of notice that crammers 

were placing fraudulent charges on their customers’ bills. Thousands of consumers complained to both the companies and to State 

and Federal law enforcement agencies about this problem. And I 

know I received a lot of those complaints. I am sure that the FTC 

and Attorney General Sorrell and my colleagues did as well. 

The Federal Trade Commission and Attorneys General brought 

case after case, enforcement action after enforcement action against 

crammers. When confronted with evidence of widespread fraud in 

their billing systems, the telephone carriers promised to tighten 

their rules and do a better job of protecting customers. But then 

the crammers seemed to go back to business as usual. 

The telephone companies acted decisively only after the evidence 

of fraud became overwhelming and undeniable. In 2011, the major 

wireline carriers agreed to end third-party billing, and in November 2013, less than a year ago, the four major wireless carriers, 

AT&T, Sprint, T-Mobile, and Verizon, agreed to end third-party 

PSMS billing. 

Do not get me wrong. I do not think the telephone companies 

were happy or content that crammers were defrauding their customers. But they almost certainly welcomed the revenue that thirdparty billing was generating for them. The committee staff report 

released today found that the wireless carriers received 30 to 40 

percent—30 to 40 percent of each charged that third parties placed 

on their customers’ bill through PSMS. For every $9.99 monthly 

charge placed on a bill, the carriers kept $3 to $4. Their financial 

incentive to allow third-party billing seems to conflict with their responsibility to protect their customers from fraud. They may not 

have been happy about it, but the fraud sure benefited them. 

While the telephone carriers have discontinued certain types of 

third-party billing, their systems are still open for business. As we 

will hear today, the carriers are experimenting with new direct carrier billing techniques. I hope we will not be sitting here in several 

months or several years and discussing how they too failed to protect consumers from fraud. The time for effective action is now. The 

notice has been abundant that consumers are suffering, and I hope 

that these new measures will be truly effective. 

I am now happy to yield to the Ranking Member, Senator Thune. 

STATEMENT OF HON. JOHN THUNE, 

U.S. SENATOR FROM SOUTH DAKOTA 

Senator THUNE. Well, thank you, Mr. Chairman, for holding this 

hearing to discuss the unauthorized charges on mobile phone bills 

and the findings of Chairman Rockefeller’s wireless cramming inVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00059 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
56 

vestigation. I commend the Chairman and staff for shining a light 

on these abuses. 

I understand, Senator Blumenthal, that you are graciously filling 

in for him today and appreciate that. 

Mobile payments are a growing way for consumers to pay for 

goods and services. Third-party billing is one way that consumers 

can take advantage of new technologies and customer conveniences. There are legitimate uses for this manner of billing. For instance, consumers can provide money to charities, support a political cause, or download the newest song or app and bill the purchase directly to their mobile telephone bill. Yet, despite the industry efforts to implement protections and state and Federal regulations in place to prevent cramming, unscrupulous actors have been 

able to game the system to take advantage of third-party billing. 

Of course, cramming is not a new phenomenon. In the late 1990s 

Congress devoted a lot of time and attention to the issue of cramming on landline phone bills. This committee held a hearing on 

that issue again in 2011, highlighting the Chairman’s investigation 

into cramming on landline phone bills and demonstrating the persistence of the problem. 

Some states have enacted laws to limit third-party billing in an 

effort to prevent cramming on landline phones, and most of the 

major phone carriers have ended most types of third-party billing 

on landline phone bills. More recently, however, concerns have 

been raised about fraud on wireless phone bills, the topic of today’s 

hearing and the chairman’s more recent investigation. 

There are three key parties involved in placing third-party 

charges on consumers’ wireless phone bills: the third-party content 

provider, the billing aggregator, and the phone carrier. From what 

I have seen, there are some content providers and even some 

aggregators that appear to be bad actors, but all of the parties involved could do more to protect consumers from cramming. While 

cramming has been identified as a problem, it has been challenging 

to accurately measure how many consumers have been affected by 

cramming. 

I appreciate that the wireless carriers and their association, 

CTIA, have taken a number of actions to prevent cramming of 

third-party charges on wireless phone bills. Significantly, this past 

November, the carriers decided to end most so-called premium 

SMS programs, which billed customers for text messages related to 

topics like daily horoscopes and sports alerts. In addition, at least 

one carrier has recently decided to end browser-based direct carrier 

billing. These steps show the carriers treat this issue seriously, but 

we will be asking whether they should do more. 

At the same time, it is important to underscore the extraordinary 

innovation and economic dynamism in the wireless communications 

space. The owners of approximately 188 million smart phones in 

this country spend more time with their mobile devices each day 

than they do going online with a laptop or a PC. While we must 

strive to protect consumers from fraud, we must also make sure 

that we do so in a way that does not stifle innovation. 

I look forward to hearing from CTIA, who is here today representing the wireless carriers, to discuss how the industry is 

working to address these issues. I also look forward to hearing 

57 

from FTC Commissioner McSweeny, who is here for the first time 

since her confirmation; Mr. LeBlanc of the FCC; and Attorney General Sorrell. The FTC, FCC, and State Attorneys General play a 

key role in fighting cramming with their law enforcement efforts 

and by educating consumers about carrier billing. 

I also want to thank the South Dakota Public Utilities Commission and the South Dakota Attorney General, Marty Jackley, for 

their work in this area to better protect consumers. One recent government survey found that the Midwest is the most wireless connected region in the country, with 44 percent of Midwesterners living in cell phone-only homes. This underscores the importance to 

my constituents of addressing wireless cramming. 

This hearing presents a good opportunity to recognize the good 

that everyone at the witness table is already doing to combat cramming. Industry, Congress, Federal agencies, and State Attorneys 

General all need to continue to work together on this issue to ensure that consumers are informed and protected against bad actors. 

I want to thank our witnesses for appearing here today, and I 

look forward to your testimony. 

Thank you, Mr. Chairman. 

Senator BLUMENTHAL. Thank you very, very much, Senator 

Thune. 

I will introduce the witnesses, and then we will hear from you 

in this order. 

First of all, welcome to Commissioner McSweeny, your first appearance since your swearing in in April of this year. Prior to joining the Commission, Commissioner McSweeny served as Chief 

Council for Competition Policy and Intergovernmental Relations for 

the United States Department of Justice, Antitrust Division. She 

has a long and distinguished career in public service, serving as a 

Deputy Assistant to the President and Domestic Policy Advisor to 

the Vice President and a number of other positions in public service where she has significant experience in areas of competition 

and antitrust, as well as women’s rights, domestic violence, judicial 

nominations, immigration and civil rights. She is a graduate of 

Harvard University and Georgetown University Law School. 

Attorney General Sorrell has served in Vermont as the Attorney 

General there since—I am trying to remember—in June of—— 

Mr. SORRELL. 1997. 

Senator BLUMENTHAL.—1997. I knew it was about 13 years that 

we served together. And before that, he was a prosecutor and distinguished law enforcement officer. He received the National Association of Attorney General Kelly Wyman Award given annually to 

the outstanding Attorney General and served as president of that 

organization for a year between 2004 and 2005. He is a graduate 

of the University of Notre Dame, magna cum laude, and Cornell 

Law School. And I know he knows a lot about this subject because 

I have worked with him on it and appreciate your being with us 

today. 

Travis LeBlanc, who is the Acting Chief of the Enforcement Bureau of the Federal Communications Commission, is a graduate of 

Princeton University and the Yale Law School, among other institutions, and has served, before his present position, in the California Attorney General’s Office as Special Assistant Attorney GenVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00061 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
58 

eral in charge of the enforcement bureau—I am sorry—as Special 

Assistant Attorney General in charge of technology, high-tech 

crime, privacy, antitrust, and health care issues. And he also advised the California Attorney General on significant appellate and 

constitutional matters. 

Mr. Altschul, Michael Altschul, is Senior Vice President and General counsel of CTIA, The Wireless Association. He has served in 

that capacity since September of 1990, if I am not mistaken, and 

was a trial attorney in the Antitrust Division of the United States 

Department of Justice between 1980 and 1990. Before then, he was 

in private practice. He is a graduate of Colgate University and New 

York University Law School. 

We welcome you all. We thank you for all of your public service. 

All of you have been involved in public service. And if we can begin 

with you, Commissioner McSweeny. 

STATEMENT OF HON. TERRELL MCSWEENY, COMMISSIONER, 

FEDERAL TRADE COMMISSION 

Commissioner MCSWEENY. Thank you very much, Senator 

Blumenthal and Ranking Member Thune and Senator Johnson, for 

inviting me here today. I am Terrell McSweeny and I am the newest member of the Federal Trade Commission. 

I appreciate the opportunity to appear here today and also the 

leadership that this committee has shown on mobile cramming 

and, indeed, on cramming generally. 

I also want to thank the other witnesses for their perspectives 

and for the collaboration the Federal Trade Commission has received from the Federal Communications Commission and State 

Attorneys General in addressing this important consumer protection issue. 

For more than 15 years, the Commission has been working with 

Congress to stop fraudsters that place unauthorized charges on 

consumers’ telephone bills. The FTC began targeting landline 

cramming in the late 1990s and since then has brought more than 

30 cases resulting in hundreds of millions of dollars in judgments. 

As consumers have migrated to smart phones and mobile payment systems, we have turned our attention to the problem of unauthorized charges on mobile phone accounts. Mobile cramming 

scams can take a variety of forms. Sometimes consumers are 

tricked into subscribing for services by third-party merchants who 

use false pretenses to collect their telephone numbers, such as 

promises of free concert tickets or $1,000 gift cards. In other cases, 

consumers are targeted by deceptive ads. In one example, consumers were targeted with an ad for virus protection software for 

their phone and instead were subscribed to ring tones for $9.99 a 

month. 

Generally, these unauthorized subscriptions are automatically renewed and the charges for them are racked up month after month. 

Frequently consumers are unaware that they are being billed for 

third-party services because charges are often difficult to locate on 

phone bills, and it is rarely clear that they are unassociated with 

phone service. And many consumers who have prepaid accounts or 

auto-pay bills do not receive bills at all or may not routinely inspect them. 

59 

1While the views expressed in this statement represent the view of the Commission, my oral 

presentation and responses to questions are my own and do not necessarily reflect the view of 

the Commission or any Commissioner. 

Since the spring of 2013, the Federal Trade Commission has 

brought six enforcement actions aimed at combating these types of 

mobile cramming scams. We have obtained stipulated orders in 

three of these matters with judgments totaling more than $160 

million. 

Earlier this month, the Trade Commission announced our first 

case against a telecommunications company, T-Mobile. In that 

case, the FTC is alleging that T-Mobile deceptively described cramming charges on phone bills and unfairly continued to charge customers even after it became aware of telltale signs that charges 

were unauthorized. 

These enforcement actions reinforce that basic consumer protections apply in the mobile environment just as they do in the brickand-mortar world. 

Along with our law enforcement efforts, the Commission has engaged with industry and consumer advocates to develop recommendations to better protect consumers while enabling innovation and access to mobile payment systems. In a report issued this 

week, the Commission staff recommends that carrier and industry 

participants take the following additional steps to reduce fraud and 

improve reliability of mobile carrier billing. 

First, they should make it clear to customers and consumers that 

they can block all third-party charges on their accounts if they 

wish to. 

Second, they should ensure that advertising, marketing, and optin processes for third-party charges are not deceptive. 

Third, they should take action when refund requests, complaints, 

and other factors indicate a merchant is cramming unauthorized 

charges. 

Fourth, they should clearly delineate third-party charges on bills. 

And fifth, the industry should implement effective and consistent 

dispute resolution for consumers who wish to dispute charges or 

obtain refunds. 

As consumers increasingly turn to their mobile phones as payment mechanisms, it is critical that carriers and other industry 

participants proactively address mobile cramming. 

Unfortunately, crammers have been able to come up with creative and evolving ways to harm consumers. That is why the FTC 

remains committed to working with this committee and with Members of Congress and our State and Federal partners such as the 

State Attorneys General and the Federal Communications Commission to continue our efforts to shut down scammers as they appear. 

I am pleased to answer any questions. 

[The prepared statement of Commissioner McSweeny follows:] 

PREPARED STATEMENT OF THE FEDERAL TRADE COMMISSION

I. Introduction 

Chairman Rockefeller, Ranking Member Thune, and members of the Committee, 

my name is Terrell McSweeny, and I am a Commissioner at the Federal Trade Commission (‘‘FTC’’ or ‘‘Commission’’).1 I appreciate this opportunity to appear before 

60 

2The FTC has jurisdiction under the FTC Act over market participants engaged in third-party 

billing. See FTC v. Verity Int’l, Ltd., 443 F.3d 48, 59–60 (2d Cir. 2006); In re Detariffing of Billing and Collection Servs., 102 F.C.C.2d 1150¶¶ 30–34 (1986). 3To date, defendants have stipulated to final judgments, partially suspended based on inabil- ity to pay, totaling more than $160 million. See FTC v. Wise Media, LLC, No. 1:13–cv–1234– 

WSD (N.D. Ga. 2013); FTC v. Jesta Digital, LLC, No. 1:13–cv–01272 (D.D.C. 2103); FTC v. Tatto, Inc., No. 2:13–cv–08912–DSF–FFM (C.D. Cal. 2013). See also FTC v. Acquinity Interactive, LLC, No. 14–60166–CIV (S.D. Fla.) (amended complaint filed June 16, 2014); FTC v. MDK Media, Inc., No. 2:14–cv–05099–JFW–SH (C.D. Cal.) (complaint filed July 3, 2014). 4FTC v. T-Mobile USA, Inc., No. 2:14–cv–00967 (W.D. Wash. filed July 1, 2014). 5See Reply Comment of the Federal Trade Comm’n, Fed. Commc’ns Comm’n CG Docket No. 

11–116 (July 20, 2012), at 7, 12, available at http://www.ftc.gov/sites/default/files/documents/ 

advocacyldocuments/ftc-reply-comment-federal-communications-commission-concerning-placement-unauthorized-charges/120723crammingcomment.pdf [hereinafter ‘‘FTC Reply Comment’’]. 6See Fed. Trade Comm’n, Mobile Cramming Roundtable (May 8, 2013), available at http:// 

www.ftc.gov/news-events/events-calendar/2013/05/mobile-cramming-ftc-roundtable [hereinafter 

‘‘Roundtable’’]. 7See Fed. Trade Comm’n Staff, Mobile Cramming: An FTC Staff Report (2014), available at 

http://www.ftc.gov/system/files/documents/reports/mobile-cramming-federal-trade-commission 

-staff-report-july-2014/140728mobilecramming.pdf [hereinafter ‘‘Mobile Cramming Report’’]. 

you today to discuss the Commission’s experience addressing mobile cramming. I am 

pleased to be testifying alongside my partner at the Federal Communications Commission, with which the FTC has worked collaboratively to combat the problem of 

mobile cramming. I also would like to commend this Committee and you, Mr. Chairman, for the work you have done to investigate and address this important consumer protection issue. 

Mobile cramming is the act of placing unauthorized third-party charges on mobile 

phone accounts. It occurs when consumers are signed up and billed for third-party 

services, such as ringtones and recurring text messages containing trivia or horoscopes, without the consumers’ knowledge or consent. Companies that place 

crammed charges sometimes obtain consumers’ phone numbers without any contact 

with consumers. Other times, these entities use deceptive means to obtain consumers’ mobile phone numbers—such as in connection with offering free prizes— 

and then begin charging their phone accounts for recurring third-party charges for 

purported services unrelated to the offer. These unauthorized charges often appear 

buried in phone bills and have generic descriptors such as ‘‘usage charges.’’ As a result, many consumers do not notice the charges or do not understand that they are 

unrelated to their phone service. Moreover, some consumers have prepaid accounts 

and do not receive bills at all, while others auto-pay their bills and therefore may 

not routinely inspect them. And many consumers do not even receive the services 

for which they are being charged. 

Mobile cramming is a significant problem that threatens to undermine confidence 

in the developing payment method known generally as ‘‘carrier billing,’’ which offers 

consumers the opportunity to charge goods and services to their mobile phone accounts. As stakeholders have noted, carrier billing of third-party charges may be 

particularly beneficial for unbanked and underbanked consumers. Additionally, consumers have used text messages to donate funds to a charitable organization, with 

the charge placed on their mobile phone account. As carrier billing has developed, 

however, fraud has become a significant problem for consumers. 

For the past two decades, one of the Commission’s top priorities has been ensuring that consumer protections keep pace with technological developments, including 

emerging mobile products and services, while encouraging innovations that benefit 

consumers and businesses. In the past few years the Commission has focused on 

mobile cramming as a key consumer protection issue.2 Among other things, since 

the spring of 2013, the Commission has brought five mobile cramming cases against 

merchants, resulting in substantial monetary judgments.3 And, earlier this month, 

the Commission filed its first action against a telecommunications company, T-Mobile USA, for mobile cramming.4 These actions all reinforce the basic principle that 

a company must obtain a consumer’s express, informed consent before placing 

charges on their bills—which applies to the mobile environment just as it does to 

brick-and-mortar companies. 

In addition to its enforcement work, the Commission has recommended the adoption of certain baseline consumer protections,5 encouraged public dialogue among industry stakeholders through a public roundtable in May 2013,6 and, just this week, 

authorized the release of a Bureau of Consumer Protection staff report providing additional information about mobile cramming and discussing recommended approaches to address it.7

This testimony begins with an overview of the Commission’s and this Committee’s 

work to address landline cramming, which has provided the foundation for the ComVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
61 

8See MAJORITY STAFF OF S. COMM. ON COMMERCE, SCI., & TRANSP., OFFICE OF OVERSIGHT &

INVESTIGATIONS, UNAUTHORIZED CHARGES ON TELEPHONE BILLS, (July 12, 2011), at ii, available 

at http://www.commerce.senate.gov/public/?a=Files.Serve&Filelid=3295866e-d4ba-4297-bd26– 

571665f40756. 9See, e.g., FTC v. Hold Billing Servs., Ltd., No. 98–cv–00629–FB (W.D. Tex.) (contempt motion filed Mar. 28, 2012); FTC v. Inc21.com Corp., 745 F. Supp. 2d 975 (N.D. Cal. 2010), aff’d, 

2012 WL 1065543 (9th Cir. Mar. 30, 2012); FTC v. Nationwide Connections, Inc., No. 06–80180 

(S.D. Fla. Sept. 18, 2008) (stipulated order). 10Fed. Trade Comm’n, Examining Phone Bill Cramming: A Discussion (May 11, 2011), available at http://www.ftc.gov/bcp/workshops/cramming. 11See Comment of the Fed. Trade Comm’n, Fed. Commc’ns Comm’n CG Docket No. 11–116 

(Oct. 24, 2011), at 5–6, available at http://www.ftc.gov/os/2011/12/111227crammingcom 

ment.pdf. 12See, e.g., Cecilia Kang, A Nation Outnumbered By Gadgets, Washington Post, Oct. 12, 2011, 

available at http://www.washingtonpost.com/business/economy/a-nation-outnumbered-by-gadgets/2011/10/11/gIQAhjdhdLlstory.html. 13See FTC Reply Comment, supra note 5. 14See Roundtable, supra note 6. 15See FED. TRADE COMM’N STAFF, PAPER, PLASTIC . . . OR MOBILE? AN FTC WORKSHOP ON

MOBILE PAYMENTS (2013), at 7–8, available at http://www.ftc.gov/sites/default/files/docu 

ments/reports/paper-plastic-or-mobile-ftc-workshop-mobile-payments/p0124908lmobilelpayme 

ntslworkshoplreportl02-28-13.pdf. 16Mobile Cramming Report, supra note 7. 

mission’s recent efforts to address mobile cramming. The testimony then discusses 

publicly available evidence regarding the scope of the mobile cramming problem, 

and the Commission’s recent enforcement actions to combat it. Finally, the testimony discusses the recommendations in the FTC staff report released this week. 

II. Landline Cramming 

As this Committee has recognized, the issue of unauthorized third-party billing 

on landline phone bills has been a problem for well over a decade. The Committee’s 

investigation and 2011 staff report have played critical roles in illuminating this important consumer protection issue. Indeed, the Committee’s staff report estimated 

that landline cramming has likely cost consumers billions of dollars.8

The FTC has brought more than 30 enforcement actions under Section 5 of the 

FTC Act to halt landline cramming practices and provide restitution to consumers.9

These cases have resulted in tens of millions of dollars in refunded charges and 

stringent court orders to prevent future cramming violations. Over the years, the 

FTC also has worked closely with Federal and state partners, including State Attorneys General and the Federal Communications Commission, to combat the problem, 

and has engaged in consumer and business education to raise awareness about the 

issue. In addition, the FTC has sought input on the problem from industry participants, consumer groups, and other stakeholders, including by holding a workshop 

devoted to cramming in 2011.10 Based on this multi-faceted experience, the FTC has 

advocated a number of measures to address landline cramming.11

III. FTC Enforcement Actions 

Over the past few years, it has become apparent that unauthorized third-party 

charges were appearing not only on landline bills but also on mobile accounts. The 

use of mobile devices has grown so rapidly that, according to industry, mobile devices now outnumber people in the United States.12 Building on its experience in 

the landline arena, the Commission has looked closely at how cramming has spread 

to mobile accounts. The Commission devoted a portion of the FTC’s 2011 cramming 

workshop to the topic of mobile cramming, filed a comment in an FCC proceeding 

in July 2012 recommending certain baseline consumer protections,13 and held a separate roundtable in May 2013 specifically to address mobile cramming.14 FTC staff 

also addressed the issue in its April 2013 report on mobile payments.15 Further, this 

week, the Commission released a staff report on mobile cramming recommending 

best practices for industry to prevent and remedy mobile cramming.16

As noted above, since the spring of 2013, the Commission also has brought six 

enforcement actions to prevent mobile cramming and provide restitution for injured 

consumers. Thus far, the Commission has obtained strong relief in the three actions 

that have been fully or partially resolved: 

• Tatto, Inc. & Bullroarer, Inc. In this case, the FTC alleged that a widespread 

mobile cramming operation engaged in deceptive and unfair practices, for example by running web advertisements that promised consumers a chance to win 

prizes such as free Justin Bieber tickets and then solicited their phone numVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00065 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
62 

17 Complaint for Permanent Injunction and Other Equitable Relief, at 10, FTC v. Tatto, Inc., 

No. 2:13–cv–08912–DSF–FFM (C.D. Cal. Dec. 5, 2013), available at http://www.ftc.gov/sites/ 

default/files/documents/cases/131216bullroarercmpt.pdf. 18See id.; Memorandum In Support of Plaintiff’s Ex Parte Application For Temporary Restraining Order With An Asset Freeze and Other Equitable Relief, And Order to Show Cause 

Why A Preliminary Injunction Should Not Issue, at 12, FTC v. Tatto, Inc., No. 2:13–cv–08912– 

DSF–FFM (C.D. Cal. Dec. 5, 2013). 19See Stipulated Order for Permanent Injunction and Monetary Judgment Against Defendants Tatto, Inc., Shaboom Media, LLC, Bune, LLC, Mobile Media Products, LLC, Chairman 

Ventures, LLC, Galactic Media, LLC, Virtus Media, LLC, and Lin Miao, FTC v. Tatto, Inc., No. 

