Telecommunications: Preliminary Observations about Consumer Satisfaction and Problems with Wireless Phone Service and FCC's Efforts to Assist Consumers with Complaints
Published: 2009-06-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The use of wireless phone service in the United States has risen dramatically over the last 20 years, with an estimated 270 million subscribers as of December 2008. Americans increasingly rely on wireless phones as their primary or sole means of telephone communication. Concerns have been raised in recent years about the quality of this service, including specific concerns about billing and carriers' contract terms, such as fees charged for terminating service before the end of a contract period. Under federal law, the Federal Communications Commission (FCC) has flexibility in regulating wireless phone service carriers. FCC's rules include procedures for addressing consumer complaints. This testimony provides preliminary information on (1) consumers' current satisfaction with wireless phone service and problems consumers have experienced with this service (2) FCC's efforts to assist wireless consumers with complaints. The statement is based on related ongoing work that GAO is conducting for this committee and plans to report on later this year. To conduct this work, GAO surveyed 1,143 adult wireless phone users from a nationally representative, randomly selected sample and interviewed and analyzed documents obtained from FCC and various stakeholder organizations representing consumers, state agencies and officials, and industry.
section_title: What GAO Found
paragraphs: On the basisof its national survey of adult wireless phone users, GAO estimates that overall, 84 percent of users are very or somewhat satisfied with their wireless phone service. Stakeholders GAO interviewed cited billing, terms of the service contract, carriers' explanation of their service at the point of sale, call quality, and customer service as key aspects of service in which consumers have experienced problems with wireless phone service in recent years. GAO's survey results indicate that while most wireless phone users are very or somewhat satisfied with each of these key aspects of wireless phone service, the percentages of those very or somewhat dissatisfied with these specific aspects ranged from about 9 to 14 percent. GAO's survey results also indicate that some wireless phone service consumers have experienced problems with billing, certain contract terms, and customer service. For example, GAO estimates that about a third of users responsible for paying their bills had problems understanding their bills or had unexpected charges at least some of the time. Additionally, GAO estimates fees for the early termination of a contract were a problem for about 42 percent of users who wanted to switch services but did not, and that about 21 percent of users who contacted customer service with a specific problem were dissatisfied with their carriers' efforts to address the problem. In response to the types of consumer problems noted above, wireless carriers have taken some actions, such as prorating early termination fees, offering noncontract service options, and spending billions of dollars each year on wireless infrastructure, which can improve call quality. FCC assists wireless consumers by handling thousands of their complaints about carriers' service each year, but consumers may lack awareness of this process and its intended outcomes. FCC reviews consumer complaints submitted through its call centers and Web site, forwards complaints to carriers for response, reviews the carriers' responses, and closes complaints when it finds the responses sufficient. While FCC informs consumers through its Web site and fact sheets that they may submit complaints to it, GAO's survey results suggest that most consumers do not know they can do so and many do not know where they could complain. FCC has not articulated goals that clearly identify intended outcomes of its efforts to address consumer complaints and lacks measures to demonstrate how well it is achieving intended outcomes. For example, FCC has a goal to "improve customer experience" with its call centers and Web site, through which consumers submit complaints, but lacks measures of customer experience. Further, it is not clear if the intended outcome of FCC's complaint handling efforts is resolving consumer problems or fostering communication between consumers and carriers. Consequently, consumers may not understand what to expect from FCC's complaint process, and the effectiveness of FCC's efforts to assist consumers with complaints is unclear. GAO plans to complete its ongoing work in the fall, and expects to make recommendations at that time.

section_title: Letter
paragraphs: We appreciate the opportunity to participate in this hearing to discuss  wireless phone service consumer issues. My statement today is based on  our ongoing work on consumers’ experience with wireless phone service  and efforts by the Federal Communications Commission (FCC) to assist  wireless phone service consumers with complaints. The use of wireless  phone service in the United States has risen dramatically over the last 20  years, and Americans increasingly rely on wireless phones as their primary  or sole means of telephone communication. According to industry data,  wireless subscribership has grown from about 3.5 million subscribers in  the United States in 1989 to about 270 million today (see fig. 1). About 82  percent of adults now live in households with wireless phone service, and  35 percent of households use wireless phones as their primary or only  means of telephone service.