2:13–cv–08912–DSF–FFM (C.D. Cal. June 11, 2014), available at http://www.ftc.gov/system/ 

files/documents/cases/140613bullroarerstiporder.pdf. The judgment was partially suspended 

based on defendants’ inability to pay, but the defendants that have settled to date have surrendered more than $10 million in assets to be used for restitution. 20 Complaint for Permanent Injunction and Other Equitable Relief, at ¶¶ 8–25, FTC v. Jesta 

Digital, LLC, No. 1:13–cv–01272 (D.D.C. Aug. 20, 2013), available at http://www.ftc.gov/sites/ 

default/files/documents/cases/2013/08/130821jestacmpt.pdf [hereinafter ‘‘Jesta Digital Complaint’’]. 21WAP opt-in involves consumers responding to an offer displayed on the mobile web by 

clicking on a confirmation button from the phone two separate times. This process captures the 

consumer’s phone number without the need for the consumer to enter it manually. 22See Jesta Digital Complaint, supra note 20, at ¶¶ 8–28. 23See Stipulated Final Order for Permanent Injunction and Monetary Judgment Against Jesta 

Digital, LLC, FTC v. Jesta Digital, LLC, No. 1:13–cv–01372 (D.D.C. Aug. 23, 2013). 24 Complaint for Permanent Injunction and Other Equitable Relief, at 7–8, FTC v. Wise 

Media, LLC, No. 1:13–cv–1234–WSD (N.D. Ga. Apr. 16, 2013), available at http://www.ftc.gov/ 

sites/default/files/documents/cases/2013/04/130417wisemediacmpt.pdf. 25Memorandum in Support of Motion for Temporary Restraining Order, at 6, 10–11, FTC v. 

Wise Media, LLC, No. 1:13–cv–1234–WSD (N.D. Ga. Apr. 16, 2013) [hereinafter ‘‘Wise Media 

TRO Memo’’]. 26 Id. at 6–9. 

bers.17 Consumers did not receive the Justin Bieber tickets, but rather, as the 

Commission has alleged, it is likely that consumers were signed up for the defendants’ subscription plans.18 The primary corporate defendants and their operator have agreed to a partially suspended judgment of more than $150 million.19

• Jesta Digital, LLC. In this case, the FTC alleged that the defendant lured consumers into purchasing a monthly subscription for ringtones using deceptive 

virus scan ads.20 According to the complaint allegations, some consumers saw 

banner ads on their mobile devices while playing a popular mobile app that 

falsely claimed a virus had been detected. Clicking on the ad led to a screen 

with a button stating ‘‘Get Now’’ above the phrase ‘‘Protect your Android 

[phone] today.’’ Consumers who clicked ‘‘Get Now,’’ and then a button on a subsequent page marked ‘‘Subscribe,’’ were then subscribed to the $9.99 per month 

ringtone subscription plan, though the nature and cost of the subscription were 

never adequately disclosed. Indeed, some consumers were subscribed even if 

they clicked on parts of the screen other than the ‘‘subscribe’’ button. Moreover, 

if consumers actually attempted to subscribe and download Jesta’s so-called 

anti-virus software to their mobile devices, the download often failed. To obtain 

consumers’ purported authorization for the charges, Jesta used a process known 

as WAP or Wireless Access Protocol billing,21 which captures consumers’ phone 

numbers from a mobile device. Thus, consumers never even entered their phone 

numbers prior to being billed.22 Under the terms of the settlement, the company 

must provide refunds to injured consumers and pay an additional $1.2 million 

to the FTC.23

• Wise Media LLC. The FTC filed suit in April 2013 against the merchant Wise 

Media, LLC, which purported to sell recurring subscriptions to text message 

services providing ‘‘love tips,’’ horoscopes, diet tips, and similar kinds of ‘‘alerts’’ 

for $9.99 a month.24 The company claimed that consumers signed up for the 

services by entering their information into websites, receiving PIN codes by text 

messages, and inputting the PINs into the websites. The FTC alleged that 

many consumers did not notice the charges, which were often buried in their 

phone bills, including, in at least one consumer’s case, on page 18 of the consumer’s bill.25 Consumers who discovered the charges widely reported that they 

had never heard of Wise Media or signed up for the services; the FTC alleged 

that consumers were simply billed without authorization.26 In November 2013, 

a court entered a stipulated order with a judgment for more than $10 million 

63 

27Stipulated Order for Permanent Injunction and Monetary Judgment Against Defendants 

Brian M. Buckley and Wise Media, LLC, at 4–6, FTC v. Wise Media, LLC, No. 1:13–cv–1234– 

WSD (N.D. Ga. Nov. 22, 2013), available at http://www.ftc.gov/sites/default/files/documents/ 

cases/131121wisemediabuckleystip.pdf. 28 Amended Complaint for Permanent Injunction and Other Equitable Relief, FTC v. Acquinity 

Interactive, LLC, No. 14–60166–CIV (S.D. Fla. June 16, 2014), available at http://www.ftc.gov/ 

system/files/documents/cases/140707revenuepathcmpt.pdf. 29 Complaint for Permanent Injunction and Other Equitable Relief, FTC v. MDK Media, Inc., 

No. 2:14–cv–05099–JFW–SH (C.D. Cal. July 3, 2014). 30See Press Release, FCC Investigates Cramming Complaints Against T-Mobile (July 1, 2014), 

available at http://www.fcc.gov/document/fcc-investigates-cramming-complaints-against-t-mobile. 31See Complaint for Permanent Injunction and Other Equitable Relief, FTC v. T-Mobile USA, 

Inc., No. 2:14–cv–00967, ¶¶ 11–20 (W.D. Wash. July 1, 2014) [hereinafter ‘‘T-Mobile Complaint’’] 32See id., ¶¶ 21–36. 33State law enforcement actions are discussed in more detail at pages 11–12 of the Mobile 

Cramming Report, supra note 7. The fact patterns described by the states are similar to those 

described in the Commission’s actions. 34See Mobile Cramming Report, supra note 7, at 14–15, 17–18. 

and a ban that prohibits Wise Media from placing charges on mobile phone bills 

altogether.27

The Commission is litigating two similar actions against content providers. In 

FTC v. Acquinity Interactive, LLC, the Commission alleges that crammers sent text messages promising free $1,000 gift cards and iPads as a way to deceive consumers 

into ‘‘confirming’’ their phone number and entering PINs on a website; this resulted 

in consumers being signed up for unwanted premium text messaging services and 

incurring charges of $9.99 per month on their mobile phone accounts.28 In another 

case, against MDK Media, Inc., the Commission alleges that a content provider 

similarly used the lure of ‘‘free’’ gift cards to collect consumers’ phone numbers and 

crammed consumers for subscription services such as horoscope alerts.29

Earlier this month, the Commission filed suit against T-Mobile USA, alleging that 

it unlawfully charged consumers for unauthorized monthly text message subscriptions offered by third-party merchants.30 The complaint alleges that T-Mobile deceptively described these charges on its phone bills in a manner that made it difficult 

for consumers to discover them. For example, T-Mobile’s online bill summaries 

lumped third-party charges into a line item labeled ‘‘Use Charges’’ that could include charges for both T-Mobile’s own text services and for third-party charges.31

Additionally, according to the complaint, T-Mobile continued to charge consumers 

even after becoming aware of telltale signs that the charges were unauthorized. The 

complaint alleges that T-Mobile’s own internal documents showed that consumers 

increasingly were calling T-Mobile to complain about unauthorized third-party 

charges. It also alleges that large numbers of consumers sought refunds and the refund rate—the ratio of refunds to charges billed for a particular period of time such 

as a month—for some subscriptions was as high as 40 percent in some months. Further, the complaint states that T-Mobile continued to bill consumers for charges 

from third-party merchants for years after those merchants were the subject of law 

enforcement or other legal action for cramming, and after news articles and industry alerts detailed cramming behavior and other deceptive behavior by those merchants. On the same day the FTC filed its complaint, the FCC announced that it 

had opened its own investigation into T-Mobile’s practices in regard to cramming.32

A number of lessons can be drawn from these actions, as well as the enforcement 

actions brought by our state law enforcement partners.33 First, many entities have 

been able to cram charges onto mobile phone accounts using similar practices, and 

the amount of money at stake has been substantial. The Wise Media, Jesta Digital, 

and Tatto/Bullroarer cases alone involved settlements totaling more than $160 million. 

Second, the level of consumer complaints and refund requests has understated the 

overall harm. Carriers have received a large number of complaints and refund requests related to third-party charges on mobile accounts, but the evidence indicates 

that many consumers do not notice the unauthorized charges, which often are buried in their mobile phone bills and, as alleged in the T-Mobile matter, appear under 

non-descriptive headers mixed in with charges for phone services.34 Further, consumers with prepaid mobile phone accounts do not receive a bill at all; unauthorized 

charges are simply deducted from their available balance of minutes. 

Third, even when consumers notice unauthorized charges and have requested refunds, they have reported difficulties obtaining refunds from carriers. Many complain that carriers refuse to give more than two months’ worth or other limited 

amounts of refunds, even if consumers learn that crammed charges have appeared 

64 

35 Id. at 14, 33. 36See Wise Media TRO Memo, supra note 25, at 11–12; Mobile Cramming Report, supra note 

7, at 14. 37 Until recently, the Mobile Marketing Association (‘‘MMA’’), a trade association that promotes mobile marketing, had taken the lead in publishing best practices for merchants who 

wish to place charges on mobile phone bills using Premium SMS, but the MMA itself did not 

enforce those best practices. See Mobile Cramming Report, supra note 7, at 23–25. 38See, e.g., Ina Fried, AT&T, Sprint, T-Mobile, Verizon Dropping Most Premium Test Service 

Billing in Effort to Combat Fraud, ALLTHINGSD.COM, Nov. 21, 2013, http://allthingsd.com/ 

20131121/att-sprint-t-mobile-verizon-all-dropping-most-premium-text-service-billing-in-effort-tocombat-fraud/. 39See FTC Reply Comment, supra note 5, at 12. 40Mobile Cramming Report, supra note 7, at 22. 

on their bills for longer periods of time.35 In other instances, carriers have told consumers to contact the merchant for a refund, a request that the merchant often denies.36

IV. Staff Recommendations on Best Practices to Address Mobile Cramming 

The Commission has advocated certain baseline consumer protections to combat 

mobile cramming, and the staff report released this week provides staff’s additional 

recommendations for industry best practices. Stakeholders in the mobile billing industry generally have relied on a set of voluntary guidelines to attempt to address 

cramming, but as demonstrated above, these have not been effective in stopping 

cramming.37

In making its recommendations, Commission staff considered how the mobile carrier billing industry has evolved. Until recently, the dominant type of carrier billing 

has been ‘‘Premium SMS’’ billing. Premium SMS typically involves a text-messaging 

component, whereby a consumer purportedly authorizes charges by texting a particular five or six-digit number known as a ‘‘short code.’’ Since the adoption of 

smartphones with advanced mobile web browsing capabilities and the greater use 

of mobile apps, there has been an increasing use of other forms of third-party billing 

arrangements, known as ‘‘direct carrier billing’’ arrangements. In direct carrier billing arrangements, a consumer does not necessarily need to send or receive a text 

message to initiate or complete a transaction that is billed to a mobile account. Instead, a consumer can initiate a transaction on a mobile website or within a mobile 

app, and the merchant can have the charge placed on the consumer’s mobile account 

through back-end arrangements that involve the mobile carriers. In late 2013, after 

the Commission had held its mobile cramming roundtable and Federal and state 

agencies had brought numerous law enforcement actions highlighting the prevalence 

of mobile cramming, the four largest mobile carriers stated their intention to discontinue one form of third-party billing—Premium SMS billing for commercial 

transactions.38 Direct carrier billing, in contrast, is expected to continue growing, 

and it appears likely to supplant Premium SMS as the preferred mode of carrier 

billing. Regardless of the type of carrier billing involved, it is important for companies to provide basic consumer protections. 

Providing consumers the option to block third-party charges 

The Commission has advocated that mobile providers give consumers the option 

to block all third-party charges from their mobile phone accounts.39 Providing a 

blocking option would significantly benefit consumers who wish to avoid third-party 

charges while imposing minimal costs to consumers who wish to use their mobile 

accounts for third-party billing. At activation, consumers should be informed that 

third-party charges may be placed on their accounts, and they should be given the 

opportunity to block all charges at that time. This option should be clearly and 

prominently disclosed to consumers while the accounts are active, including on the 

carriers’ websites. 

Staff also suggests that carriers should consider offering consumers the ability to 

block or allow only specific providers, or to block commercial providers only, as this 

may benefit consumers who wish to use their mobile accounts for only certain kinds 

of third-party charges. Allowing more granular blocking would permit consumers to 

continue to authorize third-party charges such as charitable or political donations.40

Strategies for Detecting and Preventing Mobile Cramming 

Industry participants have adopted a range of strategies to attempt to detect and 

prevent mobile cramming. The staff report discusses many of these in detail and 

recommends best practices for improvement. These strategies address two key 

issues: avoiding deceptive practices that lead to unauthorized charges on mobile accounts, and ensuring that consumers are providing express, informed consent to 

third-party charges on mobile accounts. 

65 

41See FED. TRADE COMM’N STAFF, REVISED.COM DISCLOSURES: HOW TO MAKE EFFECTIVE DISCLOSURES IN DIGITAL ADVERTISING (2013), at 10, available at http://www.ftc.gov/sites/default/ 

files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312 

dotcomdisclosures.pdf. 42Mobile Cramming Report, supra note 7, at 26–27. 43While there are costs to effective monitoring, there are also substantial benefits to both industry and to consumers. Industry participants can lower expenses related to the processing of 

refund requests and handling of customer complaints. And consumers avoid being crammed with 

unauthorized charges. 44See Mobile Cramming Report, supra note 7, at 28–30. Centralization may shift some compliance costs, in the short term, from the merchants to carriers and billing intermediaries. However, it should benefit consumers and industry participants by making it more difficult for unscrupulous merchants to place unauthorized charges and by streamlining dispute resolution 

when a consumer claims a charge was unauthorized. 45See id. at 13–14 For example, in the Wise Media case, the monthly refund rates for some 

services on one carrier were as high as 40 percent. Wise Media TRO Memo, supra note 24, at 

10. 46See Fed. Trade Comm’n, Mobile Cramming Roundtable Transcript (May 8, 2013), J. Manis, 

Mobile Giving Foundation, at 58, available at www.ftc.gov/sites/default/files/documents/publiclevents/Mobile%20Cramming%20Roundtable/30508mob.pdf. 

The staff report notes that merchants are responsible in the first instance for ensuring that their practices—including any advertising, marketing, and opt-in processes—are not deceptive, pursuant to the FTC Act. Further, information about price 

is important to consumers and should be disclosed clearly and conspicuously before 

charging a consumer’s telephone account for a good or service.41 Thus, at a minimum, pricing information should be on the same page and immediately next to the 

purchase or buy button, entry of a PIN, or other invitation for a consumer to agree 

to a charge for a product or service. Additionally, advertising and purchase confirmation screens should clearly disclose that the charge is being billed to a specific 

telephone account. While industry guidelines have in the past focused extensively 

on the text-message based Premium SMS opt-in process, the basic consumer protection principles outlined in the report should apply regardless of the type of carrier 

billing used. 

The staff report also recommends that carriers and billing intermediaries should 

implement reasonable procedures to scrutinize risky or suspicious merchants and 

terminate or take other appropriate steps against companies engaging in unlawful 

practices. For example, the report recommends that if a carrier or billing intermediary discovers that a merchant has run a campaign containing deceptive advertising, or discovers the merchant engaged in unauthorized billing on landline 

phones, the carrier or intermediary should closely monitor other campaigns run by 

that third party or its affiliates to ensure compliance.42 Carriers and intermediaries 

can use monitoring techniques that compensate for known tactics that fraudsters 

use to evade detection of deceptive advertisements and sign-up processes. Industry 

participants also can adopt a policy of terminating serious and repeat offenders.43

Additionally, the report recommends that industry take stronger steps to ensure 

that consumers have opted-in to charges as represented by merchants. In Premium 

SMS, mobile carriers typically have relied on the merchant’s representation—passed 

on by the billing intermediary—that a consumer opted-in to a charge. However, as 

the enforcement actions described above demonstrate, those representations are 

often unreliable. One option is to move toward more centralized control of the consumer opt-in process and authorization records, which appears to be the trend for 

at least some part of the industry.44

Finally, the staff report notes that monitoring consumer refund requests, and taking appropriate action when there are indications of unauthorized charges, can be 

a highly effective means of detecting and stopping cramming. Businesses providing 

other payment mechanisms use similar approaches to root out unauthorized 

charges. For example, credit card networks typically investigate merchants with 

chargeback rates of 1 percent, a threshold that is less than one-tenth of the refund 

rates seen in the cramming context.45 While refund rates may differ across different 

types of payment methods, a representative from the Mobile Giving Foundation has 

suggested that charitable donations charged to a mobile bill and processed through 

the Foundation typically have a refund rate of under 1 percent overall.46

Adequate Disclosure of Third-Party Charges 

Another important step in preventing cramming is ensuring that consumers are 

adequately informed of all third-party charges on their accounts. Carriers should 

clearly and conspicuously disclose all charges for third-party services in a non-deceptive manner. In particular, the name of the third-party service and any associated 

bill heading should relate to the product offered and not suggest an affiliation with 

66 

47FTC Reply Comment, supra note 5, at 12. 48Mobile Cramming Report, supra note 7, at 14, 33. 49See 12 C.F.R. §§ 1026.12, 1026.13. 50See 12 C.F.R. §§ 1005.6, 1005.11. 

the carrier’s service. And, in order for carriers to make these disclosures, billing 

intermediaries and merchants should provide accurate information about these 

charges to them. 

For consumers who auto-pay their bills, and may be especially unlikely to review 

the charges, or consumers who have prepaid phone plans, staff has urged carriers 

to consider whether a separate notification of third-party charges is warranted. 

Consumer Dispute Protections and Refunds 

The Commission has explained that mobile carriers should provide a clear and 

consistent process for customers to dispute suspicious charges on their mobile accounts and obtain reimbursement.47 And indeed, FTC enforcement actions show 

that it is difficult for consumers to obtain refunds, and that refunds often are limited to only some months’ worth of charges, even when consumers discover they incurred crammed charges for a longer time period.48 A clear and consistent process 

is particularly important in this context because no Federal statutory protections 

have been applied to consumer disputes about unauthorized charges placed on mobile carrier accounts. Consumers therefore have different dispute rights when using 

carrier billing than when using other payment mechanisms. For example, consumers have dispute resolution rights and liability limits for unauthorized credit 

card charges under Regulation Z, including a right to withhold payment while the 

dispute is pending, 49 and for unauthorized debit card charges under Regulation E, 

including a requirement that funds debited in an unauthorized transaction be returned to a consumer’s account within ten days, pending further investigation.50

The staff report further suggests that mobile carriers also can do more to provide 

redress to consumers who have been crammed. For example, in the landline billing 

context, industry members have stated that consumers can withhold payment on 

disputed charges during the dispute period without a cut-off in phone service or accrual of interest. Industry should extend this protection to the mobile billing context, and inform consumers about it. The staff report also suggests that carriers be 

more proactive in notifying consumers when a third party’s billing activities are terminated for unauthorized charges, in order to allow them to request a refund if appropriate. 

V. Conclusion 

Thank you for the opportunity to provide the Commission’s views on mobile cramming. The Commission is committed to protecting consumers from mobile cramming 

and we look forward to continuing to work with the Committee and Congress on 

this important issue. 

Senator BLUMENTHAL. Thank you, Commissioner. 

Attorney General Sorrell? 

STATEMENT OF HON. WILLIAM H. SORRELL, 

ATTORNEY GENERAL, STATE OF VERMONT 

Mr. SORRELL. Senator Blumenthal, Ranking Member Thune, 

thank you for inviting me to be here today to participate in this 

hearing and to speak from the perspective of the State AGs. 

I do want to make it clear that although Vermont is the lead 

state in a 47-state effort right now to combat wireless cramming, 

that I am speaking only on behalf of myself today. 

It was over 10 years ago that Vermont started addressing the 

problem of landline cramming, and our focus was on the thirdparty providers and not on the carriers. But from enforcement actions and settlements, we have recouped for 25,000 Vermonters 

over $2 million in refunds. If you want to take Vermont at twotenths of 1 percent of the U.S. population and look at that nationally, just from the companies that we looked at and have settled 

with, that would be over 125 million Americans and over $1 billion 

67 

lost to landline cramming. And that is just from those companies 

that we have taken action against. 

Ultimately, self-regulation, we realize, did not work in the 

landline cramming arena, and our State legislature banned essentially all third-party charges on landlines. 

And then about 3 years ago, our office with other AGs turned to 

the wireless arena. But instead of going at the third-party providers, we focused on the four large cell phone or wireless carriers. 

And we conducted a survey in Vermont involving all Vermonters 

with third-party charges on their cell phone bills on the part of two 

large carriers over a two-month period in the summer of 2012. We 

retained the University of Vermont Center for Rural Studies to 

conduct the survey, and what that survey turned up was that approximately 60 percent of those Vermonters with third-party 

charges from those carriers on their cell phone bills during those 

2 months—they had been crammed. They did not know the charges 

were there. They were not availing themselves of those charges. 

And perhaps more compelling is the fact that 80 percent of those 

surveyed were not aware that charges on their cell phone bill were 

not exclusively for services provided by their own carrier. 

And other AG’s have found similar results as they have looked 

at this issue in their States. 

Now, as you and the Ranking Member have pointed out, there 

has been some progress in that the four big carriers last November 

essentially got out of the PSMS business, and consequently, complaints to us have sort of fallen off a cliff. 

But we are very much looking forward and wanting to avoid 

recurrences of wireless cramming in the future and also be aware 

of new methodologies, new technologies, and opportunities for consumers to be scammed. So we want to protect going forward. We 

also want to see that those customers who have been crammed are 

made whole by their carriers, and we hope that there will be enhanced consumer education efforts to avoid recurrences going forward. 

This is a national problem. We very much hope that the Federal 

regulators will step up and be aggressive and, if appropriate, that 

the Congress will take action to better protect American consumers 

going forward. In the wireless arena, self-regulation has failed, and 

with my Federal partners and the Congress, we need to step up. 

Thank you very much. 

[The prepared statement of Mr. Sorrell follows:] 

PREPARED STATEMENT OF HON. WILLIAM H. SORRELL, ATTORNEY GENERAL, 

STATE OF VERMONT

Summary 

Chairman Rockefeller, Ranking Member Thune, and members of the Committee, 

thank you for the opportunity to testify today. The placement of unauthorized 

charges on telephone bills, also known as ‘‘cramming,’’ has victimized many of my 

constituents in Vermont, and many of your constituents as well, including consumers, small businesses, and even large organizations. Cramming is a practice of 

significant interest to me, and one that the Vermont Attorney General’s Office has 

been combatting, on behalf of Vermonters and citizens nationwide, for well over a 

decade. 

Cramming is a huge, nationwide problem that has been pervasive in both landline 

and mobile telecommunications and has cost American consumers many billions of 

dollars. Cramming involves consumers being charged amounts on their phone bills 

68 

1These dollar amounts are typical for crammed charges on mobile phones. 

2S. COMM. ON COMMERCE, SCI. AND TRANSP., 112TH CONG., UNAUTHORIZED CHARGES ON

TELEPHONE BILLS: STAFF REPORT FOR CHAIRMAN ROCKEFELLER (July 12, 2011). 3 Beware of Bogus Phone Bill Fees; Consumers Could Be Losing Up to $2 Billion a Year, CON- SUMER REPORTS, August 2012, available at http://www.consumerreports.org/cro/magazine/ 

2012/08/beware-of-bogus-phone-bill-fees. 4Press Release, Office of the Attorney General of Vermont, A.G. Settles Case for $1.6 Million 

in Ongoing Effort to Combat ‘‘Cramming’’ (Nov. 12, 2013), available at http://ago.vermont.gov/ focus/news/a.g.-settles-case-for-$1.6-million-in-ongoing-effort-to-combat-cramming.php. 5 Unauthorized Charges on Telephone Bills: Why Crammers Win and Consumers Lose: Hearing 

before the S. Comm. on Commerce, Sci., and Transp., 112th Cong. 112–171 (2011) [hereinafter 

Hearing] (statement of Elliot Burg, Senior Assistant Atty Gen., State of Vermont). 6See State & County QuickFacts, Vermont, UNITED STATES CENSUS BUREAU (July 8, 2014), 

http://quickfacts.census.gov/qfd/states/50000.html (estimating United States and Vermont 

populations for 2013). 7See Jane Kolodinsky, Mobile Phone Third-Party Charge Authorization Study: Vermont, CENTER FOR RURAL STUDIES AT THE UNIVERSITY OF VERMONT (May 5, 2013). available at http:// 

ago.vermont.gov/assets/files/Mobile%20Phone%20Third-Party%20Charge%20Authorization%20 

Study.pdf 

without authorization, usually for goods and services ‘‘sold’’ by third-party vendors 

ranging from $9.99 to $24.99 1 per month that the consumer neither requested nor 

used. Among the things that make cramming so pernicious and persistent is the 

continuing lack of consumer awareness that their trusted telephone carriers are able 

and willing to place charges on their telephone bills for goods and services sold by 

disreputable third parties. Not only do consumers not expect unanticipated thirdparty charges on their bill, they rarely recognize the charges that do appear on their 

bills as unauthorized third-party charges. Those few consumers that do detect unauthorized third-party charges—at least with respect to mobile cramming—have not 

consistently been able to obtain full refunds from their carriers or the carriers’ 

third-party partners. 

A number of regulatory approaches have proven to be ineffective in curbing cramming. In both the landline and mobile contexts, the telecommunications industry 

has largely been permitted to engage in ‘‘self-regulation.’’ As this laissez-faire approach evinced its failure with respect to landline cramming, Vermont tried a notice-regime, requiring consumers to be notified in writing before receiving a thirdparty charge from their landline carrier. It is under these failed policies that cramming blossomed into the national, industry-wide, multi-billion dollar problem law 

enforcement officials and regulators—and, increasingly, consumers—across the 

country are familiar with today. 

Cramming is a Huge Problem that has Cost Consumers Many Billions of 

Dollars 

As the Committee is well aware, cramming has been recognized by many for its 

size and cost to consumers. In July 2011, this Committee concluded that landline 

cramming—a problem that had then been in existence for over a decade—had cost 

consumers a ‘‘substantial percentage’’ of $2 billion annually in ‘‘recent years.’’ 2 In 

2012, Consumer Reports estimated that landline and mobile cramming together 

could be costing American consumers up to $2 billion per year.3

Based upon Vermont’s experience, if anything, these estimates of consumer loss 

are low. To date, as a result of my Office’s investigations into dozens of third-party 

merchants and billing aggregators involved in landline cramming, 25,000 Vermonters have recouped nearly $2.3 million in crammed landline charges.4 My 

Office has no reason to believe that these companies disproportionately targeted 

Vermont consumers. Moreover, there are many more such companies that perpetrated cramming that my Office has not investigated.5 Thus, it is reasonable to 

conclude that approximately 1.25 million Americans have lost a staggering $1.15 

billion to the entities Vermont has investigated and settled with to date alone and 

that these figures represent just a fraction of total consumer loss due to landline 

cramming.6

On the wireless side, the magnitude of consumer loss is equally daunting. As the 

Committee may be aware, my Office recently retained the University of Vermont’s 

Center for Rural Studies to conduct a survey to determine the mobile cramming rate 

in Vermont for the customers of two major wireless carriers—that is, the proportion 

of third-party charges placed on mobile phones that were unauthorized.7 Through 

the study, a sample of 2,400 Vermonters who had third-party charges placed on 

their mobile telephone bills during August and/or September of 2012 were contacted 

by my Office; we asked them about 5,388 third-party charges for a total of 

$43,250.96 that had been placed on their mobile phone bills over the course of those 

two months. Over 60 percent of the surveyed consumers reported the charges were 

69 

8 Based on the 84 months from January 2007 through December 2013; while my Office’s understanding is that the practice of placement of third-party charges on mobile telephones began 

as early as 2004, we are not aware of cramming complaints predating 2006. 9Letter from Nat’l Ass’n of Att’ys Gen. to Donald Clark, Sec’y, Fed. Trade Comm’n 2–3 

(June 24, 2013) (on file with Fed. Trade Comm’n), available at: http://www.ftc.gov/sites/default/files/documents/publiclcomments/2013/06/564482-00015-86106.pdf [hereinafter Letter]. 10 Id. 11 Id. 12Letter, supra note 9, at 3—4. 

crammed, bringing consumer losses over a two month period for these 2,400 

Vermonters alone to over $25,950.58. Extrapolating nationwide, the Vermont survey 

suggests a similar survey done on a national scale would reveal that a sample of 

1.2 million Americans lost $12,975,290 to mobile cramming during August and September of 2012 alone. My Office believes that carriers started placing third-party 

charges on mobile phone bills in Vermont as early as 2006. Even if only 5 percent 

of American consumers have ever experienced third-party charges on their mobile 

phone bills, consumer losses for mobile cramming alone may have exceeded $10 billion between 2007 and 2013.8

Cramming is a Pervasive, Nationwide and Industrywide Problem 

This Committee is well aware of the depth and breadth of the landline cramming 

problem; I expect the Committee’s work in recent years has uncovered the fact that 

mobile cramming is similarly nation and industrywide. Vermont, like other jurisdictions around the country, fielded an increasing number of consumer complaints 

about mobile cramming from 2006 to 2013.9 While these complaints are voluminous, 

it is generally believed that they represent only a very small fraction of the consumers who have been improperly charged for third-party goods and services on 

their mobile phone bills.10 Nevertheless, consumer complaints implicate the entire 

third-party charge industry; naming more than a dozen mobile carriers and hundreds of third parties, including content providers and billing aggregators.11

Importantly, mobile cramming is a problem that victimizes consumers no matter 

what mobile carrier they choose. Indeed, in a recent study of over 750 consumer 

complaints received by 28 jurisdictions, several state attorneys general discovered 

that 14 mobile carriers were implicated in cramming. Moreover, the following 

themes of consumer complaints were consistent across those carriers as well as 

across the country, and across time: 

Typically, consumers complain of having been signed up for a premium text 

messaging subscription service (or ‘‘PSMS’’ subscription) without their knowledge or authorization, costing them $9.99 or more on their mobile phone bill 

each month. 

Some of these subscriptions purport to be for goods such as ringtones and wallpaper, but many more are for ‘‘alerts’’—a service in which the content provider 

purports to send periodic texts to the consumer with information about weather, 

traffic, news, or sports, for example, or with inspirational messages, horoscopes, 

celebrity gossip, or trivia. 

Consumers typically complain that they do not desire and do not use the goods 

and services for which they are being billed. Some consumers report that they 

do not even receive the alerts for which they have been charged. 

While consumers can sometimes recall having gotten spam text(s) or having entered their mobile phone numbers into a website immediately prior to being 

signed up for a subscription service (often to receive a ‘‘free’’ good or service), 

just as often—if not more often—consumers simply have absolutely no idea how 

they came to be signed up for the subscription. 

Consumers are often crammed by more than one content provider and, many 

times, after they have already asked their mobile carrier to place a block on 

their account to stop third party billing altogether. 

Consumers that detect that they have been crammed on their mobile phone bills 

typically do so after they have been paying for a subscription service for several 

months. 

Even consumers who do not text and have no access to the Internet (and thus, 

cannot have opted in to a third party good or service through a typical method) 

report having been crammed. Too often, these consumers are elderly.12

70 

13 Id. at 4, 6. 14See Complaint, Fed. Trade Comm’n v. T-Mobile USA, Inc., No. 2:14–cv–00967 (W.D. Wash. 

July 1, 2014), available at http://www.ftc.gov/system/files/documents/cases/140701tmobile 

cmpt.pdf (alleging, inter alia, that T-Mobile charged consumers for unauthorized third-party 

subscriptions despite clear indications that the charges were unauthorized, that T-Mobile retained a significant portion of the revenue obtained through such charges, and that T-Mobile 

bills obscured the nature and source of such charges on consumers’ mobile telephone bills). 15Letter, supra note 9, at 4. 16 Hearing, supra note 5, at 2. 17S. COMM. ON COMMERCE, SCI. AND TRANSP., 112TH CONG., supra note 2, at iii; Complaint, 

Fed. Trade Comm’n v. T-Mobile USA, Inc., No. 2:14–cv–00967, at 3–4. 18 Hearing, supra note 5, at 2. 19Letter, supra note 9, at 4. 20 Id. at 3. 21Michael F. Altschul, Senior Vice President and Gen. Counsel, CTIA: The Wireless Association, Fed. Trade Comm’n Workshop: Bill Shock and Cramming (Apr. 17, 2014, 9:00 AM) http:// 

www.fcc.gov/events/workshop-bill-shock-and-cramming. 

These are the very same issues my Office hears about when it communicates with 

Vermont consumers about mobile cramming.13 Thus, it should come as no surprise 

that my Office believes that many of the allegations contained in the Federal Trade 

Commission’s recent complaint against T-Mobile are representative of behaviors engaged in by carriers throughout the industry.14

Most Third-Party Charges are Crammed Charges 

It is my Office’s conclusion that most third-party charges are crammed charges. 

My Office has conducted three consumer surveys regarding cramming since the Fall 

of 2011. According to these surveys, in excess of 60 percent of third party charges 

are unauthorized (‘‘crammed’’). As stated above, according to our 2013 mobile third 

party authorization study, over 60 percent of third-party charges on mobile phone 

bills were crammed charges. Previously, in the fall of 2011, my Office spoke to over 

100 Vermont consumers by phone about their experience with third-party charges 

on their mobile telephone bills; a full 92 percent of the consumers said the charge 

was crammed, while only 8 percent of the consumers reported that the charge was 

authorized.15 Finally, nearly 90 percent of consumers surveyed in connection with 

my Office’s first landline billing aggregator investigation reported that the thirdparty charges on their landline bills were unauthorized.16 We are aware of no studies that contradict these findings. 

Third-Party Charges have Enriched Industry while Offering Consumers 

Little Value 

It is no secret that the landline and mobile telecommunications industries have 

profited to the tune of billions of dollars from placing third-party charges on 

landline and mobile telephone bills.17 And yet, consumers have gained very little as 

a result. Consumers not only report that they are crammed for third-party services 

that they did not want or authorize, but that they would have no reason to value 

such offerings. A number of the landline consumers my Office spoke to in connection 

with our first landline billing aggregator investigation indicated they had no reason 

to order the voice-mail service for which they were charged; the respondents gave 

such explanations as, ‘‘[I] have an answering machine [and so] would never use this 

service,’’ ‘‘I had voice-mail from the phone company [and] did not need [another 

service],’’ and ‘‘[I] can’t imagine agreeing to voice-mail since we have always had a 

personal voice recorder.’’ 18 Further, 73 percent of the consumers my Office interviewed in 2011 said they would have had no reason to purchase the goods or services for which they were billed on their mobile phone—for example, one consumer 

had been charged for stock alerts, but owned no stocks and did not follow the market.19 Finally, while consumers typically complain they do not desire and do not use 

the goods and services for which they are charged on their phone bills, some consumers report they have not even received the goods and services for which they 

have been charged.20 It is, therefore, of no surprise that there was no consumer outcry following the mobile carriers’ decision to exit the Premium Short Message Service (‘‘PSMS’’) platform—widely believed to be responsible for the lion’s share of the 

mobile cramming problem—in November of 2013. Likewise, my Office has received 

no negative feedback from consumers following Vermont’s passage of the 2011 ban 

on most third-party charges on landline bills. The only logical conclusion: contrary 

to industry talking points,21 very few, if any, consumers received any real value 

from this billion-dollar industry. 

71 

22Kolodinsky, supra note 7, at 8. 23Letter, supra note 9, at 4. 24 Hearing, supra note 5, at 2. 25Letter, supra note 9, at 3–4. 26 Id. at 7. 27 Id. at 3, n. 4 (explaining that national consumers named the following third parties and/ 

or campaigns in their complaints: ‘‘General Texting,’’ ‘‘General Texting Co.,’’ ‘‘General Texting, 

LLC,’’ ‘‘General Texting.com,’’ ‘‘Premium Axcess,’’[sic], ‘‘Premium Customer Care,’’ ‘‘Premium 

SMS,’’ ‘‘Premium Text Messaging,’’ ‘‘Text Savings,’’ and ‘‘Text Savings, LLC.’’). 28Letter, supra note 9, at 7. 29 Id. 30 Id. at 3–4. 

Cramming goes Undetected by Consumers 

Cramming is a particularly serious problem because consumers do not know the 

underlying activity—the placement of third-party charges on phone bills—is happening. Consumers do not expect third-party charges to appear on their phone bills 

because they do not understand it is possible for third parties to charge them this 

way. Often third-party charges appear on phone bills without the consumer having 

taken any action at all. This problem is exacerbated by the fact that such charges 

are not readily discernible on the billing statements. 

The data consistently show that consumer awareness about the third-party 

charges on their landline and mobile telephone bills is very low in Vermont. According to our 2013 mobile cramming survey, in excess of 78 percent of the consumers 

reported that, prior to receiving the survey, they had been unaware they could be 

billed for goods and services provided by third parties on their mobile phone bills.22

In my Office’s 2011 mobile cramming survey, significantly more than half of the consumers did not know that the third-party charge was on their bill until they were 

informed of the charge by my Office, nor did they know that they could be billed 

for third-party goods and services on their mobile phone bills prior to being informed of the charge in question.23 Finally, according to the consumers surveyed in 

connection with my Office’s first landline aggregator investigation, only 27.4 percent 

of consumers noticed the third-party charge on their landline bills within three 

months of being charged.24

The national picture is no different; consumers often do not know how they came 

to be signed up for third-party charges on their phone bills. A recent national mobile-cramming complaint analysis indicated the following were among the themes of 

consumer complaints: 

While consumers can sometimes recall having gotten spam text(s) or having entered their mobile phone numbers into a website immediately prior to being 

signed up for a subscription service (often to receive a ‘‘free’’ good or service), 

just as often—if not more often—consumers simply have absolutely no idea how 

they came to be signed up for the subscription. 

Consumers that detect that they have been crammed on their mobile phone bills 

typically do so after they have been paying for a subscription service for several 

months. 

Even consumers who do not text and have no access to the Internet (and thus, 

cannot have opted in to a third party good or service through a typical double 

opt-in method) report having been crammed. Too often, these consumers are elderly.25

Consumers also routinely report that they do not understand their mobile phone 

bills and/or they find it difficult to detect the source of the third-party charges appearing on their bills.26 Some consumers have even complained of having been 

crammed by third parties whose names (or whose subscription/product names) make 

it very difficult to detect that a third party was involved.27 Consumers often express 

confusion about their mobile phone bills, and report that they had no idea they 

could be charged on their mobile phone bills for goods and services provided by third 

parties.28 As a result, consumers are typically charged on their mobile phone bills 

for third-party subscriptions for multiple months before they recognize they have 

been crammed.29

Consumers Do Not Obtain Full Refunds for Cramming 

At least with respect to mobile cramming, consumer experience with obtaining refunds is inconsistent. While some consumers are able to get full refunds from their 

mobile carrier, many are not.30 Vermont consumers have likewise reported mixed 

success with obtaining refunds from their mobile carriers; while some are able to 

72 

31 Id. at 6. 32 Id. 33 Id. at 3–4. 34See 9 VT. STAT. ANN. tit. 9 § 2466 (2014) (prohibiting most third-party charges from being 

placed on Vermonters’ landline telephone bills). 35 Hearing, supra note 5, at 4. 36 In the approximate two years since the ban became effective, my Office has received no 

more than 2 complaints about unauthorized third-party charges on landline bills that postdate 

the ban. 37See Press Release, Office of the Attorney General of Vermont, AT&T Mobility, Sprint and 

T-Mobile Will Stop Billing Problematic Third-Party Charges (November 21, 2013), available at 

http://ago.vermont.gov/focus/news/att-mobility-sprint-and-t-mobile-will-stop-billing-problematic-third-party-charges.php (referring to a then-45-state matter). 38 Id.; Ina Fried, AT&T, Sprint, T-Mobile, Verizon Dropping Most Premium Text Service Billing in Effort to Combat Fraud, ALL THINGS D (November 21, 2013), http://allthingsd.com/ 

20131121/att-sprint-t-mobile-verizon-all-dropping-most-premium-text-service-billing-in-effort-tocombat-fraud/. 39 Note also that my Office’s 2013 study was of all third-party charges, and not just PSMS 

charges. 

obtain full refunds, others are only able to obtain a partial refund.31 Still others are 

unable to get any refund from their mobile carrier, or are promised refunds they 

never receive.32 Consumers also report that carriers refer them to the third-party 

content provider to seek refunds, and/or that they are unable to reach the content 

provider, or, if they do reach the content provider, are unable to get a full, or even 

partial, refund.33

The Time is Ripe for a New Approach 

After over a decade of fighting landline cramming with enforcement actions 

against third-party merchants and billing aggregators, my Office successfully advocated for legislation prohibiting most third-party charges on landline telephone 

bills.34 This statutory approach takes account of actual consumer expectations—i.e., 

that consumers do not anticipate they will be charged on their phone bills for thirdparty goods and services—is straightforward to enforce, and does not interfere with 

other methods of receiving payment for services provided.35 Most importantly, we 

believe the law has worked.36

My Office decided to take another approach when turning our attention to mobile 

cramming. After launching dozens of investigations into third-party content providers and mobile billing aggregators, my Office began pursuing carriers for billing 

for unauthorized charges, first on behalf of Vermont, and then on behalf of—now— 

46 states.37 In November of 2013, the Nation’s four largest mobile carriers—Verizon, 

AT&T, Sprint and T-Mobile—decided to stop charging their customers for commercial PSMS, a platform which accounted for the majority of third-party charges on 

mobile phones, and for the overwhelming majority of cramming complaints.38 My 

Office believes that billing for commercial PSMS has now ceased industry-wide, and 

has heard from Offices around the country that mobile-cramming complaints have 

slowed to a trickle, no doubt as a result. While the mobile carriers’ exit of PSMS 

is undoubtedly very positive for consumers, it was a voluntary move on the part of 

industry and carries with it no guarantee of future action with regard to PSMS or 

other, similar platforms such as Direct to Consumer Billing (‘‘DCB’’). Non-PSMS mobile cramming complaints are few in number, but do exist.39 Moreover, we expect 

platforms, such as DCB, that are more appropriate for consumption by consumers 

with smartphones (rather than feature phones, to which PSMS was keyed) to be on 

the rise. 

It is my opinion that a new approach would be appropriate on a Federal level as 

well. While my Office’s legislative advocacy has effectively stopped landline cramming in Vermont, we believe our law-enforcement leadership has merely pressed the 

‘‘pause’’ button on mobile cramming. As we look forward to a world that becomes 

more mobile-device oriented, the time is right for all of us to take stock of the major 

lessons learned—the potential for enormous consumer loss, low consumer awareness 

about the practice, the difficulty of getting consumer redress—to ensure that cramming does not fool us again. 

Senator BLUMENTHAL. Thank you very much, Attorney General 

Sorrell. 