Concerns have been raised in recent years about the quality of wireless  phone service, including specific concerns about billing, customer service,  and carriers’ contract terms, such as fees carriers charge customers for  terminating their service before the end of the contract period (known as  early termination fees). Under federal law, FCC is directed to foster a  competitive wireless marketplace and the agency has the flexibility to  exempt wireless carriers from regulation if it determines that doing so  promotes competition and is in the public interest. FCC’s rules require  that wireless carriers, like other common carriers, provide their services to  consumers at a reasonable rate and in a manner that is not  discriminatory. Its rules also establish procedures for FCC to work with  carriers to address consumer complaints. States, which have traditi onally  regulated local telephone service, also retain some authority under federallaw to regulate the terms and conditions of wireless phone service, and  many address consumer complaints.
My testimony today discusses (1) consumers’ satisfaction with wireless  phone service and problems they have experienced with this service and (2) FCC’s efforts to address consumers’ complaints about this service.  This testimony presents preliminary observations based on ongoing wo we expect to complete this fall for this committee and the House  Subcommittee on Communications, Technology, and the Internet. This  ongoing work will also examine FCC’s wireless phone service oversight  efforts and the extent to which state utility commissions oversee wireles phone service and assist consumers.
To determine consumers’ satisfaction with their wireless phone service  and identify problems consumers have experienced with this service, we  surveyed a nationally representative, randomly selected sample of adult  wireless phone users aged 18 or older who had cell phone service in 2008,  from which we completed 1,143 interviews; interviewed stakeholders  from various organizations, including national consumer and state agency  organizations, state agencies in three selected states (California, Nebraska,  and West Virginia), wireless industry associations, the four major wireless  carriers and two selected smaller carriers, and FCC; and reviewed  documents obtained from these sources. To determine how FCC  addresses consumers’ complaints, we interviewed FCC officials about  these activities and reviewed related documentation obtained from the  agency. We also reviewed relevant laws, regulations, and procedures and  FCC’s quarterly complaint reports, strategic plan, and budget, including  the agency’s performance goals and measures (additional information  about our scope and methodology appears in app. I). We are conducting  this performance audit, which began in September 2008, in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings based on our audit objectives.
subsections: section_title: According to Our National Survey, Most Consumers Are Satisfied with Their Wireless Phone Service, but Some Have Experienced Problems
paragraphs: According to our survey results, overall, wireless phone service consumers  are satisfied with the service they receive. Specifically, we estimate that 84  percent of adult wireless phone users are very or somewhat satisfied with  their wireless phone service, and that approximately 10 percent are very  or somewhat dissatisfied with their service (see fig. 2).
Stakeholders we interviewed identified a number of areas in which  consumers have reported problems with their wireless phone service in  recent years. On the basis of these interviews and related documents, we  identified five key areas of concern (see table 1).
Based on our survey results, we estimate that most wireless phone users  are satisfied with these five specific aspects of service; however, the  percentages of those very or somewhat dissatisfied range from about 9 to  14 percent, depending on the specific aspect of service (see table 2). For  example, we estimate that 14 percent of wireless phone users are  dissatisfied with the terms of their service contract. We also estimate that  85 percent of wireless phone users are very or somewhat satisfied with  call quality, while the percentages of those very or somewhat satisfied  with billing, contract terms, carrier’s explanation of key aspects of service  at the point of sale, and customer service range from about 70 to 76  percent. Additionally, we estimate that most wireless phone users are  satisfied with specific dimensions of call quality. For example, we estimate  that 86 to 89 percent of wireless phone users are satisfied with their  coverage when using their wireless phones at home, at work, or in their  vehicle.
Other results of the survey suggest that some wireless phone consumers  have recently experienced problems with billing, certain contract terms,  and customer service since the beginning of 2008. For example, we  estimate that during this time about 34 percent of wireless phone users  responsible for paying for their service received unexpected charges, and  about 31 percent had difficulty understanding their bill at least some of the  time. Also during this time, almost one-third of wireless users who  contacted customer service about a problem did so because of problems  related to billing. Further, among wireless users who wanted to switch  carriers during this time but did not do so, we estimate that 42 percent did  not switch because they did not want to pay an early termination fee.  Finally, among those users who contacted customer service, we estimate  that 21 percent were very or somewhat dissatisfied with how the carrier  handled the problem.