Mr. LeBlanc? 

73 

STATEMENT OF TRAVIS LEBLANC, 

ACTING CHIEF, ENFORCEMENT BUREAU, 

FEDERAL COMMUNICATIONS COMMISSION 

Mr. LEBLANC. Senator Blumenthal, Ranking Member Thune, and 

Senator Johnson, my name is Travis LeBlanc. I am the Acting 

Chief of Enforcement at the Federal Communications Commission. 

Thank you for the opportunity to appear before you to highlight the 

FCC’s efforts to deter, disrupt, and dismantle cramming, the fraudulent practice of placing unexpected or unauthorized charges on 

consumers’ telephone bills. 

Cramming is a significant problem, causing countless consumers 

to unwittingly open their wallets for products and services they 

never wanted. A report released in 2011 by Chairman Rockefeller 

showed that phone companies placed approximately $2 billion in 

third-party charges on their subscribers’ landline bills each year 

and that most of these charges were unauthorized. In many of 

these cases, consumers were unaware that they had been crammed 

because charges were buried in multi-page bills, not clearly described, or small enough in amount to go unnoticed. As consumers 

embrace paperless billing and automated payments, the propensity 

increases for cramming to go undetected. Consumers’ increased reliance on mobile phones makes the problem of cramming even 

thornier. 

Today 90 percent of American adults have cell phones and a majority own smart phones. These phones are used not only for calls 

but also for a wide array of purchases in the real and virtual world. 

While the adoption of new mobile technologies and services presents exciting new opportunities for consumers, it also creates new 

opportunities for crammers who, I should add, target not only adult 

consumers but also children, small businesses, nonprofits, and religious organizations. We must make sure that our consumer protections keep up with new technologies and billing practices. 

Since 2010, of the thousands of cramming complaints the FCC 

has received, the proportion of those about unauthorized charges 

on wireless bills has grown from 15 to 58 percent. To be clear, 

these are complaints from consumers who believe they were 

crammed. Yet, because so many consumers do not even know they 

have been crammed, these numbers are just the tip of the iceberg. 

As the Federal agency with primary oversight of the Nation’s 

telephone carriers, the FCC has approached the problem of cramming comprehensively using a combination of enforcement, regulation, and consumer education. The Commission has taken 14 enforcement actions since 2010 against carriers for placing unauthorized charges on consumers’ phone bills. These actions amount to 

approximately $123 million in monetary forfeitures, settlements, 

and refunds to injured consumers. Just in the last 2 weeks, we 

have taken three actions against carriers involving over $10.5 million in proposed penalties and payments to the Treasury. 

A prime area for mobile cramming enforcement involves carriers 

who have charged their own subscribers via premium text messages around $10 a month for unauthorized third-party services 

such as horoscopes and stock quotes. This is the alleged fraudulent 

activity at issue in the FCC’s cramming investigation of T-Mobile 

and the Federal Trade Commission’s complaint against it. We have 

74 

no reason to believe that T-Mobile was the only carrier to engage 

in this conduct. To leverage our shared expertise and resources, the 

Federal Communications Commission worked collaboratively with 

the FTC on the T-Mobile investigation, and we look forward to continuing our partnerships with the FTC, State Attorneys General, 

and other law enforcers in the future. 

We have also targeted our enforcement toward mobile and 

landline carriers who place unauthorized charges for their own 

services on customers’ bills and, of course, carriers who act as 

third-party crammers by placing unauthorized charges on other 

carriers’ bills. This month, we entered into a $1.2 million settlement with Assist 123 for allegedly placing unauthorized PSMS 

charges for subscription services like movie listings and lottery results on consumers’ wireless and landline phone bills. 

On the regulatory side, the FCC adopted truth-in-billing rules 15 

years ago designed to help consumers detect cramming or other 

fraud in connection with their telephone bills. The Commission has 

now asked whether it should prohibit carriers from billing for 

third-party products and services unless the subscriber expressly 

opts in, whether it should ban carriers from charging for any thirdparty products and services, and whether it should expand all of 

the existing truth-in-billing rules to wireless carriers so that thirdparty charges are more conspicuous to consumers. It is expected 

that the FCC will consider any rule changes within the next several months. 

On the education side, the FCC has been engaging consumers 

through written and video guides, tip sheets, and other materials 

aimed at empowering them to identify and report cramming. The 

Commission has also held a comprehensive public workshop on 

cramming in 2013, and to keep abreast of new and emerging kinds 

of cramming, as well as new carrier billing practices, the FCC is 

planning to host a workshop or similar event on these topics in the 

next 6 months. 

In sum, through its enforcement, regulatory, and consumer education efforts, the FCC is using its authority to protect consumers 

from these unauthorized charges, and we will continue to do so 

whenever and wherever crammers exploit innovative communications technologies, consumer trust, and the pocketbooks of American families. 

Senator Blumenthal, Ranking Member Thune, and members of 

the Committee, it has been an honor to appear before you today, 

and I look forward to answering your questions. 

[The prepared statement of Mr. LeBlanc follows:] 

PREPARED STATEMENT TRAVIS LEBLANC, ACTING CHIEF, ENFORCEMENT BUREAU, 

FEDERAL COMMUNICATIONS COMMISSION

Chairman Rockefeller, Ranking Member Thune, and members of the Committee, 

I am Travis LeBlanc, Acting Chief of the Enforcement Bureau at the Federal Communications Commission. Thank you for the opportunity to appear before you to 

highlight the FCC’s efforts to combat the harmful practice of placing unexpected or 

unauthorized charges on consumers’ telephone bills, a practice known as cramming. 

The Cramming Problem 

Cramming is a significant problem, and one that, by its nature, has caused countless consumers to unwittingly open their wallets for products and services they 

never wanted. A report released in 2011 by Chairman Rockefeller after a year-long 

75 

1 Unauthorized Charges on Telephone Bills, U.S. Senate Committee on Commerce, Science & 

Transportation, Office of Oversight & Investigations, Majority Staff, Staff Report for Chairman 

Rockefeller (rel. July 12, 2011), available at http://www.commerce.senate.gov/public/?a=Files 

.Serve&Filelid=3295866e-d4ba-4297-bd26-571665f40756. 2 Empowering Consumers to Prevent and Detect Billing for Unauthorized Charges (‘‘Cramming’’), Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 4436, 4437 

(2012) (‘‘FCC Cramming Order’’). 3 Id. at 4444. 4 Citizens Utility Board, Analysis: Frequency of Cellphone ‘‘Cramming’’ Scam Doubles in Illinois, CUB Concerned Wireless Customers Targeted as Landline Law Tighten (Dec. 4, 2012), 

available at http://www.citizensutilityboard/pdfs/NewsReleases/20121204lCellPhoneCram 

ming.pdf. 5Pew Research Internet Project, Cell Phone and Smartphone Ownership Demographics, available at http://www.pewinternet.org/data-trend/mobile/cell-phone-and-smartphone-ownershipdemographics/. 6 Centers for Disease Control and Prevention, National Center for Health Statistics, Wireless 

Substitution: Early Release of Estimates From the National Health Interview Survey, July–December 2013, (July 2014), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/ 

wireless201407.pdf. 7Pew Research Internet Project, Cell Phone and Smartphone Ownership Demographics, available at http://www.pewinternet.org/data-trend/mobile/cell-phone-and-smartphone-ownershipdemographics/. 8See, e.g., Ingrid Lunden, ‘‘Amazon’s Carrier Billing Deal With Bango To Kick In This Year— 

Changes For The Appstore And Amazon Ahead?,’’ TechCrunch, Mar. 20, 2013, available at 

http://techcrunch.com/2013/03/20/amazons-carrier-billing-deal-with-bango-to-kick-in-this-year 

-changes-for-the-appstore-and-amazon-ahead/; Kevin Parrish, ‘‘Google Play Offers Option to 

Charge Purchases to Your Bill,’’ Tom’s Guide, May 3, 2012, available at http://www 

.tomsguide.com/us/Google-Play-Carrier-Billing-AT–T-Android-Sprint,news-15070.html. 

investigation of cramming on landline telephone bills showed that telephone companies placed approximately $2 billion worth of third-party charges on their subscribers’ bills each year, and that most of these charges were unauthorized.1 Fifteen 

to twenty million U.S. households are estimated to have been victims of cramming 

on their landline telephone bills,2 and most do not even know it. Historically, many 

consumers have been completely unaware that their carriers are permitted to 

charge them for third-party products and services, and do not know to look for thirdparty charges on their telephone bills. Even those who are aware of the possibility 

often fail to spot unauthorized charges on their bills, because the charges have been 

hidden from scrutiny: they have been buried in multi-page bills, not clearly described, or small enough in amount to go unnoticed.3 Consumer deception is a hallmark of cramming. The Commission took action in 2012 to help wireline consumers 

detect—or simply avoid—cramming, but unfortunately consumers continue to be 

crammed. 

Today’s hearing is about the fact that cramming is not just a problem for those 

with landline telephones. Since 2010, the FCC has received more than 5,000 complaints about cramming, and the proportion of those about unauthorized charges on 

wireless bills has grown from about 15 percent in 2008–2010 to 58 percent in 2013. 

Because so many consumers do not even realize that they have been crammed, or 

lack the time or knowledge to complain to the FCC, these numbers represent just 

the tip of the iceberg. A 2012 analysis by the Illinois Citizens Utility Board found 

that the percentage of fraudulent third-party charges on Illinois consumers’ wireless 

bills skyrocketed in just one year, from about 26 percent to 51 percent.4 It is critical 

that cramming on wireless bills not be overlooked, especially now, when Americans 

are becoming increasingly reliant on their mobile phones. The Pew Research Center 

estimates that 90 percent of American adults have a cell phone, including 74 percent of Americans 65 and over.5 According to the Centers for Disease Control and 

Prevention, two in five U.S. households have ‘‘cut the cord’’ entirely from their 

landline phones and are using only mobile phones.6

Crammers are predators. They evolve with consumers. As consumers migrate to 

wireless phones and away from landlines, we expect that the same kind of predators 

that profited from unauthorized landline charges will look to wireless bills for new 

and creative ways to defraud consumers. Today, a majority of Americans (58 percent) have a smartphone.7 The rise in wireless phone dependence introduces new 

ways for bad actors to profit from sneaky billing practices. This is because modern 

smartphones are not just phones that facilitate only voice communications, but sophisticated handheld computers that enable consumers to engage in a wide array 

of activities, from interactive gaming, to buying a coffee in a cafe ́, to shopping online 

from wherever they are. Consumers with Android phones, for example, can charge 

all of their app purchases to their phone bills, a form of direct-carrier billing.8 The 

more consumers’ mobile phone bills become like credit card bills—reflecting a host 

76 

9Press Release, U.S. Senate Committee on Commerce, Science, & Transportation, Another 

Major Phone Company Agrees to End Third-Party Billing on Consumer Phone Bills (Mar. 28, 

2012), available at http://www.commerce.senate.gov/public/index.cfm?p=PressReleases&Content 

Recordlid=0245033e-6fe4-420d-8ed3-cdb39ed6537f. 10Press Release, Office of the Vermont Attorney General, AT&T Mobility, Sprint, and T-Mobile Will Stop Billing Problematic Third-Party Charges (Nov. 21, 2013), available at http:// 

www.atg.state.vt.us/news/att-mobility-sprint-and-t-mobile-will-stop-billing-problematic-third-par 

ty-charges.php. 11 47 U.S.C. § 201(b). 12Long Distance Direct Direct, Inc., Notice of Apparent Liability for Forfeiture, 14 FCC Rcd 

314 (1998). 

of different purchases—the more difficult it may become to spot unauthorized 

charges. 

If there is any good news, it is that in 2012, major landline carriers announced 

that they would discontinue most third-party billing,9 and in 2013, major wireless 

carriers followed suit,10 at least with respect to third-party billing via premium 

short messaging services, or PSMS. Perhaps as a result of these agreements and 

increased government scrutiny, cramming complaints are trending downward. Of 

course, to the extent that the practice of cramming decreases due to private sector 

commitments, that is commendable. Unfortunately, that has not proven to be a silver bullet to the heart of cramming; we have not seen the practice of cramming 

cease entirely. Therefore, strong enforcement is still needed and perhaps additional 

regulation as well. Protecting consumers is the common goal that we all share, and 

the FCC stands ready to use the full spectrum of its authority to thwart bad actors 

and prevent consumers from being defrauded. 

The FCC’s Role in Combatting Cramming 

As the Federal agency with primary oversight of the Nation’s telephone carriers, 

the FCC approaches the problem of cramming through a combination of enforcement, regulation, and consumer education. On the enforcement side, the Commission has taken fourteen enforcement actions since 2010 for placing unauthorized 

charges on consumers’ phone bills. Collectively, these actions are valued at no less 

than $122,750,000, including monetary forfeitures the Commission has sought to 

impose, payments the FCC has ordered enforcement targets to make to the U.S. 

Treasury in connection with settlements, and refunds the FCC has ordered the targets to make to injured consumers. Just in the last two weeks, the FCC has taken 

three of these enforcement actions, which proposed over $10.5 million in penalties 

and payments to the U.S. Treasury. 

On the regulatory side, the FCC has adopted ‘‘truth-in-billing’’ rules designed to 

help consumers detect cramming or other unauthorized activities associated with 

their phone service, and is considering expansion of the rules. It is expected that 

the Commission will consider any rule changes within the next several months. We 

also anticipate that the Commission will conduct a workshop or similar event in 

light of continually evolving third-party billing technologies and practices. And on 

the education side, the FCC has been engaging consumers through written and 

video guides, tip sheets, and other materials aimed at empowering them to identify 

and report cramming. 

The FCC’s power to address cramming comes from its statutory authority over 

carriers. The Communications Act of 1934 is the FCC’s enabling statute, and Section 201(b) is one of its cornerstones. That section declares unlawful all ‘‘unjust and 

unreasonable’’ charges and practices ‘‘for and in connection with’’ an ‘‘interstate or 

foreign or communication service by wire or radio.’’ 11 Over fifteen years ago, the 

FCC found that cramming constituted an unjust and unreasonable practice.12 Section 201(b), as well as Section 258, the anti-slamming provision of the Act, are the 

sources of authority for its truth-in-billing rules. 

Enforcement 

Under the Communications Act, the FCC has a variety of enforcement tools available to achieve compliance. Most often, the FCC initiates a forfeiture proceeding for 

violations of the Communications Act, including Section 201(b). Generally speaking, 

the first step in the process is for the FCC to issue a notice of apparent liability 

for forfeiture, or NAL. The Communications Act authorizes the FCC to impose a 

penalty of up to $160,000 for each violation, or each day of a continuing violation, 

up to a maximum of $1,575,000 for a continuing violation. Typically, the FCC proposes a forfeiture of $40,000 for each apparent cramming violation, although in recent cases it has substantially increased that amount for egregious violations. The 

Enforcement Bureau is generally open to settling a matter in lieu of initiating a forVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00080 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
77 

13Press Release, Federal Communications Commission, FCC Investigates Cramming Complaints Against T-Mobile, (rel. July 1, 2014), available at http://transition.fcc.gov/Dailyl Releases/DailylBusiness/2014/db0701/DOC-327998A1.pdf. 14 Cheap2Dial Telephone, LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 8863 (2011) ($3,000,000); Main Street Telephone Co., Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 8853 (2011) ($4,200,000); Norristown Telephone Co., LLC, Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 8844 (2011) ($1,500,000); VoiceNet Telephone, LLC, Notice of Appar- ent Liability for Forfeiture, 26 FCC Rcd 8874 (2011) ($3,000,000). 15 Assist 123, LLC, Order, 2014 WL 3512917 (Enf. Bur. 2014). 16Optic Internet Protocol, Inc., Notice of Apparent Liability for Forfeiture, 2014 WL 3427582 

(rel. July 14, 2014) ($7,620,000): Central Telecom Long Distance, Inc., Notice of Apparent Liability for Forfeiture, 2014 WL 1778549 (rel. May 5, 2014) ($3,960,000); U.S. Telecom Long Distance, Inc., Notice of Apparent Liability for Forfeiture, 29 FCC Rcd 823 (2014) ($5,230,000); Advantage Telecommunications Corp., Notice of Apparent Liability for Forfeiture, 28 FCC Rcd 6843 

(2013) ($7,600,000); Consumer Telecom, Inc., Notice of Apparent Liability for Forfeiture, 28 FCC Rcd 17196 (2013) ($3,560,000). 

feiture proceeding. As a condition of settlement, the FCC may require a carrier to 

reimburse consumers who were injured by its unlawful practices. 

The FCC’s cramming enforcement actions have arisen from three basic kinds of 

bad conduct. The first is what I will call ‘‘billing carrier cramming,’’ and involves 

a carrier, either landline or wireless, billing its own subscriber for a third-party 

product or service. In connection with mobile service in the United States, this has 

most often involved the carrier charging its subscribers, via PSMS, around $10 per 

month for services such as flirting tips, horoscopes, lottery results, and stock quotes. 

This is the alleged fraudulent activity at issue in the FCC’s recently-announced investigation of T-Mobile, and the Federal Trade Commission’s complaint in Federal 

district court against the carrier.13 The FCC and the Federal Trade Commission 

worked collaboratively on this investigation in order to harmonize our respective enforcement as well as to leverage our respective expertise. T-Mobile allegedly 

crammed hundreds of millions of dollars of PSMS charges onto its subscribers’ 

phone bills from third parties whom the carrier knew, or should have known, did 

not have authorization to bill its subscribers. Indeed, some of the third parties had 

refund rates, or ‘‘charge-backs,’’ of 40 percent, and some had been sued for fraud. 

We are pleased with our collaboration with the Federal Trade Commission on the 

T-Mobile investigation and look forward to continuing to partner with the Federal 

Trade Commission in the future. 

The second type of FCC cramming enforcement action is what I will call ‘‘thirdparty carrier cramming.’’ It involves a fraudulent carrier placing an unauthorized 

charge for its own product or service on a consumer’s phone bill issued by another 

carrier, typically the consumer’s local phone bill. Fraudulent conduct of this type 

was at issue, in four NALs the Commission released in 2011, which collectively proposed forfeitures of nearly $12 million.14 These third-party carriers assessed charges 

for their own ‘‘dial-around’’ long-distance service of around $10–15 per month on 

consumers’ local phone bills. Each of the third-party carriers assessed its charges 

on at least tens of thousands—if not hundreds of thousands—of bills for the service 

in the year preceding the enforcement action. When the FCC investigated how many 

consumers the carriers had actually provided service to during that time, incredibly, 

two of the carriers disclosed that they had serviced only about 20 to 25 consumers, 

and the other two carriers could or would not answer the question. Further, earlier 

this month, the FCC settled with another carrier, Assist 123, LLC, for allegedly 

placing unauthorized PSMS charges for subscription services like directory assistance, movie listings, driving directions, and lottery results, on consumers’ landline 

and wireless phone bills. The settlement requires Assist 123 to pay $1.3 million to 

the U.S. Treasury.15

Another flavor of ‘‘third-party carrier cramming’’ is often connected with ‘‘slamming’’—the unauthorized switch of a consumer’s preferred carrier. In the last fourteen months, the FCC has issued five NALs against carriers for apparently switching or attempting to switch consumers’ long-distance service through deceit and 

trickery, and then charging the consumers for a new carrier’s service they did not 

authorize or want. Collectively, the NALs proposed forfeitures of nearly $28 million.16 According to the NALs, the modus operandi for most of these third-party carriers involved their agents cold-calling consumers, pretending to be affiliated with 

a consumer’s existing provider, offering improved or upgraded service, recording the 

consumer supposedly authorizing such improved or upgraded service with the existing provider, and then using that ‘‘authorization’’ to switch, or attempt to switch, 

the consumer’s existing long-distance service to the third-party carrier. In several 

of these cases, the FCC found the conduct so egregious that it proposed additional 

penalties beyond doubling or tripling the ‘‘base’’ forfeiture of $40,000 for cramming. 

78 

17See, e.g., Advantage Telecommunications Corp NAL., supra note 16. 18 AT&T, Order & Consent Decree, 27 FCC Rcd 13492 (Enf. Bur. 2012); Cellco Partnership 

d/b/a Verizon Wireless, Order & Consent Decree, 25 FCC Rcd 15105 (Enf. Bur. 2010). 19See FCC Cramming Order, supra note 2. 20 47 C.F.R. § 64.2400–2401. 21Federal Communications Commission, Cramming: Unauthorized, Misleading, or Deceptive 

Charges Placed on Your Telephone Bill (last visited July 24, 2014), available at http://www. 

fcc.gov/guides/cramming-unauthorized-misleading-or-deceptive-charges-placed-your-telephoneIndeed, in one enforcement action that the FCC took this month, the agency found 

that the carrier, Optic Internet Protocol, Inc., apparently not only may have tricked 

consumers to obtain purported authorization, but also fabricated the recordings it 

offered to regulatory authorities as proof of authorization. 

In some of the slamming/cramming cases, the FCC has alleged that the rogue carrier also billed consumers directly for its service, because the rogue carrier was not 

successful in pushing its charges onto the consumers’ local exchange carrier bill. 

Conduct of this type does not involve cramming for unauthorized third-party 

charges, because the carrier is placing the charge for its own service on its own bill. 

This conduct nevertheless involves placing an unauthorized charge on a telephone 

bill, and the FCC has found that it also constitutes an unjust and unreasonable 

practice that violates Section 201(b) of the Communications Act.17

Since 2010, the FCC has pursued two major wireless carriers for allegedly placing 

unauthorized charges for their own services on their own bills. Both cases involved 

the carriers allegedly charging their subscribers for data services the subscribers did 

not expressly authorize.18 The FCC ordered both carriers to notify affected customers of the applicable charges, to offer refunds, and to make a payment to the 

U.S. Treasury in lieu of a penalty. One of the cases required the carrier to refund 

at least $52.8 million to affected consumers, and to pay $25 million to the U.S. 

Treasury. 

Rulemaking/Regulation 

The FCC is also addressing cramming on the regulatory side. Fifteen years ago, 

the FCC adopted its first ‘‘truth-in-billing’’ rules, in order to help consumers detect 

cramming, slamming, and other fraud in connection with their telephone bills and 

telecommunications services. In 2009, the FCC issued a Notice of Inquiry to explore 

whether, and if so, how, to amend its ‘‘truth-in-billing’’ rules; in 2011, in response 

to continued cramming problems, the FCC issued a Notice of Proposed Rulemaking 

to strengthen its rules; and in 2012, the agency in fact did so.19 Among other things, 

the current ‘‘truth-in-billing’’ rules require both landline and wireless carriers to 

clearly and conspicuously: (1) identify the name of each service provider associated 

with a billed charge; (2) identify any change in any service provider from the preceding billing cycle; (3) provide a brief, non-misleading, plain language description 

of the services billed; and (4) display a toll-free number for subscribers to dispute, 

or inquire about, any billed charge. The ‘‘truth-in-billing’’ rules also require 

landline—but not wireless—carriers to: (1) separate charges by service provider; (2) 

set forth charges from third parties for non-telecommunications services in a distinct section of the bill; and (3) notify subscribers that the carrier offers subscribers 

the opportunity to block third-party charges on their bills, if in fact the carrier does 

so.20

When the FCC strengthened its rules in 2012, it also issued a Further Notice of 

Proposed Rulemaking on whether it should expand the coverage of the rules still 

more. The FCC asked whether it should expand all of the existing rules to wireless 

carriers; whether it should prohibit carriers from assessing charges for third-party 

products and services on a subscriber’s bill absent the subscriber expressly opting 

in; or whether it should altogether ban carriers from assessing charges for thirdparty products and services, at least on the same bills that contain charges for regulated telecommunications services. The FCC asked for additional comment on these 

and other issues last year, with the comment period officially closing in December 

2013. The FCC is now poised for action in that docket, and expects to consider any 

rule changes within the next several months. 

To keep abreast of new and emerging kinds of cramming as well as new carrier 

billing technologies and practices, the FCC is also planning to host a workshop or 

similar event on these topics in the next six months. 

Consumer Education 

In addition to its enforcement and regulatory work, the FCC also works to educate consumers about cramming. The agency has issued both printed and video consumer guides, as well as tip sheets on how to identify and report cramming.21 The 

79 

bill; Federal Communications Commission, Cramming Tip Sheet for Consumers (last visited 

July 24, 2014), available at http://www.fcc.gov/encyclopedia/cramming-tip-sheet-consumers. 

Commission also held a comprehensive public workshop on cramming in 2013. 

These outreach efforts, many of which involved close coordination with groups such 

as AARP, are intended to alert consumers to the fact that their carriers may charge 

them for third-party products and services on their telephone bills, and encourage 

consumers to review their bills carefully each month, paying attention to even small 

charges, as well as the descriptions offered for all charges, and who is responsible 

for them. The materials also encourage consumers to call their carriers about any 

charges they question, and any provider identified on the bill associated with such 

charges. In addition, our consumer education materials explain the FCC’s ‘‘truth-inbilling’’ rules in plain English, and tell consumers how to file complaints with not 

only the FCC, but also the Federal Trade Commission and state public service commissions. 

Enforcement Bureau Reforms 

The FCC is proud of these strong enforcement actions, which are deterring cramming, but we will continue our commitment to do more to protect consumers. Since 

I joined the FCC four months ago, my first priority has been to make sure the great 

people and resources of the Enforcement Bureau are used as effectively and efficiently as possible. The Enforcement Bureau is embracing a modern enforcement 

philosophy that says we need to be smarter about how to deploy our limited resources. In many instances, that means working more closely and more frequently 

with our fellow law enforcement partners at the Federal and state levels, just as 

we have in the cramming context. 

We are focused on ensuring the widest possible compliance with the law and rules 

that have the most impact on Americans in the 21st Century. For example, America’s growing reliance on wireless phones leaves them increasingly vulnerable to unlawful privacy-invading robocalls and text-message spam. Cellular and Global Positioning System (GPS) jammers that can disrupt critical infrastructure and public 

safety networks are more and more widely available and must also continue to be 

the focus our enforcement efforts. And the recently announced Strike Force within 

the Enforcement Bureau will combat fraud, waste, and abuse in the Universal Service Fund (USF). It is our duty to vigorously protect the integrity of the USF programs by ensuring that program funds are used for their intended purposes. 

We are also in the vanguard of the FCC’s Commission-wide Process Reform efforts. For many outside the Commission, our most significant efforts in this area are 

already evident in our firm commitment to speedy resolution of both routine and 

significant matters. The reforms we have already adopted, and those in process, will 

ensure that the Commission’s team of prosecutors will have the best chance at doing 

the most good for the greatest number of Americans. 

Fundamentally, we are creating an Enforcement Bureau that is an efficient and 

smart prosecutorial unit. We are striving to be data-driven, nimble, creative, strategic and collaborative. Ultimately, I hope this will be good for consumers, good for 

industry, and just plain good government. 

Conclusion 

The FCC is the Nation’s Federal regulatory authority over telecommunications 

carriers, and Congress has empowered the agency to combat unjust and unreasonable practices by carriers, as well as to adopt rules governing the conduct of carriers. Through its enforcement, regulatory, and consumer education work, the FCC 

is actively using these powers to address cramming and other unlawful acts by carriers that place unexpected and unauthorized charges on consumers’ phone bills. We 

look forward to continued cooperation with the Committee and other regulatory authorities at both the Federal and state levels toward the common goal of protecting 

consumers from these unjust and unauthorized charges. 

Senator BLUMENTHAL. Thank you very much. 

Mr. Altschul? 

STATEMENT OF MICHAEL F. ALTSCHUL, 

SENIOR VICE PRESIDENT AND GENERAL COUNSEL, 

CTIA—THE WIRELESS ASSOCIATION®

Mr. ALTSCHUL. Thank you, Senator Blumenthal, Ranking Member Thune, and members of the Committee. On behalf of CTIA, 

80 

thank you for the opportunity to participate in today’s hearing and 

address the steps the wireless industry has taken and is taking to 

address cramming. 

At the outset, I want to be clear. CTIA and its members share 

the Committee’s concern, the regulators’ concern, and the public’s 

concern about cramming. Placing an unauthorized, misleading, or 

deceptive third-party charge on a consumer’s wireless bill is wrong 

and simply not acceptable. 

That is why in November 2013, wireless carriers ended their support of premium SMS services except for charitable and political 

giving and inmate calling services. Moreover, carriers allow customers to block all third-party charges and have worked to make 

it easier for consumers to obtain refunds for unauthorized or fraudulent charges. 

CTIA originally became involved in the industry’s efforts police 

premium SMS through the association’s role as the common short 

code administrator. As I think you know, common short codes are 

used by commercial entities ranging from Dunkin’ Donuts to 

Walmart, as well as by noncommercial entities, including government, charities, and political campaigns. From their start, users of 

common short codes issued by CTIA have been subject to written, 

publicly available guidelines administered both by the Mobile Marketing Association and CTIA. Not only do these guidelines reflect 

broadly accepted consumer best practices, between 2008 and 2010 

these guidelines were incorporated as industry requirements in a 

series of State consent actions. 

It is fair to say that CTIA and its carrier members discovered 

that trust alone was not sufficient to ensure compliance with these 

guidelines. The industry stepped up its efforts from trust to trust 

but verify through industry and individual carrier monitoring of all 

short code campaigns. And then when fraudsters went to great 

lengths to evade these monitoring efforts, CTIA added vetting to its 

monitoring efforts to confirm the identity of content providers and 

root out known offenders. 

Although the annual complaint rates published by the FCC, 

FTC, and provided by State Attorneys General do not suggest a 

significant problem in this area as a result of both its own investigations and the Federal and State enforcement actions, the industry recognized that wireless customers and carriers were being victimized by determined fraudsters who crafted elaborate schemes to 

defeat the industry’s self-regulation and third-party monitoring. Accordingly, wireless carriers chose to discontinue support for premium short code campaigns, as you have noted, in late last year 

except for the charitable and political campaign donations. 

CTIA continues to monitor and vet all common short code leases 

and lessees. When monitoring identifies a problem, that information is sent to the carriers so they may take corrective action. 

These efforts and the national carriers’ decisions to end support for 

premium short code campaigns should combine to significantly reduce the opportunity for third parties to use carrier billing platforms as a tool to commit fraud. 

With the elimination of premium short codes for commercial 

campaigns, the remaining opportunities for third-party charges to 

appear on wireless bills are limited to instances involving direct 

81 

carrier billing. Although CTIA has no direct involvement in this 

area, it is our understanding that each of the carriers employs 

stringent vetting and safeguards to guard against abuse of this 

process, and as reported to this committee and included in the staff 

report, there have been very few consumer complaints associated 

with direct carrier billing and refund rates are around 1 to 1.5 percent. 

As this committee’s staff report recommends, the wireless industry is prepared to vigilantly monitor evolving third-party billing 

practices to make sure that bad actors do not find ways to penetrate barriers to cramming on direct carrier billing and other new 

systems, evaluate consumer protection gaps that have occurred in 

the context of landline and PSMS to establish consistent policies 

going forward that will provide consumers with appropriate transparency to the process and a clear avenue of recourse where unauthorized charges occur. 

Moreover, the wireless industry already has adopted many of the 

recommendations proposed by the Federal Trade Commission staff 

report, including giving consumers the option of blocking all thirdparty charges on their phone accounts, monitoring advertisements 

and vetting merchants to ensure that advertising, marketing, and 

opt-in processes are not deceptive and the price information is 

clearly disclosed, ensuring that consumers provide their express informed consent to charges before it is billed to their mobile bill, as 

well as investigating and taking appropriate action when consumer 

complaints indicate a merchant may be cramming charges. 

And we look forward to considering other ways to make thirdparty charges more clear and conspicuous on carrier bills and enabling consumers to dispute suspicious charges and obtain refunds 

for unauthorized charges through a clear and consistent dispute 

resolution process. 

So thank you again for this opportunity to address your concerns 

and address the steps the wireless industry has taken to safeguard 

wireless consumers from unauthorized, misleading, or deceptive 

charges. 

[The prepared statement of Mr. Altschul follows:] 

PREPARED STATEMENT OF MICHAEL F. ALTSCHUL, SENIOR VICE PRESIDENT AND

GENERAL COUNSEL, CTIA—THE WIRELESS ASSOCIATION®

On behalf of CTIA—The Wireless Association®, thank you for the invitation to 

participate in today’s hearing. At the outset, I want to be clear—CTIA and its members share the Committee’s concern about cramming. Placing an unauthorized, misleading, or deceptive third party charge on a consumer’s wireless bill is wrong and 

simply not acceptable. That’s why, in November of 2013, wireless carriers ended 

their support of Premium SMS services, except for charitable and political giving 

and inmate calling services. Moreover, carriers allow customers to block all thirdparty charges and have worked to make it easier for consumers to obtain refunds 

for unauthorized or fraudulent charges. 

CTIA became involved in the industry’s efforts to police Premium SMS and the 

associated carrier billing for these services through the Association’s role as the 

Common Short Code Administrator. Common Short Codes allow mobile users to engage and interact with a brand or service by using a short five-digit address to send 

text messages to a mobile application. CTIA, as the Common Short Code Administrator, assigns Common Short Codes to applicants allowing a single code to be used 

for the same application across multiple wireless service providers. Common short 

codes are used by commercial entities ranging from Dunkin Donuts to Wal-Mart, 

as well as by non-commercial entities, including government, charities, and political 

campaigns. 

82 

1http://www.fema.gov/text-messages 

2https://www.text4baby.org/. 

3Pew Internet and American Life Project, REAL TIME CHARITABLE GIVING, (Jan. 12, 

2012), available at http://pewinternet.org/∼/media//Files/Reports/2012/Real%20Time%20Cha 

ritable%20Giving.pdf at 2. 4http://www.huffingtonpost.com/2012/08/23/obama-text-message-donationslnl1824250 

.html and http://www.newsmax.com/Politics/Romney-text-messages-donations/2012/08/31/id/ 

450534/. 5http://www.txtcollect.com/. 

6http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless201407.pdf at 2. 7http://www.mmaglobal.com/files/bestpractices.pdf. 

8http://www.ctia.org/docs/default-source/default-document-library/industry-best-practices.pd 

f?sfvrsn=0, http://www.ctia.org/docs/default-source/default-document-library/guidelines-for-mo 

bile-giving-via-wireless-carrier-s-bill.pdf?sfvrsn=0 and http://www.ctia.org/docs/default-source/ 

default-document-library/guidelines-for-federal-political-campaign-contributions-via-wireless-carrier-s-bill.pdf?sfvrsn=0. 9 Empowering Consumers to Prevent and Detect Billing for Unauthorized Charges (‘‘Cramming’’), Report and Order and Further Notice of Proposed Rulemaking 27 FCC Rcd 4436 (rel. 

April 27, 2012)(at para. 20). 10 Id. at para. 20–21. The last time the FCC directly reported wireless-related cramming figures was in 2002—at which time there were 92 complaints. Since then, wireless-related cramming complaints were too few to be included in the FCC’s quarterly reports on Informal Complaints and Inquiries. 11The FTC’s 2013 Consumer Sentinel report lists the number of complaints about ‘‘Mobile: 

Unauthorized Charges or Debits’’ for 2011, 2012, and 2013 as 626, 714, and 363. See http:// 

www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-january-december-2013/sentinel-cy2013.pdf at 84. To put those numbers in context, in 2011 there were 

306,300,207 active subscriber units, so complaints averaged 2.0 per million subscribers. In 2012, 

the wireless industry served 321,716,905 active subscriber units, with complaints amounting to 

Short code campaigns can be employed to provide life saving information. For example, the Federal Emergency Management Agency’s text message program offers 

regular safety tips for specific disaster types and allows for a search to find the 

nearest shelters and disaster recovery centers by texting ‘‘43362’’ (‘‘4FEMA’’).1 Another highly successful program is the Text4Baby campaign that has leveraged the 

power of mobile technology to help more than 700,000 new mothers and expectant 

women keep themselves and their babies healthy since the program’s creation.2 Not 

all short code campaigns are so serious—they also can be used for purposes as varied as voting for one’s favorite player or summoning an usher during a Major 

League baseball game. 

While the overwhelming majority of short code campaigns involve no charge other 

than the carrier’s standard rate for SMS messages, short codes also can enable 

users to support charities or political candidates. For example, the American Red 

Cross employed common short code 90999 to raise money for disaster relief in the 

wake of the Haitian earthquake in 2010, with donors contributing more than $43 

million. A 2012 study by the Pew Internet and American Life Project found that 1 

in 10 Americans has made a charitable donation through a text message.3 Similarly, 

after the Federal Elections Commission granted limited approval for Federal candidates, political committees, and political parties to collect political contributions 

through text message campaigns, the Obama for America and the Romney campaigns began using common short codes to solicit small dollar donations via mobile 

devices.4 Each of these programs was, and remains, opt-in for consumers. Short 

codes have also been employed by state Departments of Correction to enable collect 

calls placed by inmates to be completed and billed to the mobile phone of the called 

party,5 often a family member, who may be among the nearly 40 percent of American adults who have chosen to go ‘‘wireless-only’’ and forego subscribing to a 

wireline telephone.6

From their start, commercial, charitable, and political uses of common short codes 

issued by CTIA have been subject to written, publicly available guidelines administered both by the Mobile Marketing Association 7 and CTIA.8 Carriers have looked 

to the ‘‘connection aggregators’’ who link content providers to wireless carriers to supervise and enforce the consumer best practices and carrier-specific practices. In 

2008, a year in which the Federal Communications Commission received only about 

345 wireless cramming complaints from the Nation’s then 270 million wireless customers,9 the wireless industry, both individually and through CTIA, began independent monitoring of all short code campaigns to detect any violations of the consumer best practices. 

Over the next few years, the number of consumer wireless complaints filed with 

both the Federal Communications Commission and the Federal Trade Commission 

remained low and continued to decrease even with the significant growth in the 

number of wireless connections. While neither the FCC 10 nor FTC 11 complaint data 

83 

2.2 per million subscribers. In 2013, subscribership rose to 326,914,000 active subscriber units, 

meaning complaints represented 1.1 per million subscribers, or just 0.0001 percent and a decline 

of 49 percent from 2012. 12See, for example, the statement by the Texas Attorney General, https://www.texasattor 

neygeneral.gov/oagnews/release.php?id=4576, and the cases brought against Mobile Messenger, 

https://www.texasattorneygeneral.gov/newspubs/releases/2013/Mobile-Messenger-POP.pdf, and 

Eye Level Holdings, https://www.texasattorneygeneral.gov/newspubs/releases/2011/030911eye 

levelholdingslpop.pdf. 13 Ina Fried, ‘‘AT&T, Sprint, T-Mobile, Verizon Dropping Most Premium Text Service Billing 

in Effort to Combat Fraud,’’ All Things D (Nov. 21, 2013), available at http://allthingsd.com/ 

20131121/att-sprint-t-mobile-verizon-all-dropping-most-premium-text-service-billing-in-effort-tocombat-fraud/#ina-ethics and http://www.atg.state.vt.us/news/att-mobility-sprint-and-t-mobilewill-stop-billing-problematic-third-party-charges.php. 

suggested there was a significant problem in this area, the industry recognized that 

both wireless customers and their carriers were being victimized by fraudsters who 

crafted elaborate schemes to defeat the industry’s self-regulation and third-partying 

monitoring. Where problems were alleged or identified, CTIA and its member companies worked with law enforcement officials to identify solutions and shut down 

entities that pursued cramming schemes. 12

As a further safeguard to consumers, beginning in February 2012, CTIA contracted with an outside vendor to verify information supplied to the Common Short 

Code Administration registry by companies seeking to lease short codes for premium 

SMS campaigns. CTIA’s vendor uses numerous commercially-available databases 

such as Lexis/Nexis, Dun & Bradstreet, and the Better Business Bureau to confirm 

that the Content Provider displayed in the registry represents a legitimate company 

and is identified correctly in the registry. This vetting service satisfies the requirement of the California Public Utilities Commission that carriers be responsible for 

the content of their bills. Any discrepancies discovered during the vetting process 

are communicated directly to the carriers. Although the national carriers chose to 

discontinue support for premium short code campaigns in late 2013,13 CTIA has expanded the scope of its vetting to include all common short code lessees. 

In addition to this front-end vetting, CTIA continues to work with outside vendors 

to ensure that codes are used in compliance with the applicable guidelines. When 

monitoring identifies problems, that information is sent to the carriers so they may 

take corrective action. These efforts and the national carriers’ decisions to end support for premium short code campaigns (with the limited exceptions for charities 

and political campaigns) should combine to significantly reduce the opportunity for 

third-parties to use carrier billing platforms as a tool to commit fraud. 

With the carriers’ decisions to no longer support premium short codes for commercial campaigns, the remaining opportunities for third-party charges to appear on 

wireless bills are limited to instances involving direct carrier billing. Although CTIA 

has no first-hand knowledge of carrier practices in this area, it is our understanding 

that each of the national carriers employs stringent vetting and safeguards to guard 

against any abuse of the process. 

Thank you for the opportunity to participate in today’s discussion. 

Senator BLUMENTHAL. Thanks very much, Mr. Altschul. 

I have a few questions. Then I will turn to Senator Thune. 

As all of you are aware, the third-party wireless billing has involved three major players: the carriers, the third-party vendors, 

and the billing aggregators that act as middlemen. In this business, there is a lot of finger-pointing as to who is to blame, where 

the buck should stop. And law enforcement cases have now alleged 

wrongdoing at every stage of that billing process from vendors to 

billing aggregators to the recent action that you mentioned, Commissioner, by the FTC against T-Mobile. But all of that fingerpointing may not be of much benefit to consumers. 

So the question is: where should the buck stop? Since the wireless carriers control the billing platform and they have ongoing relationships with their customers and they have been taking $3 to 

$4 out of every $10 vendors charge to consumers on this platform, 

Mr. Altschul, should the buck not stop with the wireless carriers? 

84 

Mr. ALTSCHUL. The carriers will take responsibility for charges 

on their bills and urge their customers to look at their bills carefully and call the carrier if they have any questions or if they detect anything that is suspicious on a bill. 

Senator BLUMENTHAL. If they were making less money, would 

there be a greater incentive to take stronger action? 

Mr. ALTSCHUL. Well, the amount that is collected, as you know 

from the fact that the carriers have discontinued the service, has 

not influenced the carriers’ decisions to, first and foremost, protect 

their consumers. And carriers, of course, whatever they choose 

independently to charge, also have costs associated with providing 

this service. The carriers provide their own independent monitoring 

and vetting, in addition to the industry’s efforts. There are costs associated with what they call onboarding and activating these systems in their billing systems and maintaining support. So what is 

collected and what is kept can be very different charges. 

Senator BLUMENTHAL. Let me ask the others on the panel whether that level of revenue and the percentage that the wireless carriers make on those charges serves as a disincentive to take more 

effective action. And conversely, what kind of incentives would lead 

perhaps to the wireless carriers to take more effective action? 

Commissioner MCSWEENY. I would start by saying that in the 

Federal Trade Commission’s view, carriers and all of the participants in the sector have a role to play here. And certainly we believe that while some steps that have been taken are very promising, there are additional steps that are necessary and that should 

be taken to protect consumers. 

As you point out, there are some questions about whether there 

are perverse incentives here, and I would also add that I have seen 

estimates that direct carrier billing is expected to grow. So while 

PSMS may have stopped, there is certainly some prospect here for 

a very vibrant direct carrier billing industry going forward. 

Accordingly, we think the carriers have a role to play in protecting consumers and in improving the integrity of this kind of 

billing process both by ensuring better dispute resolution and consistent dispute resolution processes, but also by making it clear to 

consumers that they can block third-party charges and by taking 

steps to terminate or scrutinize merchants that may be involved in 

cramming unauthorized charges on their phone bills. 

Senator BLUMENTHAL. Attorney General Sorrell? 

Mr. SORRELL. Thank you, Senator. 

First, in answer to your question, the buck stops with the carriers. There are others responsible, but that is where the buck 

stops. It is the carriers that decided to contract with the thirdparty providers and to pass along their bills and, as you suggested, 

keep 30 to 40 cents on the dollar of every payment made by the 

carriers’ customers. 

I am pleased to hear Mr. Altschul say that the carriers will take 

care of their customers when they call and question charges on 

their bills. But the reality has been very mixed in the past on this. 