In response to the areas of consumer concern noted above, wireless  carriers have taken a number of actions in recent years. For example,  officials from the four major carriers, Verizon Wireless, AT&T, Sprint  Nextel, and T-Mobile, reported taking actions such as prorating their early  termination fees, offering service options without contracts, and providing  Web-based tools consumers can use to research a carrier’s coverage area,  among other efforts. In addition, according to CTIA–The Wireless  Association, the wireless industry spent an average of $24 billion annually  between 2001 and 2007 on infrastructure and equipment to improve call  quality and coverage. Also, carriers told us they use information from  third-party tests and customer feedback to determine their network and  service performance and identify needed improvements.
section_title: FCC Assists Consumers with Wireless Complaints but Lacks Clear Goals and Outcome Measures for These Efforts
paragraphs: FCC assists wireless consumers by handling thousands of their informal  complaints each year, but consumers may lack awareness of this process  and its intended outcomes. FCC has a process to receive consumers’  complaints and forward them to carriers for a response. However, the  results of our consumer survey suggest that most consumers are not  aware of FCC’s complaint process. Furthermore, FCC has not articulated  goals that clearly identify the intended outcomes of its efforts to address  wireless consumer complaints and lacks related measures. As a  consequence, FCC’s effectiveness in assisting wireless consumers with  complaints is unclear and consumers may not understand what to expect  from FCC’s complaint process.
subsections: section_title: FCC Assists Consumers with Wireless Complaints
paragraphs: Each year, FCC receives thousands of complaints submitted by consumers  about problems with telecommunications services, including wireless  service, via its Web site, telephone, e-mail, mail, or fax. In 2008, the  agency received over 430,000 informal complaints from consumers,  including over 19,000 complaints related to services provided by wireless  carriers. The top categories of wireless complaints FCC reported  receiving were for problems related to billing and rates, service-related  issues, and contract early termination fees. According to FCC officials,  the agency informs consumers they may complain to FCC about problems  with their wireless service or other telecommunications services by  providing information on how to complain to the agency on its Web site  and in fact sheets that are distributed to consumers through its Web site  and other methods.
After reviewing a complaint received, FCC responds by sending the  consumer a letter about the complaint’s status. If FCC determines that the  complaint should be forwarded to the carrier for a response, the agency  sends the complaint to the carrier and asks the carrier to respond to FCC  and the consumer within 30 days. Once FCC receives a response from the  carrier, the agency reviews the response, and if FCC determines the  response has addressed the consumer’s complaint, marks the complaint as  closed. FCC officials told us they consider a carrier’s response to be  sufficient if it responds to the issue raised in the consumer’s complaint;  however, such a response may not address the problem to the consumer’s  satisfaction. When FCC considers a complaint to be closed, it sends  another letter to the consumer, which states that the consumer can call  FCC with further questions or, if not satisfied with the carrier’s response,  can file a formal complaint. FCC officials also told us that if a consumer is  not satisfied, the consumer can request that FCC mediate with the carrier  on his or her behalf; however, the letter FCC sends to a consumer whose  complaint has been closed does not indicate this is an option.
Since, based on our survey results, we estimate that about 21 percent of  wireless phone users who contacted their carriers’ customer service were  dissatisfied with how their carriers addressed their concerns, FCC’s efforts  to handle complaints are an important means by which consumers may be  able to get assistance in resolving their problems. However, the results of  our consumer survey suggest that most consumers would not complain to  FCC if they have a problem that their carrier did not resolve. Specifically,  we estimate that 13 percent of wireless phone users would complain to  FCC if they had such a problem and that 34 percent do not know where  they could complain.
section_title: FCC Lacks Clear Goals and Measures for Its Complaint Handling Efforts
paragraphs: FCC has not articulated goals that clearly identify intended outcomes for  its efforts to address wireless consumer complaints and lacks measures to  demonstrate how well it is achieving intended outcomes. The Government  Performance and Results Act of 1993 (GPRA) requires an agency to  establish outcome-related performance goals for the major functions of  the agency. GPRA also requires an agency to develop performance  indicators for measuring the relevant outcomes of each program activity in  order for the agency to demonstrate how well it is achieving its goals.
FCC’s key goal related to its consumer complaint efforts is to “work to  inform American consumers about their rights and responsibilities in the  competitive marketplace.” Under this key goal, one of FCC’s subgoals is to  “facilitate informed choice in the competitive telecommunications  marketplace.” According to FCC officials, “informed choice” means  consumers are informed about how a particular telecommunications  market works, what general services are offered, and what to expect when  they buy a service. FCC’s measure pertaining to its efforts to address  wireless consumer complaints under this subgoal is to respond to  consumers’ general complaints within 30 days. According to FCC  officials, this measure reflects the time it takes FCC to initially respond to  the consumer about the status of a complaint. This measure does not  clearly or fully demonstrate FCC’s achievement of its goal to facilitate  informed consumer choice. Additionally, this is a measure of a program  output, or activity, rather than of the outcome the agency is trying to  achieve. Another subgoal is to “improve customer experience with FCC’s  call centers and Web site.” While this subgoal does identify an intended  outcome, FCC does not have a measure related to this outcome that  pertains to consumers who complain about services provided by their  wireless carrier. FCC officials told us that they do not measure customer  experience with the agency’s call centers and Web sites, but sometimes  receive anecdotal information from customers about their experiences.
We have previously reported that to better articulate results, agencies  should create a set of performance goals and measures that address  important dimensions of program performance. FCC’s goals may not  represent all of the important dimensions of FCC’s performance in  addressing consumer complaints. A logical outcome of handling  complaints is resolving problems, or, if a problem cannot be resolved,  helping the consumer understand why that is the case. However, it is not  clear whether resolving problems is an intended outcome of FCC’s  consumer complaint efforts. While FCC’s goals in this area indicate that  informing consumers is a goal of the agency, some information from FCC  implies that another intended outcome of these efforts is to resolve  consumers’ problems. For example, FCC’s fact sheets state that  consumers can file a complaint with FCC if they are unable to resolve a  problem directly with their carrier. This may lead consumers to believe  that FCC will assist them in obtaining a resolution. However, FCC officials  told us that the agency’s role in addressing complaints, as outlined in the  law, is to facilitate communication between the consumer and the carrier  and that FCC lacks the authority to compel a carrier to take action to  satisfy many consumer concerns. Thus, it is not clear if the intended  outcome of FCC’s complaint handling efforts is resolving consumer  problems, fostering communication between consumers and carriers, or  both. Furthermore, FCC has not established measures of its effectiveness  in either resolving consumer problems or fostering communication  between consumers and carriers. For example, FCC does not measure  consumer satisfaction with its complaint-handling efforts. Without clear  outcome-related goals and measures linked to those goals, the purpose  and effectiveness of these efforts are unclear and the agency’s  accountability for its performance is limited. Moreover, consumers may  not understand what to expect from FCC’s complaint process.
Chairman Rockefeller and members of the committee, this concludes my  prepared statement. Our future work, which we expect to complete this  fall, will provide more definitive information about many of the matters  covered in my statement today, including detailed information about  oversight of wireless phone service carried out by FCC and state utility  commissions. We also expect to make recommendations at that time. I  would be pleased to respond to any questions that you or other members  of the committee might have.
section_title: Appendix I: Scope and Methodology
paragraphs: To obtain information about consumers’ satisfaction and problems with  their wireless phone service, we commissioned a telephone survey of the  U.S. adult population of wireless phone service users. Our aim was to  produce nationally representative estimates of adult wireless phone  service users’ (1) satisfaction with wireless service overall and with  specific aspects of service, including billing, terms of service, carriers’  explanation of key aspects of service, call quality and coverage, and  customer service; (2) frequency of problems with call quality and billing;  (3) desire to switch carriers and barriers to switching; and (4) knowledge  of where to complain about problems. Percentage estimates have a margin  of error of less than 5 percentage points unless otherwise noted. We  conducted this survey of the American public from February 23, 2009,  through April 5, 2009. A total of 1,143 completed interviews were  collected, and calls were made to all 50 states. Our sampling approach  included randomly contacting potential respondents using both landline  and cell phone telephone numbers. Using these two sampling frames  provided us with a more comprehensive coverage of adult cell phone  users.
Because we followed a probability procedure based on random selections,  our sample is only one of a large number of samples that we might have  drawn. Since each sample could have provided different estimates, we  express our confidence in the precision of our particular sample’s results  as a 95 percent confidence interval. This is the interval that would contain  the actual population value for 95 percent of the samples we could have  drawn. As a result, we are 95 percent confident that each of the confidence  intervals in this report will include the true values in the study population.  Each sampled adult was subsequently weighted in the analysis to account  statistically for all the adult cell phone users of the population. The final  weight applied to each responding adult cell phone user included an  adjustment for the overlap in the two sampling frames, a raking  adjustment to align the weighted sample to the known population  distributions from the 2009 supplement of the U.S. Census Bureau’s  Current Population Survey and the Centers for Disease Control’s 2008  National Health Interview Survey, and an expansion weight to ensure the  total number of weighted adults represent an estimated adult population  eligible for this study.