Some carriers had a rather robust reimbursement mechanism. Others would reimburse only 2 months no matter how long the $9.99, 

the $20, or $29.99 a month was on customers’ bills and being paid. 

And some of the carriers referred their own customers to the thirdVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00088 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
85 

party providers. In my view, for recurring monthly charges, the 

carriers should be obligated to confirm their customers’ consent to 

those billings. And I do not think there is any question but that 

the hundreds of millions dollars, if not billions of dollars, that the 

carriers have made as their share of their customers being 

crammed is a huge incentive for them to look the other way. 

Senator BLUMENTHAL. Mr. LeBlanc, do you want to add something? 

Mr. LEBLANC. I will keep it short. I will echo the comments of 

Commissioner McSweeny, as well as Attorney General Sorrell, and 

also just to mention one further point which is the carriers here actually are acting as the platform for these charges. And as the platform, they bear a responsibility to ensure that the conduct that is 

taking place on their platform, that it is not deceiving and defrauding their customers. So we completely agree with our fellow law enforcement partners that the carriers bear accountability. 

Senator BLUMENTHAL. Thank you. 

My time has expired. I am going to come back to some of these 

questions and also give Mr. Altschul an opportunity to respond if 

he wishes. And I will turn to Ranking Member Thune. 

Senator THUNE. Thank you, Mr. Chairman. 

Commissioner McSweeny, the FTC’s complaint in the T-Mobile 

case states that the FTC and the FCC have ‘‘concurrent enforcement jurisdiction over mobile telephone companies’ billing and collection of third-party charges for non-telecommunications services,’’ 

but it does not cite to any authority for that statement. Given the 

so-called common carrier exception, could you explain the authority 

for this claim in the FTC’s complaint? 

Commissioner MCSWEENY. The FTC has jurisdiction over carriers when they are engaged in non-common carrier activities such 

as billing for third-party services, which is the conduct at issue in 

this case. It is established by the relevant case law. 

Senator THUNE. Are there other activities that the FTC might 

characterize as a non-telecommunications activity by the carriers 

that the FTC would then claim jurisdiction over? 

Commissioner MCSWEENY. I would hesitate to give you an exhaustive list, but I imagine hypotheticals in which carriers are billing for third-party services. For example, if a carrier wants to put 

billing for a weight loss product on their phone bill, then we would 

consider that kind of conduct covered by the FTC Act. 

Senator THUNE. Mr. LeBlanc, in your opinion, what independent 

agency is best equipped to regulate and enforce wireless cramming 

matters for telecommunications carriers? 

Mr. LEBLANC. Well, as Senator Blumenthal pointed out at the 

beginning, there are a number of different entities that are involved in any cramming. There are the third-party content providers. There are the aggregators, as well as the carriers. At the 

FCC, we have primary jurisdiction over the carriers. We do not 

have the ability under our authority to reach the third parties 

which the FTC, for example, does, as well as our partners at the 

State level as well. So from our perspective, we think that it is necessary that you have Federal FTC, FCC, as well as State involvement to get to all three parties. 

86 

Senator THUNE. But in your view, though, the FCC is best 

equipped to deal with the carrier component of that. 

Mr. LEBLANC. Certainly on the regulatory side, there is no question about it, Ranking Member Thune. We are the only authority 

that has the ability to promulgate regulations to prevent and to respond to this through rulemaking. On the enforcement side, we 

have worked very much over the last 4 years in fact in particular 

on cramming at the carrier level, and we are going to continue to 

vigorously enforce in that area. 

Senator THUNE. Mr. Altschul, the Chairman’s report on wireless 

cramming discusses emerging third-party wireless billing technologies such as the practice known as ‘‘direct carrier billing.’’ Is 

this ‘‘direct carrier billing’’ practice being widely used by the wireless carriers? 

Mr. ALTSCHUL. At present, the most popular and prevalent use 

is for billing for purchases made on various web app stores, in particular, Google Play. And when the customer goes to the Google 

Play store, Google presents the customer with a number of payment options, including credit cards and direct carrier billing, and 

presents and walks the customer through a number of screens and 

disclosures to obtain their knowing consent to the direct carrier 

billing. 

Senator THUNE. Should we be concerned that this practice will 

have the same risk of cramming for consumers as premium text 

messaging did? 

Mr. ALTSCHUL. I think everyone needs to be vigilant to make 

sure that this remains a safe and trusted payment vehicle. But as 

you know, as mentioned in the reports that came out this week, the 

Federal Reserve Bank of Boston and others have noted that there 

are many consumers who are unbanked or under-banked and a 

mechanism such as direct carrier billing provides a mechanism, another on-ramp to many of these Internet and information services. 

Senator THUNE. And it appears that the burden is on the consumer to identify unauthorized charges on their bills. The FTC in 

its recently released report—recommended that when a carrier terminates a third-party’s billing activities for unauthorized charges, 

the carrier also should notify consumers who incurred charges from 

the third party to inform them about the termination so that they 

can request a refund. 

What is CTIA’s response to this recommendation by the FTC’s 

staff? And should carriers do more, such as sending an e-mail or 

making a phone call, to proactively alert customers of potentially 

fraudulent activity? 

Mr. ALTSCHUL. Well, first, we endorse the recommendation. It 

seems to be universal that customers need to look at their bills, 

whether they are paper, online, and be aware and be prepared to 

call and question any charges they do not recognize. 

Second, with respect to carrier activities, I think the record in 

these reports shows that in certain instances carriers have done 

just that. Carriers actually are at a bit of a disadvantage in that 

they do not know which of their consumers may or may not have 

opted into existing programs. Some of these programs may strike 

those of us in this room as not of much value, but not just in your 

home states but at the Georgetown Safeway, take a look when you 

87 

go through the checkout counter at the horoscopes, the tabloids, the 

other magazines that sell exactly the same kind of content that had 

been marketed through these carrier billing mechanisms. And 

there is a legitimate interest among many Americans for these 

services. The carriers just are not in a position to know who has 

been defrauded. Certainly they are not in as good a position as the 

customer when they look at their bill. 

Senator THUNE. But should they do more in the form of e-mails, 

phone alerts, just to be proactive? 

Mr. ALTSCHUL. Well, again, in appropriate cases, they have done 

this and they certainly should continue to do it. Yes. 

Senator THUNE. Mr. Chairman, thank you. My time has expired. 

Senator BLUMENTHAL. Thank you very much. 

Senator Johnson? 

STATEMENT OF HON. RON JOHNSON, 

U.S. SENATOR FROM WISCONSIN 

Senator JOHNSON. Thank you, Mr. Chairman. 

Ms. McSweeny and Mr. LeBlanc, both of you in your testimony 

talked about enforcement actions. So it sounds like this is being 

regulated, it is being enforced. Is there any authority that you do 

not have to conduct proper enforcement? I will start with you, Ms. 

McSweeny. 

Commissioner MCSWEENY. Thank you, Senator. 

I think we are using the enforcement authority that we have appropriately to combat scammers, and we do have adequate authority. I would note there is no civil penalty authority in this area for 

the FTC, but we have been able to take action to stop conduct and 

to get consumer redress. 

Senator JOHNSON. Mr. LeBlanc, do you feel you have full authority? Is there anything else you would need in law? 

Mr. LEBLANC. Senator Johnson, we are right now at the Commission looking at promulgating revised rules with respect to cramming. Those rules are asking questions about whether or not to 

block all third-party charges, whether to permit opt-in, whether to 

apply the same truth-in-billing rules that we use in the landline 

context to the wireless context. We look forward to the resolution 

of that in the next several months. That would offer us new opportunities to look at new avenues that we would have. 

Senator JOHNSON. But, again, you are going to write the regulations. You believe you have the authority to write those regulations 

and enforce them? 

Mr. LEBLANC. Yes. 

Senator JOHNSON. Mr. Altschul, would the industry challenge 

that authority? 

Mr. ALTSCHUL. We have filed comments questioning the FCC’s 

existing authority over non-telecommunications services and billing 

for such services. I notice in Mr. LeBlanc’s prepared testimony, he 

rests his authority or the Federal Communications Commission’s 

authority over billing in Title II of the Communications Act. That 

is the so-called common carrier provision. And as Senator Thune 

raised in his questions, that does create a tension between the 

overlapping jurisdiction between the agencies here. 

88 

Senator JOHNSON. So you would question the authority then? To 

resolve this by regulation—— 

Mr. ALTSCHUL. Without detouring into the old debate about net 

neutrality and what should be Title II and not Title III, whether 

billing services for non-communications services are properly characterized as a communications service or not could stand to be 

clarified. Yes. 

Senator JOHNSON. In both the testimony of Attorney General 

Sorrell and I believe Mr. LeBlanc, they both claimed that the majority of third-party charges were cramming. Do you agree with 

that? 

Mr. ALTSCHUL. I do not, in my role in the association, have visibility into the universe of charges. But, no, I think that there have 

been many, and I would say the majority of charges have been 

charges that consumers have accepted and opted into. I am not denying that there has been cramming and that any cramming is too 

much cramming. 

Senator JOHNSON. But do you think that may be an overstatement that the majority of third-party charges are cramming? 

Mr. ALTSCHUL. That strikes me as an overstatement, yes. 

Senator JOHNSON. What type of standards or what type of 

screening do the carriers provide to try and limit this? 

Mr. ALTSCHUL. Well, as documented not just in my testimony but 

in both the Federal Trade Commission and Senate Commerce Committee staff reports that were released this week, the industry, 

both through the association and individually, contracts with thirdparty auditors. The auditors do three kinds of auditing of every 

premium SMS and standard SMS message. They monitor the marketing to make sure that marketing has all the necessary disclosures, does not misuse the word ‘‘free,’’ and provides meaningful 

notice and opportunity to consent and—— 

Senator JOHNSON. Let me just stop you. Those disclosures can be 

very long. Right? They are probably contained in a very long statement that people just click. 

Mr. ALTSCHUL. Well, the Federal Trade Commission actually has 

published some very helpful guidance on how to use the word 

‘‘free,’’ how big the asterisk has to be. And we have boiled down 

these disclosures so they can fit on the first screen that the customer looks at. And the Florida Assurance of Voluntary Compliance, which is a form of consent decrees, really specified how these 

can be done in a way that at least the Florida AG thought would 

protect consumers. 

Senator JOHNSON. I interrupted you. 

Mr. ALTSCHUL. Well, that is the first monitoring is media monitoring. 

The second monitoring is that for every short code—and we now 

have the standard codes that are still being used on the networks— 

the monitoring firms subscribe. They make sure all the necessary 

disclosures—if somebody sends stop to stop a subscription service, 

that the service is stopped and likely do that on a monthly basis. 

And finally, the industry has added last year vetting of every applicant for a short code because we were, frankly, deceived and 

burned by a scheme where repeat offenders hid their identity, went 

around the United States, used mail box—post office boxes and emVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00092 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
89 

ployee names rather than corporate names to get additional codes 

when their prior codes had been cutoff. So now we confirm that 

every applicant is a brick-and-mortar operation. We can find them 

in established directories on the Internet and so on. 

So those are the three kinds of monitoring the industry does for 

SMS messages. And I understand it is very similar to what the 

monitoring carriers are doing for direct carrier billing. 

Senator JOHNSON. Thank you. 

Thank you, Mr. Chairman. 

Senator BLUMENTHAL. Thanks very much. 

Senator Nelson? 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Ladies and gentlemen, just so you know where 

I am coming from, as the former elected regulator of insurance 

products in Florida, I actually worked with our fraud division 

against insurance companies that billed for, charged for insurance 

services that the customer did not ask for, could not afford. And as 

a result, we sent some people to jail. Now, you need to know where 

I am coming from. So I do not have a lot of patience when I hear 

on somebody’s wireless service that they are getting billed for 

things that they do not want or do not know about. 

Now, could we require consumers to affirmatively opt in to allow 

third-party billing of services at the time they execute a contract 

for wireless services? What do you think? 

Commissioner MCSWEENY. Well, Senator, I think it is a great 

question. I would point out that in the Federal Trade Commission’s 

view, we think there are a lot of legitimate uses for mobile carrier 

billing, and that many consumers will want to take advantage of 

them. 

What is very important here, though, is that consumers have 

adequate information, that they understand clearly that they have 

the right in many cases to block third-party charges for a phone 

if they elect to, and that they be able to take a look at their bill 

and understand where the third-party charges are and who they 

are from. Very often, they really do not have adequate transparency to see that the charge is unrelated to their phone service. 

So it is difficult to identify on the bill. And the information is not 

clearly presented around rights to block third-party charges. 

I would also note that there is inconsistent dispute resolution 

among the carriers when customers do identify problems. So we 

really are urging clearer and more consistent dispute resolution, 

which would be consistent with the kinds of measures that are 

present in other industries. 

Senator NELSON. Do you think there ought to be an independent 

consumer ombudsman at your agency to resolve consumer complaints? 

Commissioner MCSWEENY. I think it is a very interesting proposal and one that I would have to give more thought to. At the 

moment, I think the Commission is doing a good job using its enforcement powers to go after scammers where we see them, to respond quickly to consumer complaints, and to provide consumer 

education material, which I think is very, very valuable. It is imVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00093 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
90 

portant for people to understand that right now, they are their own 

first line of defense against these kinds of practices, and that if you 

see something on your bill that you do not understand, you can 

contact your carrier, or you can contact the FTC, and we will respond. 

Senator NELSON. I am not sure that there is enough public 

awareness. And that is one of the reasons, thanks to the chairman 

and Chairman Rockefeller and the Ranking Member, that we are 

having this hearing. 

What do you think about an independent ombudsman, Mr. 

LeBlanc? 

Mr. LEBLANC. The independent ombudsman is a very interesting 

idea, Senator. The concern that we see right now from the enforcement perspective at the FCC is that consumers do not have substantial protections when it comes to dispute resolution. In the 

credit card industry, for example, if a consumer has a dispute 

about something on their credit card bill, they have certain rights. 

They have a right to dispute the billing errors by notifying the 

credit card companies. They can have a right to withhold payment 

for damaged goods, for example. Here there are no such rights 

when they have an actual concern about something. And so it is 

helpful certainly to have an additional person, an ombudsman or 

the FTC, the FCC, State Attorneys General, State public utilities 

commissions that are there that they can go to to complain when 

they believe that they have been charged for unauthorized charges. 

Senator NELSON. When you have that many choices, I cannot 

keep up with that. That is only one. I go to the next one. Let me give you an example. A $9.99 a month charge for daily 

horoscopes or celebrity gossip. It was very cleverly designed. It is 

small enough that consumers may have missed it when they were 

paying their bill, and taking $9.99 from consumers month after 

month really adds up. So when you multiply these charges across 

millions of customers, you can see how this can become such a big 

industry. 

So, Commissioners, tell me. Would any of you want to comment 

about how a small charge like $9.99 or less a month can make a 

big impact on consumers? 

Commissioner MCSWEENY. I think it absolutely does make a big 

impact, especially as you point out, it is very easy for consumers 

to rack up these charges month after month before even recognizing that they are being crammed, if they do at all. And in some 

cases, the charges may be more than $9.99 or a consumer may be 

experiencing cramming from more than one third party. 

We have had recent cases where we have indications that more 

than a million consumers have been charged, and there have been 

hundreds of millions in consumer harm associated with the conduct. So I think it is very significant, sir. 

Mr. LEBLANC. I would add to that, Senator, that in 2011 Chairman Rockefeller released a report on cramming that found that it 

added up to $2 billion annually. That is a lot of money. A lot of 

Americans in this country live paycheck to paycheck. These charges 

we are finding are ones that very few people even notice. Many 

people are not even aware that third-party billing is possible on 

their telephone bill. So it is of great concern that $9.99 adds up and 

91 

they are unable to actually get all of these removed, if they catch 

it 2, 3, 4 years down the road. 

Mr. ALTSCHUL. One solution which the Federal Trade Commission report recommends and the industry supports is to move the 

disclosure and consent process away from the merchant to the 

aggregator or the carrier so that there is clear responsibility for obtaining and maintaining the record of the customer’s consent to be 

charged for whatever service is on their bill. 

Senator NELSON. That sounds like a good suggestion. What do 

you think, Attorney General Sorrell? 

Mr. SORRELL. I am not so sure about the aggregator. The buck 

stops with the carrier, as I said earlier, and for recurring charges, 

I think the carrier should be the one to have to confirm the consent. 

But, you know, quite apart from putting these third-party 

charges in a separate section of the bill so someone knows that it 

is a service that is not afforded by the carrier, for the real scam 

artist they had names like ‘‘Text Savings’’ or ‘‘Text Savings, LLC.’’ 

And I think the worst case I have heard or maybe the best depending on your perspective where the Texas AG’s Office found a bill 

that—the third-party bill was ‘‘refund.’’ So for those minority of 

consumers who are aware that third-party charges may be on their 

bill, these scam artists were masking what they were doing with 

what they put on the bill, and the carriers took a blind eye in passing along ‘‘refund’’ on their customers’ bills when it was not a refund. It was a charge. 

Senator BLUMENTHAL. Thank you, Senator Nelson. 

Senator Markey? 

STATEMENT OF HON. EDWARD MARKEY, 

U.S. SENATOR FROM MASSACHUSETTS 

Senator MARKEY. Thank you, Mr. Chairman, very much and 

thank you for holding today’s very important hearing. 

So let us be clear. The practice of cramming, forcing consumers 

to pay for fraudulent charges on their phone bills, costs consumers 

dearly. Cramming is wrong. Cramming is scamming. It is that simple. 

Our focus today should be entirely on how to stop fraud now and 

in the future. 

My first question. We are talking a lot today about cramming on 

wireless phone bills, which is very important. But what about the 

potential for abuse on broadband bills or on bills for bundled services where consumers pay for a telephone, broadband, and TV in 

one bill? Plenty of opportunity for cramming and scamming. 

Mr. LeBlanc, is the FCC taking steps to look into whether 

broadband, bundled services is an emerging problem today? 

Mr. LEBLANC. Senator Markey, crammers are predators. They 

evolve with consumers. Wherever consumer bills are, they are likely to try to pop up if third-party charges are allowed. We are trying 

to keep up and get in front of the crammers as they evolve. There 

is no question that to the extent that we are talking about wireless 

bills today, which include mobile broadband as part of the bill, that 

the investigation we have into T-Mobile, as well as the Assist 123 

92 

case that we recently did this month, show that there are concerns 

on wireless bills. 

Senator MARKEY. Is the FCC looking right now at your rules, 

your enforcement strategies with regard to bundled services, 

broadband, telephone, TV, and then the cramming that occurs as 

part of the bill? Are you looking at that right now? 

Mr. LEBLANC. We just put out last week an enforcement advisory 

about transparency in the commercial terms of service around mobile and broadband. 

Senator MARKEY. And broadband. 

Mr. LEBLANC. And broadband. And we indicated that we are 

going to focus enforcement in that area. 

Senator MARKEY. OK. 

Ms. McSweeny, do you want to talk about what the Federal 

Trade Commission is doing with regard to broadband cramming? 

Commissioner MCSWEENY. I would say I think the Federal Trade 

Commission believes that we have the authority to take action to 

protect consumers from fraud and from unfair practices. And we 

believe that these protections extend to the mobile environment 

and beyond, just as they exist in the brick and mortar world. 

Senator MARKEY. Mr. Sorrell, we have industries that take actions with voluntary guidelines on the books, which are always 

good for good people. They do not have the murder statute on the 

books for my mother or yours. They are not going to be committing 

murders, only for the bad people. That is why you have laws on the 

books. 

So how do you feel about that as to its adequacy of ensuring that 

the bad actors in this space are not still free to act in anti-consumer ways, knowing that any sanction is voluntary and industrydriven rather than having a governmental sword behind the threat 

if they violate the consumer protections which we are trying to advance? 

Mr. SORRELL. Thank you, Senator. 

Self-regulation in Vermont’s experience did not work in the 

landline cramming arena, and it has not worked in the wireless 

arena. Where there are bad actors, there must be regulatory efforts 

to identify them and hold them accountable. 

Senator MARKEY. I want to give you, Mr. Altschul, a chance to 

talk about that issue, voluntary versus mandatory, just so that all 

the good players in the wireless sector are not tarred by the actions 

of a few. 

Mr. ALTSCHUL. Thank you, Senator. 

Well, first, I could not agree more. These crammers and 

fraudsters are predatory and they do move from one service to another. As one door shuts, they try another. 

We do support voluntary efforts. Our experience, with hindsight 

always being 20/20, is we built a wall. The bad guys came over it 

with a ladder. We raised the wall. The bad guys came back with 

a taller ladder, and so on and so forth. So I think that with that 

experience, the industry is responsible for protecting its consumers 

in the first instance. 

There is no shortage of enforcement agencies at the Federal and 

State level. They have said today—and we know from their enforcement actions—they are energetic. They have ample enforcement 

93 

authority to go after bad guys, and we support that. In fact, the 

industry and the association has assisted them in those efforts. 

Senator MARKEY. May I ask one final question, Mr. Chairman? 

Thank you. 

And it is a related subject and it is that I am the House author 

of the Telephone Consumer Protection Act of 1991, and I feel as 

strongly today as I did 2 decades ago that consumers should not 

be subject to intrusive calls from telemarketers, whether they are 

at home or on their mobile phones. By banning most autodial and 

prerecorded calls to landlines and mobile phones and establishing 

the Do-Not-Call List, which I am very proud of, the law created a 

zone of privacy that remains popular with consumers to this day. 

As a matter of fact, every consumer every time they get a call from 

somebody they do not know, they say how did they get my number. 

So they are conditioned now to think that they do not have a right 

to call someone who is not receptive to it. 

For the Federal Trade Commission and the FCC, please tell me 

about your efforts to enforce this law and keep up with the changing technologies that seek to circumvent these protections. It seems 

to be increasing as a problem once again. 

Mr. LEBLANC. Senator Markey, I recognize that you were the 

driver of the Do-Not-Call law, and thank you for your commitment 

to it. 

There is no question that to date even the number one complaint 

that we get at the FCC is Do-Not-Call, by far, consumer complaints. We just recently in the last 3 months took the largest enforcement action under Do-Not-Call that we have taken in our history where we settled a case for $7.5 million with a carrier and we 

continue to aggressively enforce the TCPA there, as well as in the 

robo call context. 

Senator MARKEY. I can only encourage you to be even more aggressive. It really ticks people off. 

Ms. McSweeny? 

Commissioner MCSWEENY. Senator, I would just second our appreciation for the TCPA as an important pro-consumer law, and I 

would add that we are very proud of our track record on Do-NotCall at the FTC—we have more than 200 million people signed up, 

I think, by last count—and take the responsibility of continuing to 

protect those consumers very seriously. We are trying to work with 

technologists to address the robocall problem that typically tries to 

thwart the Do-Not-Call registry, and we are taking new steps to 

try to address those issues. 

Senator MARKEY. And if I could just say this. We all grew up 

kind of conditioned to our phone in our living room ringing, and it 

could be somebody soliciting us. And we have a law saying do not 

solicit anymore. But when your cell phone rings, you are saying to 

yourself, well, the only people who have my number are my family 

and my friends. How did you get my number? And it just ticks people off. So the more aggressive you can be, I think the happier the 

American people will be. 

Thank you, Mr. Chairman. 

Senator BLUMENTHAL. Senator Klobuchar, I am sure, has some 

questions. I will just give her a chance to be seated. And if you like, 

I can fill in time or I can yield to you. 

94 

Senator KLOBUCHAR. Well, if you are just filling in, I can handle 

it. 

Senator BLUMENTHAL. I have got some questions. 

Senator KLOBUCHAR. Why do you not go ahead. 

Senator BLUMENTHAL. You know, I think that this testimony has 

been very valuable, and I want to elaborate on some of the questions that have been asked. 

First of all, the comparison inevitably has to be made to the 

other payment mechanisms that encounter similar problems with 

unauthorized charges. And they voluntarily, for example, credit 

card networks, typically investigate merchants when there are 

charge-backs, when there are requests for refunds above a certain 

rate. In other words, for any one of these chargers, whether valid 

or invalid, if there are refund requests above a certain rate, they 

investigate. For the credit card networks, that threshold is 1 percent. For the wireless carriers, my understanding is that it is 10 

times as high, 10 percent, or higher, which indicates a much less 

vigorous level of vigilance. 

I think you mentioned, Commissioner, that you thought greater 

scrutiny was one answer here, and perhaps that is what you meant 

by that answer. You did not elaborate on it, but you do in your testimony mention those numbers, and I am wondering whether perhaps you can elaborate on that point. 

Commissioner MCSWEENY. I think it is a very important point, 

and in some of our cases, we have actually seen refund rate requests at 40 percent which is, as you point out, significantly higher 

than you see in other industries. So we do think that there needs 

to be much more scrutiny both by intermediaries and by carriers 

of merchants that have high refund rates and a much more consistent and aggressive approach to terminating those merchants or 

reviewing their activities. 

Senator BLUMENTHAL. Mr. Altschul, does that not make sense to 

you that there should be investigative efforts, intense scrutiny 

when refunds are higher than 1 or 2 percent? 

Mr. ALTSCHUL. I agree. Actually the statements of the State AG 

in Texas thanked the industry for working with the State’s efforts 

in the cases that that Attorney General brought. 

Senator BLUMENTHAL. But apparently the industry practice is 

very different from that one instance. 

Mr. ALTSCHUL. The Committee staff’s own report released today 

indicates that for direct carrier billing for charitable campaigns, it 

is 1 percent or less and for direct carrier billing, it is 1 to 1.5 percent, which is in the range that you have described for credit card 

investigations. 

Senator BLUMENTHAL. I want to come back to this area of questioning, but I will yield to Senator Klobuchar. 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Oh, thank you very much, Senator 

Blumenthal. Thank you for holding this hearing and thank you, 

Senator Thune. 

Two years ago, as I know you have discussed—I am sorry I was 

away chairing a hearing, contact lenses actually, with the Antitrust 

95 

Subcommittee. But two years ago, the FCC finally took additional 

regulatory action on wireline cramming following up on pressure 

from this committee, and one of the things that I was concerned 

about at the time, while I thought the action was important, that 

there were not protections put in place for wireless customers. And 

as I said in my filing at the FCC at the time, quote, with more and 

more households cutting the cord on their landline phones, the 

FCC should take all necessary steps to prevent crammers from 

finding new opportunities with wireless bills. 

While I am encouraged that the FCC recently refreshed its 

record on truth-in-billing regulations in relation to wireless protections, we need to continue to look for ways to address the current 

and future evolution of crammers and actions that need to be 

taken. 

I am a cosponsor of Senator Rockefeller’s Fair Telephone Billing 

Act, which would address cramming as we know on wireline 

phones, and I hope this committee can work together to pass this 

legislation and continue to look at action on wireless cramming as 

well. 

I guess I will start with you, Mr. LeBlanc, as well as Mr. Sorrell. 

In 2012, the FCC updated its truth-in-billing rules, which included 

protections for consumers from wireline cramming, as I just noted. 

However, the argument was made that there was not enough evidence of cramming on wireless. Two years later, it is extremely 

clear that wireless cramming is a huge problem, and the FCC still 

has not expanded cramming protections for wireless. 

Mr. LeBlanc, will the FCC take regulatory action this year to 

protect wireless consumers from cramming, and what about some 

kind of additional enforcement action? 

Mr. LEBLANC. Thank you, Senator Klobuchar, and thank you 

very much for your comments as well that you filed with the FCC 

over the last couple years. 

The record in that matter closed in December 2013, and we anticipate that it will be ready for a decision within the next several 

months. So we are hopeful that we will see a change. Some of the 

issues that are presented to the Commission right now involve 

whether all third-party charges should be banned entirely, also 

whether we should have an opt-in process, and then finally ensuring that the truth-in-billing rules that apply in the landline context 

also apply in the wireless context. So it is ripe right now for a decision and we hope to have an answer within the next several 

months. 

On the enforcement side, we are vigorously tailoring our enforcement resources toward the issues that affect average Americans 

today in the 21st century. And there is no question that the wireless space and cramming concerns in that space are those issues. 

We have just recently announced the investigation of T-Mobile, and 

we have no reason to believe that T-Mobile was the only wireless 

carrier that was engaging in cramming. 

Senator KLOBUCHAR. Thank you. And I was aware of that action. 

Thank you. 

Attorney General, do you think there should be more action here 

on the Federal level on the wireless issue? 

96 

Mr. SORRELL. Thank you, Senator. As the lead state of a 47-state 

effort to try to—— 

Senator KLOBUCHAR. That would be called a softball. 

[Laughter.] 

Mr. SORRELL. But I already hit it earlier before you came in. So 

I will just hit it again. 

It is a huge problem and there is some good news in that the 

major carriers have gotten out of the PSMS business, and complaints to us have fallen off at the State level about wireless cramming. But now our focus is, one, trying make our constituents who 

have been crammed whole for the wrongs of the past, but also to 

work with Federal regulators to assure that there is not a recurrence of wireless cramming or a close cousin using new technologies going forward. 

Senator KLOBUCHAR. And then, Commissioner McSweeny, you 

mentioned in your testimony, as did the Attorney General, that 

consumers are not aware that their cell phone carriers are able to 

add third-party charges to their bills and that they are not checking their bills, which is always an issue. I remember doing an 

event on this in Minnesota and I found like some math teacher, of 

course, checked his bill and figured it out, and a Lutheran minister. He also checked. 

How long do you think it takes the average consumer to notice 

an unauthorized charge on their account, and how are you working 

to better inform consumers? And how under-reported do you think 

wireless cramming is? 

Commissioner MCSWEENY. I think the six cases that the FTC has 

brought so far address mobile cramming—and I would say stay 

tuned. I am sure we will have more. Two things are very important 

here. One, the vast majority of customers who have been crammed 

do not realize it. So we are, I think, seeing the proverbial tip of the 

iceberg. And two, people really are having a hard time getting redress and getting refunds if they are lucky enough to identify 

charges that may be on their account. 

So we think consumer education is very important. We have consumer education materials available. But as you point out, they 

recommend people review their bill and try to identify any charges 

that they do not understand. This can be very complicated, and in 

most cases, identifying third-party charges on bills is almost impossible. They generally look like phone bill charges. So we recommend people take that step. We hope they do. We are available 

as a resource at the FTC. Of course, the FCC is a resource, as well 

as our State Attorneys General. And we are urging industry to 

really take a look and try to make these kinds of third-party services more clear to consumers on their bills. 

Senator KLOBUCHAR. Do you know what the average charge is for 

one of these cramming, whether it is wireline or wireless? What do 

you think the costs are? I know it is hundreds of millions of dollars. 

But how often did they get the full refund? 

Commissioner MCSWEENY. Well, what we typically see are subscription services that range from $9.99 to $14.99 a month. But, 

again, people can be crammed by multiple third parties. So they 

may be billed more than just that $9.99. And very often it takes 

97 

some time for consumers to even realize it is occurring to them. So 

it can occur and accumulate over a matter of months or even years. 

We have heard cases and had cases where people tried to get refunds and have not succeeded or have only gotten a couple of 

months’ worth. So that is a significant problem. 

Senator KLOBUCHAR. All right. Well, we encourage you to keep 

working on this. I think you know our Attorney General in Minnesota, Laurie Swanson, has been very aggressive about these 

cases and worked hard on them, and we have done some of this 

work together. I am glad that Senator Blumenthal as a former Attorney General understands how important it is as well. So we will 

continue to push on this issue. But thank you very much, all of 

you, for being here. 

Senator BLUMENTHAL. Returning to the question I was about to 

ask you—and I appreciate your comment that your belief is that 

there are investigative efforts in some areas after the threshold 

reaches a percentage and a half. I take it then that you would not 

object to a requirement that there be investigative scrutiny after, 

let us say, a 2 percent—— 

Mr. ALTSCHUL. The devil is always in the details. Certainly not. 

I would be certainly willing to look into it. 

One of the interesting things in the Vermont consumer survey 

that Attorney General Sorrell mentioned—and it was filed in the 

FCC docket—is how often in the customer responses you discover 

that a lot of these charges were what sometimes are called teachable moments in families with family plans. And the survey response indicates that a child on a family plan made a charge without the parents’ consent. This is a serious issue. It is in violation 

of FTC rules, though maybe not a conflict because the users may 

be over 13. So not all of the refunds are attributed to lack of knowledge, just maybe perhaps, as I said, lack of adult supervision. 

So that is why a refund rate per se is a very crude metric. And 

if that is the metric, you may find carriers being less liberal with 

their refund policies to stay under that line. That is a not a desire 

that the industry wants, and I am sure the Committee wants. 

Senator BLUMENTHAL. I would not set the threshold at the level 

of refunds. I would set it at the level of requests for refunds. And 

I take it that you would not, barring viewing some of the details, 

object to, let us say, 2 or 3 percent. 

Mr. ALTSCHUL. No. In fact, the actual numbers in the public 

record from the monitoring or the reports received by the FCC and 

Federal Trade Commission and the State AG’s over a period of 4 

years are below that number, and yet that number, as we have 

heard today, does not necessarily indicate the scope of the problem. 

So that is why the devil is in the details. 

Senator BLUMENTHAL. OK. Well, maybe we will work on some of 

the details. 

Comparing again the consumer disputes in this area as compared 

to some others, as you know, when a consumer disputes a vendor 

charge on their phone bill, they have far less protections—far fewer 

protections than a consumer who disputes a credit card charge. 

Those consumers have a statutory right to reasonable investigation 

of the dispute and they cannot be penalized for a bad credit report 

98 

for failing to pay the charge during the investigation, unlike consumers who dispute a vendor charge on a phone bill. 

Let me ask the members of the panel whether perhaps those 

same protections in the credit card or credit charge area should be 

extended to charges on phone bills. 

Mr. SORRELL. In my view that makes sense, Senator. 

Commissioner MCSWEENY. I would note that the FTC’s view is 

to suggest continued voluntary regulation at this point and a series 

of steps that we believe the industry and carriers should take. Personally, I would be very interested in working with you on that 

issue. 

Senator BLUMENTHAL. Thank you. 

Mr. LeBlanc? 

Mr. LEBLANC. Senator, I would echo both Attorney General 

Sorrell, as well as Commissioner McSweeny, and say it is squarely 

a policy question that should definitely be considered. 

Mr. ALTSCHUL. If I might add. 

Senator BLUMENTHAL. Yes, please. 

Mr. ALTSCHUL. While not an expert in payment mechanisms, I 

am sufficiently aware it is a mess of different levels of protection. 

And if this committee and Congress has the appetite, what they 

should do is take on the entire range of credit cards, debit cards, 

prepaid cards, charges to all kinds of additional third-party mechanisms because the current landscape is a total mess of differing 

and sometimes conflicting rights and obligations. 

Senator BLUMENTHAL. Well, I am not sure how to interpret that 

answer. You would not object but only if it is more far-reaching? 

Mr. ALTSCHUL. You have chosen to compare the credit cards with 

the protections that consumers have. That is just one of the existing regulatory schemes that exists for payment mechanisms today. 

There are other payment mechanisms which exist which have very 

similar rules and regulations as carrier billing which, as we have 

heard today, the Federal Trade Commission and Federal Communications Commission oversees. 

Senator BLUMENTHAL. Well, let me take another area that is 

very comparable to yours. In the landline industry, industry members have stated that consumers can withhold payment on disputed 

charges. Is that true in the wireless area? 

Mr. ALTSCHUL. It is not part of the FCC’s truth-in-billing rules, 

and that was because the FCC found that wireline service, at least 

at the time, was something that households had and had a right 

to without interruption. Wireless—there were additional choices 

and very low barriers to getting additional wireless service. 

Senator BLUMENTHAL. Would you object to that rule as applied 

to your industry? 

Mr. ALTSCHUL. Once again, the devil is in the details. But certainly I think the industry would be open to discussing. 

Senator BLUMENTHAL. Do you, by the way, have evidence that 

you could give us? I know you disputed the contentions made by 

the members of the panel that the majority of charges are 

unrequested. Do you have facts or data or studies that you could 

submit? 

Mr. ALTSCHUL. I do not. The one study, as we all know, that is 

in the record is from Vermont. Our association has filed some comVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00102 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\95539.TXT JACKIE
99 

ments in the FCC docket just pointing out some of the flaws in that 

study. But that study itself indicates that there are a lot of reasons 

and a lot of inconsistent reasons why these charges show up on 

customer bills. 

Senator BLUMENTHAL. Do you have a number that you can attribute to unauthorized or—— 

Mr. ALTSCHUL. I do not. 

Senator BLUMENTHAL. So on what basis are you disputing that 

the majority are unrequested or unauthorized? 

Mr. ALTSCHUL. As I believe I represented, it is my belief, based 

on my experience and the experience of my peers and friends, that 

the majority of charges on customer bills are charges that customers have opted into and consented to. I know I have looked at 

my charges. I hope you have looked at your bills as well. 

Senator BLUMENTHAL. You described this problem as de minimis, 

I think, before the FTC not all that long ago. 

Mr. ALTSCHUL. We described the number of complaints received 

by the FTC as de minimis. 

Senator BLUMENTHAL. Do you still believe it is de minimis? 

Mr. ALTSCHUL. Based on what we said at the time, the number 

of complaints reported by the agencies remain de minimis. The 

scope of the problem has been demonstrated to be significant, and 

that is why the industry has discontinued their support of premium 

SMS charges. 

Senator BLUMENTHAL. You agree that it is significant? 

Mr. ALTSCHUL. Significant, yes. 

Senator BLUMENTHAL. Attorney General Sorrell, I am not sure 

whether it has been mentioned yet, but I think you did in your testimony say that in Vermont these third-party charges were actually banned by statute on landlines. 

Mr. SORRELL. On landline, yes, Senator. 

Senator BLUMENTHAL. In your testimony, you also call for a—and 

I am quoting—new approach. What about the idea of banning 

third-party charges on wireless? 

Mr. SORRELL. I think given what is happening in the marketplace and how smart phones I believe are now a majority of cell 

phones in America, that I am concerned that an outright ban would 

have unintended consequences that might well be harmful to consumers. An opportunity for one to block all third-party charges on 

their phone or to block certain types of charges makes sense to me, 

but I would be concerned that if I took the position that what we 

have done in landline should also apply to the wireless arena, that 

although it would take care of a lot of bad actions by a lot of bad 

actors, that it might also tend to harm consumers and the economy 

going forward. 

Senator BLUMENTHAL. Well, I tend to agree with you. I do not 

know whether any other members of the panel would have observations. 

Commissioner MCSWEENY. I would agree and second what the 

Attorney General said. I think from the FTC’s perspective and certainly my personal perspective, there are a lot of innovations in 

mobile carrier billing right now that are very beneficial to consumers. And at the moment, one of the primary gaps here is the 

fact that consumers may have the ability to, but do not know that 

100 

they can, block these third-party transactions if they wish to. 

Again, they may not wish to because they may be taking advantage 

of that service, but then it can be very difficult for them to see 

where the third-party charges are showing up in their bills. And 

as we have discussed, they do not have the same consistent dispute 

resolution procedures available to them, should they wish to dispute the charges. 

Senator BLUMENTHAL. I am going to turn to Senator Klobuchar. 

I apologize. I did not know that you had more. I am sorry. 

Senator KLOBUCHAR. No. I am just listening, believe it or not. 

The usual line in the Senate: everything has been said, but I have 

not said it. I am not using that today. 

[Laughter.] 

Senator KLOBUCHAR. You have been saying everything in a very 

good way. 

Senator BLUMENTHAL. Thank you. 

I have just a few more questions. The Commission actually has 

advocated, as you point out in your testimony, that consumers have 

the right to block these charges on a selective basis, in part perhaps to avoid the kind of teaching moments that Mr. Altschul has 

raised. I think that recommendation was made back in 2012. Can 

you bring us up to date as to what the FTC’s position is now? 

Commissioner MCSWEENY. It is my understanding—and I would 

defer to Mr. Altschul on this—that most of the carriers provide this 

as an option. And we articulate this in the report we released this 

week. Very few consumers are aware of it, and the information 

about the option is not readily available. So the FTC does include 

it in consumer education materials, and we think it is a valuable 

option, especially perhaps if you want to make sure that a phone 

a young person in your family has access to cannot include thirdparty charges on it. But it is not widely used and I think that is 

because people really do not understand that it is available or what 

it even means. 

Senator BLUMENTHAL. A lot of these issues really seem to come 

back to consumers knowing what they are doing, paying attention, 

being educated. And I hope that this hearing will play at least 

some part in raising awareness, but I think with all due modesty, 

outside of this building, outside of Washington, D.C., there are 

probably very few people who will be watching their bills more 

closely simply because we had this hearing today. And so I think 

there are a number of areas where we can work together to ensure 

that consumers are not only educated but better protected. 

And Attorney General Sorrell has very commendably and interestingly suggested that a new approach is necessary in this area. 

And I would welcome more specific ideas from the State Attorneys 

General, from the FTC, and the FCC, and of course, from the industry as to how we can do better. 

If there are no other questions from the panel, we will keep the 

record open for 2 weeks. 

I want to thank the staff for its really excellent work on the report that was released today. It is a profoundly important document, and rather than listen to me talk about it, I hope people will 

read it. I hope the American public looks at it. I hope it gains 

greater currency because it is truly eye-opening and important. 

101 

So record will remain open for two weeks. We welcome other 

comments. 

And with that, the hearing is adjourned. 

[Whereupon, at 4:30 p.m., the hearing was adjourned.] 

(103) 

A P P E N D I X 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. CORY BOOKER TO

HON. TERRELL MCSWEENEY

Question. When it comes to consumer education, which mobile stakeholders 

should bear the responsibility for ensuring consumers are adequately informed 

about billing practices and equipped with the tools needed to challenge unauthorized activity on their phone bills? Is this incumbent on the carriers, or do others 

bear responsibility, as well? 

Answer. All of the stakeholders in the mobile ecosystem should play a role in ensuring that consumers are adequately informed about billing practices and equipped 

with the tools needed to challenge unauthorized charges, and carriers can play a 

particularly important role in providing their customers with adequate information 

about third-party charges. 

For instance, third-party providers of services charged to mobile bills should clearly and conspicuously disclose the cost of their services to consumers up front, and 

advertising and purchase confirmation screens should clearly disclose that the 

charge is being billed to a specific telephone account. Merchants also should ensure 

that the means used to obtain authorization for such charges is not deceptive. Billing intermediaries can take steps to ensure that consumers have consented to the 

charges placed on their bills, such as by scrutinizing risky or suspicious merchants. 

Mobile carriers should take a lead role in ensuring that consumers are adequately 

informed, because they are uniquely situated in several respects. Mobile carriers are 

the only parties that can and should inform consumers at the time that they sign 

up for service that charges for third-party services may be placed on their telephone 

bills. Carriers can also give consumers the ability to block third-party charges from 

their bills, and inform consumers of that option at sign-up and while the accounts 

are active. And mobile carriers are responsible for the format and content of the 

telephone bills that consumers receive, so they are in the best position to ensure 

that third-party charges are clearly disclosed. 

Carriers are also the natural first point of contact for consumers who wish to inquire or complain about third-party charges, so they should develop fair and efficient dispute resolution procedures and refund policies to address such complaints. 

To assist industry efforts to combat mobile cramming and educate consumers, the 

FTC has issued consumer education materials and a Staff Report on Mobile Cramming that includes recommended best practices for industry members. See http:// 

www.consumer.ftc.gov/articles/0183-mystery-phone-charges; http://www.consumer. 

ftc.gov/blog/hiding-plain-sight; http://www.ftc.gov/reports/mobile-cramming-fede 

ral-trade-commission-staff-report-july-2014. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

HON. TERRELL MCSWEENY

Question 1. Is the recent T-Mobile cramming case the first time the FTC has 

taken enforcement action against a telecommunications carrier? 

Answer. The T-Mobile case is the first enforcement action the FTC has brought 

against a telecommunications carrier for deceptive or unfair practices under the 

FTC Act. 

Question 2. Do you believe the exemption from the FTC’s jurisdiction of communications common carriers inhibits the FTC’s consumer protection mission? Please 

explain your answer. 