Telephone surveys require assumptions about the disposition of  noncontacted sample households that meet certain standards. These  assumptions affect the response rate calculation. For this survey the  response rate was calculated using the American Association of Public  Opinion Research (AAPOR) Response Rate 3. Based on these  assumptions, the response rate for the survey was 32 percent; however,  the response rate could be lower if different assumptions had been made  and might also be different if calculated using a different method. We used  random digit dial (RDD) sampling frames that include both listed and  unlisted landline numbers from working blocks of numbers in the United  States. The RDD sampling frame approach cannot provide any coverage of  the increasing number of cell-phone-only households and limited coverage  of cell-phone-mostly households (i.e., households that receive most of  their calls on cell phones in spite of having a landline). Because of the  importance of reaching such households for this survey about wireless  phone service, we also used an RDD cell phone sampling frame. The RDD  cell phone sampling frame was randomly generated from blocks of phone  numbers that are dedicated to cellular service. About 43 percent of the  completed interviews were from the RDD cell phone sample.
Because many households contain more than one potential respondent,  obtaining an unbiased sample from an RDD frame of landline numbers  requires interviewing a randomly selected respondent from among all  potential respondents within the sampled household (as opposed to  always interviewing the individual who initially answers the phone). We  obtained an unbiased sample by using the most recent birthday method, in  which the interviewer asks to speak to the household member aged 18 or  older with a wireless phone who had the most recent birthday. If the  respondent who was identified as the member of the household with the  most recent birthday was unavailable to talk and asked to schedule a  callback, the call representative recorded the person’s name and preferred  telephone number for the callback. There were also cases when a  respondent from the cell phone sample asked to be called back on his or  her landline. These respondents, if they completed the survey, were  considered a completed interview from the cell phone sample. There were  no respondent selection criteria for the cell phone sample; each number  dialed from the cell phone sample was assumed to be a cell phone  number, and each cell phone was assumed to have only one possible  respondent to contact.
The results of this survey reflect wireless phone users’ experience with  their current or most recent wireless phone service from the beginning of  2008 through the time they were surveyed. Not all questions were asked of  all respondents. For example, questions about the prevalence of billing  problems were asked only of respondents who indicated they were solely  or jointly responsible for paying for their service. Additionally, satisfaction  with wireless coverage for particular locations (i.e. at home, at work, and  in a vehicle) was calculated only among respondents who indicated they  used their wireless phone service in those locations.
To identify the type and nature of problems consumers have experienced  in recent years with their wireless phone service, we interviewed officials  from the Federal Communications Commission (FCC), consumer  organizations, national organizations that represent state agency  officials, and state agency officials from three selected states—California,  Nebraska, and West Virginia—representing utility commissions, offices of  consumer advocates, and offices of attorneys general. We selected these  states based on their various geography, populations, and region, and their  varying approaches to providing wireless phone service oversight based  on information obtained from national organizations representing state  agency officials. We also interviewed officials from the four major wireless  carriers, two selected smaller carriers that serve mostly rural areas, and  wireless industry associations. In addition, we reviewed documents  obtained from some of these sources and FCC’s recent quarterly reports  about consumer complaints. We also used the information obtained from  these stakeholders to develop some of the questions in the consumer  survey.
To determine how FCC addresses consumer complaints, we interviewed  FCC officials about these activities and reviewed related documentation  obtained from these officials. We also reviewed relevant laws, regulations,  and procedures, as well as FCC’s quarterly complaint reports, strategic  plan, and budget with performance goals and measures. In addition, we  reviewed the Government Performance and Results Act of 1993  requirements and our prior recommendations on performance goals and  measures and determined whether FCC’s efforts to measure the  performance of its consumer assistance efforts are consistent with these  requirements and recommendations.
section_title: Appendix II: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Judy Guilliams-Tapia, Assistant  Director; James Ashley; Scott Behen; Nancy Boardman; Andrew  Huddleston; Eric Hudson; Ophelia Robinson; Andrew Stavisky; and Mindi  Weisenbloom made key contributions to this testimony.
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