Answer. While the FTC’s jurisdiction over telecommunications companies when 

they are engaged in non-common carrier activities like billing for third-party services is well supported, the exemption encourages telecommunications companies to 

contend otherwise, leaving the matter open to litigation. Furthermore, non-commoncarrier activities can be mingled with common-carrier activities (such as pricing and 

advertising of bundled services). These issues can inhibit our consumer protection 

104 

mission. The common carrier exemption can also frustrate effective consumer protection under FTC principles when dealing with advertising, marketing, and billing 

practices for common carrier activities. 

Question 3. Do you believe the communications common carrier exemption is outdated or should be repealed? 

Answer. Yes, the common carrier exception was implemented in the 1930s, at a 

time when telephone companies provided basic services that were heavily regulated 

monopolies. That economic and regulatory model no longer applies. Today, consumers would be better served by the repeal of the common carrier exemption. As 

communications technologies and platforms have continued to evolve, market participants may offer a range of communications-related services to consumers, some 

of which are subject to common carrier requirements under the Communications Act 

but many of which are not. Consumers should expect and receive the same protections against unfair or deceptive acts or practices in the context of common carrier 

services as in other services. 

Question 4. Would repealing the communications common carrier exemption lead 

to duplicative jurisdiction with the FCC? Why or why not? Please explain your answer. Answer. The FTC and the FCC already share concurrent jurisdiction in certain 

areas, such as mobile cramming by telecommunications companies. The two agencies cooperate and coordinate with one another, which furthers consistency and allows each agency to use its own statutory tools to combat serious problems like mobile cramming that have caused many millions of dollars of harm. For example, the 

FTC Act provides the FTC with the authority to seek equitable injunctive and monetary relief for consumers—including refunding money that was unfairly or unjustly 

taken, while the Communications Act gives the FCC authority to impose monetary 

forfeiture on a party that is paid to the U.S. Treasury. 

Question 5. Wouldn’t repealing the communications common carrier exemption 

lead to potentially inconsistent enforcement activities by the FTC and the FCC, 

which could undermine effective guidance to industry and ultimately the protection 

of consumers of telecommunication services? Please explain your answer. 

Answer. The FTC and the FCC coordinate with each other to make sure that we 

are sending consistent messages to the industry and maximizing the effective use 

of our resources. Further, in areas that cause serious consumer harm, such as mobile cramming, it is important that each agency has the ability to use the different 

tools in its arsenal to combat the problem, such as consumer redress for the FTC 

and civil penalties for the FCC. It is important to note that concurrent jurisdiction 

is common. For example, we share jurisdiction with the CFPB over a wide swath 

of industries. We coordinate by, for example, notifying each other of investigations 

and other activities to avoid ‘‘double-teaming’’ a particular target. The presence of 

two agencies acting to address serious consumer protection issues has worked well, 

providing ‘‘more cops on the beat.’’ For example, just last month the FTC and the 

CFPB announced a joint Federal and state law enforcement sweep, which targeted 

companies peddling fraudulent mortgage relief schemes to distressed homeowners. 

By combining resources, the agencies were able to engage in more robust enforcement in an area causing significant consumer injury. Similarly the two agencies coordinate with each other to provide guidance to industry. For example, in June 

2013, the FTC and the CFPB co-hosted a roundtable to examine the flow of consumer data throughout the debt collection process. In a similar fashion, we also 

work cooperatively with the FDA and the Department of Justice in areas where we 

have concurrent jurisdiction. 

Question 6. The FTC’s complaint in the T-Mobile case states that the FTC and 

the FCC have ‘‘concurrent enforcement jurisdiction over mobile telephone companies’ billing and collection of third-party charges for non-telecommunications services,’’ but does not cite to any authority for this statement. During the hearing, you 

stated that this authority is established by ‘‘relevant case law,’’ but did not specify 

any cases. 

Please provide citations to any and all statutes, regulations, and case law that you 

believe establish the FTC’s authority, and explain why the FTC believes these cases, 

statutes, and regulations establish the FTC’s authority to sue T-Mobile notwithstanding the common carrier exemption. 

Answer. I expect this issue to be fully briefed in the T-Mobile litigation depending 

on the arguments raised by the defendant. In the interim, I am attaching the brief 

filed by the agency in FTC v. Verity Int’l Ltd., 194 F. Supp. 2d 270 (S.D.N.Y. 2002) 

that discussed this issue. In that case, the court found that the FTC has jurisdiction 

over a billing aggregator placing charges on consumers’ telephone bills, explaining 

that ‘‘the better considered authorities . . . agree that whether an entity is a comVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00108 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
105 

mon carrier for regulatory purposes depends on the particular activity at issue.’’ Id. 

at 274–75; aff’d 443 F.3d 48 (2d Cir. 2006). 

Question 7. Two of your colleagues on the Commission, Commissioner Wright and 

Commissioner Ohlhausen, have indicated they believe that ‘‘the FTC’s competencies 

as an antitrust enforcement and consumer protection agency, combined with the expertise it has developed in matters related to the Internet and broadband access, 

position the FTC well to deal with the difficult legal, economic, and technological 

issues related to net neutrality.’’ Do you agree with this statement? Please explain 

your answer. 

Answer. The issue of net neutrality raises a host of complicated legal, technical, 

and economic issues. We look forward to seeing how the FCC addresses them in its 

proceeding. While antitrust enforcement is vital to protecting a competitive marketplace, it is not always the most effective way to address policy issues in the economy. Sometimes the public interest is best protected through a combination of antitrust enforcement and well-designed regulation. 

106 

ATTACHMENT


730BRIEF1.eps
107 


730BRIEF2.eps
108 


730BRIEF3.eps
109 


730BRIEF4.eps
110 


730BRIEF5.eps
111 


730BRIEF6.eps
112 


730BRIEF7.eps
113 


730BRIEF8.eps
114 


730BRIEF9.eps
115 


730BRIEF10.eps
116 


730BRIEF11.eps
117 


730BRIEF12.eps
118 


730BRIEF13.eps
119 


730BRIEF14.eps
120 


730BRIEF15.eps
121 


730BRIEF16.eps
122 


730BRIEF17.eps
123 


730BRIEF18.eps
124 


730BRIEF19.eps
125 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. CORY BOOKER TO

TRAVIS LEBLANC

Question 1. When it comes to consumer education, which mobile stakeholders 

should bear the responsibility for ensuring consumers are adequately informed 

about billing practices and equipped with the tools needed to challenge unauthorized activity on their phone bills? 

Answer. Consumers have a direct relationship with their carriers, and they trust 

that their carriers’ bills will be accurate. Therefore, as a good business measure, all 

carriers should timely and adequately inform their customers about their billing 

practices and equip them with tools needed to challenge unauthorized activity on 

their phone bills. Additionally, third parties who place charges on consumers’ phone 

bills and any other entities that have direct relationships with consumers by providing goods or services directly to consumers should also bear this responsibility. 

This is particularly important as the mobile ecosystem prepares to embrace new innovations that would allow consumers to pay for third party goods and services 

through their phone bill. 

To help empower consumers in a world that is increasingly dependent on wireless 

communications, the FCC is currently considering a rulemaking that could extend 

wireline ‘‘cramming’’ rules to the wireless industry. For instance, wireline phone 

companies are required to place third-party charges in a separate section on customer bills and prominently disclose options for blocking such charges. The record 

was recently refreshed, and the FCC is now poised for action in that docket within 

the next several months. 

Question 2. Is this incumbent on the carriers, or do others bear responsibility, as 

well? 

Answer. As discussed above, mobile carriers and the third parties who place 

charges on consumers’ phone bills should bear responsibility for ensuring consumers 

are adequately informed about billing practices and equipped with the tools needed 

to challenge unauthorized activity on their phone bills. Additionally, these duties 

should also apply to any other entities that have direct relationships with consumers wherein consumers pay for goods or services through their phone bill. 

Also, as the Federal agency with primary oversight of the Nation’s telephone carriers, the FCC approaches the problem of cramming through regulation, enforcement, and consumer education. It is important that we continue to educate consumers about third-party charging practices and how to respond to unauthorized 

charges on wireless bills. The FCC engages consumers through written and video 

guides, tip sheets, and other materials that empower consumers to prevent cramming, or identify and report it if it occurs. For example, the FCC held a public workshop in 2013 that brought together industry members, consumer advocates, and regulators to focus more attention on the cramming problem and offer consumers practical tips. We also partner in our outreach efforts with groups representing populations particularly vulnerable to cramming, such as AARP. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

TRAVIS LEBLANC

Question 1. Do you believe the exemption from the FTC’s jurisdiction for communications common carriers frustrates effective consumer protection with regard to 

billing practices in the telecommunications industry? Please explain your answer. 

Answer. I do not believe that the exemption from the FTC’s jurisdiction for communications carriers frustrates effective consumer protection with regard to billing 

practices in the telecommunications industry. Over the years, the FCC has taken 

many enforcement actions to protect consumers from deceptive billing practices in 

the telecommunications industry. These actions have proposed forfeiture penalties, 

as well as required carriers to redress injured consumers and adopt rigorous compliance plans. The FCC has also adopted truth-in-billing rules to protect consumers 

from deceptive billing practices, and initiated a proceeding that considers the expansion of existing protections for consumers. The FCC expects to conclude this proceeding in the next several months. As a result, the exemption from the FTC’s jurisdiction for common carriers does not frustrate effective consumer protection because 

the FCC is acting to protect consumers of telecommunications services. 

Question 2. Do you believe the communications common carrier exemption is outdated or should be repealed? Please explain your answer. 

Answer. I do not believe that the communications common carrier exemption is 

outdated or should be repealed. The FCC is the Federal agency with the expertise 

and experience to serve as the primary regulatory and enforcement oversight auVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00129 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
126 

thority for the Nation’s telecommunications carriers. For decades, the FCC has exercised this authority through a combination of regulation, enforcement, and consumer 

education. The regulations that the FCC has adopted continue to protect consumers 

while also ensuring that all the people of the United States have rapid, efficient, 

and nationwide communications services with adequate facilities at reasonable 

charges. While the portfolio of enforcement actions that the Commission takes have 

evolved over time with changes in technology and industry practices, the Commission and the Enforcement Bureau are fully committed to ensuring that the Communications Act as well as the FCC’s rules and regulations are efficiently and effectively enforced to protect American consumers in the 21st Century. 

Question 3. Do you believe the FCC should remain the agency with primary jurisdiction over the telecommunications industry? 

Answer. Yes. 

Question 3a. Would repealing the communications common carrier exemption 

alter the jurisdiction of the FCC? Please explain your answer. 

Answer. I do not believe that the communications common carrier exemption 

should be repealed. That being said, the FCC’s jurisdiction is not tied to the FTC 

Act. As a result, repealing the common carrier exemption in the FTC Act would not 

alter the FCC’s jurisdiction. However, granting another Federal agency jurisdiction 

over the activities of common carriers increases the risk of inconsistent actions by 

the agencies as well as inconsistent requirements for regulatees. 

Question 4. Does the communications common carrier exemption need to be repealed or modified in order to better enable the FCC and the FTC to work together 

to protect consumers of telecommunication services? Please explain your answer. 

Answer. No. It is not necessary to modify or repeal the common carrier exemption 

in the FTC Act in order to better enable the FCC and the FTC to work together 

to protect consumers of telecommunications services. The FCC and the FTC regularly collaborate and cooperate to protect consumers. For example, as discussed at 

the hearing, the FCC and the FTC coordinated our enforcement activities with respect to T-Mobile’s alleged cramming via premium short messaging services. Our 

two agencies worked collaboratively on that investigation in order to harmonize our 

respective enforcement as well as to leverage our respective expertise. As other examples of our effective working relationship, the FCC has taken enforcement action 

against prepaid card providers for deceptive marketing based on FTC referrals; we 

have participated in each other’s workshops on areas of mutual interest; and the 

agencies meet and confer routinely on Do-Not-Call and robocall enforcement. We at 

the FCC are pleased with our collaborations with the FTC and look forward to continuing to partner with the FTC in the future. 

Question 5. As you know, call completion is a significant problem in rural America. To date, however, only three companies have reached agreement on consent decrees to address the issues, and persistent problems continue. Why has the Commission not taken more forceful and widespread enforcement action in this area? 

Answer. I agree that rural call completion has been a significant problem; it can 

interfere with an individual’s ability to communicate with family and friends, seek 

help in an emergency, and conduct important business. As a result of the Commission’s investigations, Level 3, Windstream, and Matrix made substantial payments 

to the U.S. Treasury and agreed to institute comprehensive compliance plans designed to ensure future compliance with the Commission’s rules. These investigations also informed the Commission’s rural call completion rulemaking, which resulted in the adoption of the new rules that require providers to record, retain, and 

report to the Commission call completion data for long distance calls. When these 

rules go into effect, the data that providers file should highlight which providers 

have unacceptably low call completion rates and facilitate the Commission’s ability 

to take additional enforcement action on an ongoing basis. In addition, the data collection should deter call completion problems by informing providers about their 

own performance, as well as the performance of each of their intermediate providers. 

Question 6. The Commission adopted record keeping and reporting requirements 

in the Fall of 2013 to address the call completion issue, but the rules have not been 

implemented. To the extent investigative efforts are hampered by the lack of 

records, why have the rules not yet gone into effect—nine months after they were 

adopted? 

Answer. Pursuant to the Paperwork Reduction Act (PRA), any rules that necessitate ‘‘information collections’’ from 10 or more entities, such as the recordkeeping, 

retention, and reporting requirements adopted in the Fall of 2013, must obtain Office of Management and Budget approval before taking effect. Although the Commission received OMB pre-approval for the collection proposed in the Notice of ProVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00130 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
127 

posed Rulemaking, the Rural Call Completion Order that the Commission adopted 

modified, and in some respects expanded, the recordkeeping, retention and reporting 

burdens. The revised scope of the final rules generated additional PRA comments. 

The Commission is currently working on a submission to OMB that: (1) addresses 

the arguments raised during this separate notice and comment process; and (2) is 

designed to obtain prompt approval from OMB. 

Question 7. Many believe that call completion problems can be traced to substandard intermediate providers. What will the Commission do to ensure that only 

quality intermediate providers are used to route calls and why has the Commission 

not taken enforcement action against poor performing intermediate providers? 

Answer. The Commission has taken enforcement action against intermediate providers. Each of the three companies that have entered into consent decrees with the 

Commission—Level 3, Windstream, and Matrix—acts as an intermediate provider 

and carries significant quantities of wholesale traffic. Matrix primarily serves as an 

intermediate provider for other carriers. Level 3 is subject to potential additional 

penalties for substandard performance as an intermediate provider under the terms 

of its consent decree if its wholesale call completion rates to rural areas are more 

than five percentage points below its wholesale call completion rates to non-rural 

areas. 

Moreover, the Commission’s new rules require covered long distance providers to 

record and retain detailed information regarding call completion rates for each intermediate provider that the long distance provider uses to terminate calls to rural 

areas. Many long distance providers did not previously record this information. 

After the new rules take effect, identifying sub-standard performance among intermediate providers should be easier for long distance providers. This should deter 

them from using intermediate providers that perform poorly. 

The new rules should also facilitate future enforcement actions by the Commission, which can request data regarding individual intermediate provider performance from long distance providers. Moreover carriers may be liable for call completion problems caused by the intermediate providers they employ. The 2012 Rural 

Call Completion Declaratory Ruling stated that ‘‘it is an unjust and unreasonable 

practice in violation of section 201 of the [Communications] Act for a carrier . . . 

to fail to ensure that intermediate providers, least-cost routers, or other entities acting for or employed by the carrier are performing adequately.’’ This is in accordance 

with section 217 of the Act, which provides that carriers are liable for the acts of 

their agents or other persons acting on their behalf. By holding the originating providers responsible for rural call completion problems stemming from the actions of 

their intermediate providers, the rules encourage originating providers to choose 

their downstream providers more carefully, with a better eye toward call completion 

rates. 

In addition, covered providers can reduce their recordkeeping, retention, and reporting burdens by using fewer than two intermediate providers. If a long distance 

provider choosing this option experiences call completion problems, it should be able 

to quickly identify and remove the problematic intermediate provider. 

Prospectively, the Rural Call Completion Order sought comment on whether the 

Commission should extend its recordkeeping and reporting rules to intermediate 

providers, and whether we should impose certifications or other obligations on such 

entities. We are currently analyzing the comments. 

Question 8. When the Commission issued its rural call completion report and 

order, it requested comment on additional rules. When will the Commission issue 

an order addressing the additional proposals? 

Answer. Since releasing the Rural Call Completion Order, the Commission has received comments and ex parte presentations on the record suggesting additional 

steps and proposals that might improve rural call completion rates or reduce reporting burdens. We are analyzing the record to determine the best path forward. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. CORY BOOKER TO

MICHAEL F. ALTSCHUL

Question. With fewer people using landlines, the number of wireless-only households is growing, particularly among young and low-income people. Cramming is a 

deeply troubling and deceptive practice that seems to be keeping pace with this significant growth in mobile technology. Additionally, as the use of legitimate billing 

of third-party services (such as apps and downloads) increases, it seems as though 

the mobile space presents additional challenges for consumers and their ability to 

discern unauthorized charges on their cell-phone bills. I am pleased to see the FTC 

128 

issued recommendations to carriers on how to combat mobile cramming. What is the 

industry’s response to the recommendations the FTC outlined? 

Answer. You are quite correct that the number of wireless-only (and wireless-primary) households is growing. The Center for Disease Control’s National Center for 

Health Statistics has tracked wireless-only households, and the percentages of 

adults and children under 18 who live in wireless-only households, for most of the 

past decade. According to its 2013 survey (reporting on data through December 

2012), nearly 40 percent of Americans have chosen to ‘cut the cord’ and live exclusively in wireless only homes. Overall, your state lags the Nation in the movement 

toward wireless-only households, although Essex County appears to be very close to 

the national average, with 40.2 percent of adults 18 and over living in wireless-only 

households. 

As I testified to on June 30, the wireless industry already has adopted many of 

the FTC’s recommendations. Commercial, charitable, and political uses of common 

short codes issued by CTIA are subject to written, publicly available consumer protection guidelines. Moreover, CTIA monitors advertisements to ensure compliance 

with these guidelines and that advertising and price information is clearly disclosed. 

As a further safeguard to consumers, beginning in February 2012, CTIA contracted 

with an outside vendor to verify information supplied to the Common Short Code 

Administration registry by companies seeking to lease short codes for premium SMS 

campaigns. CTIA’s vendor uses numerous commercially-available databases such as 

Lexis/Nexis, Dun & Bradstreet, and the Better Business Bureau to confirm that the 

Content Provider displayed in the registry represents a legitimate company and is 

identified correctly in the registry. When monitoring identifies problems, that information is sent to the carriers so they may take corrective action. These efforts and 

the national carriers’ decisions to end support for premium short code campaigns 

(with the limited exceptions for charities and political campaigns) should combine 

to significantly reduce the opportunity for third-parties to use carrier billing platforms as a tool to commit fraud. In addition, wireless companies provide customers 

the ability to block all third party charges (see: AT&T: http://www.att.com/shop/ 

wireless/services/purchaselblocker-sku6800254.html#fbid=pwxABFfDn2W; Sprint: 

http://support.sprint.com/support/article/FindloutlaboutlPremiumlMessaging 

/case-cx832318-20091116-142129?ECID=vanity:premiummessaging&questionlbox= 

block billing&id16=block billing; T-Mobile: http://support.t-mobile.com/docs/DOC2745?cmlsp=THE%20SOURCElSupport-l-Upgrades%20%26%20Planscontentl blockingltxt; Verizon: https://wbillpay.verizonwireless.com/vzw/nos/safeguards/ 

SafeguardProductDetails.action?productName=serviceblock). Wireless carriers are 

reviewing all of the Commission’s recommendations with the shared goal of protecting consumers from deceptive advertisements and fraud, and helping dispute 

unauthorized charges and obtain refunds through a clear and consistent dispute resolution process. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN THUNE TO

MICHAEL F. ALTSCHUL

Question 1. Is the recent T-Mobile cramming case the first time the FTC has 

taken enforcement action against a telecommunications carrier? 

Answer. To CTIA’s knowledge, it is the first time the FTC has taken enforcement 

action against a telecommunications carrier for a carrier-provided service. The FTC 

has brought actions against carriers for violations of the Fair Credit Reporting Act 

(FCRA). 

Question 2. Do you believe the current exemption from the FTC’s jurisdiction for 

communications common carriers frustrates effective consumer protection and industry guidance with regard to billing practices in the telecommunications industry? 

Answer. Currently, the FCC imposes Truth-in-Billing requirements on telecommunications carriers. If Congress eliminated the FTC’s common carrier exemption while keeping the FCC’s rules in place, wireless carriers would be subject to 

two potentially conflicting sets of Federal requirements administered by two different Federal agencies. Such an outcome would lead to consumer and carrier confusion, and would frustrate effective consumer protection. In addition, dual Federal 

regulation would result in increased costs to taxpayers by funding two agencies to 

do similar work, while at the same time increasing compliance costs for carriers, 

also likely to be passed on to consumers. 

Question 3. Do you believe the communications common carrier exemption is outdated or should be repealed? Please explain your answer. 

Answer. Any determination affecting the common carrier exemption in the FTC 

Act should await the outcome of the current ‘‘Net Neutrality’’ debate and the reguVerDate Nov 24 2008 07:48 Jul 27, 2015 Jkt 075679 PO 00000 Frm 00132 Fmt 6601 Sfmt 6621 S:\GPO\DOCS\95539.TXT JACKIE
129 

latory status of carrier services. Any changes to agency authority over communications carriers should ensure that there is not dual Federal regulation and that Federal authority preempts state authority. 

Question 4. Do you believe repealing the communications common carrier exemption would alter the jurisdiction of the FCC? Please explain your answer. 

Answer. While repealing the common carrier exemption by itself would not alter 

the FCC’s jurisdiction, such an outcome should logically be coupled with a change 

in the FCC’s jurisdiction in order to avoid dual Federal regulation. 

Question 5. Do you believe repealing the communications common carrier exemption is necessary to enable the FTC and FCC to work together to protect consumers 

of telecommunications services? 

Answer. No. Repealing the exemption without altering the FCC’s jurisdiction 

could create two potentially conflicting Federal regimes, which could undermine coordinated FTC and FCC actions to protect consumers. 

Æ