Telecommunications: FCC Needs to Improve Oversight of Wireless Phone Service
Published: 2009-11-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Americans increasingly rely on wireless phones, with 35 percent of households now primarily or solely using them. Under federal law, the Federal Communications Commission (FCC) is responsible for fostering a competitive wireless marketplace while ensuring that consumers are protected from harm. States also have authority to oversee some aspects of service. As requested, this report discusses consumers' satisfaction and problems with wireless phone service and FCC's and state utility commissions' efforts to oversee this service. To conduct this work, Government Accountability Office (GAO) surveyed 1,143 adult wireless phone users from a nationally representative, randomly selected sample; surveyed all state utility commissions; and interviewed and analyzed documents obtained from FCC and stakeholders representing consumers, state agencies and officials, and the industry.
section_title: What GAO Found
paragraphs: Based on a GAO survey of adult wireless phone users, an estimated 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 wireless phone service with which consumers have experienced problems in recent years. The survey results indicate that most users are very or somewhat satisfied with each of these key aspects of service, but that the percentages of those very or somewhat dissatisfied with these aspects range from about 9 to 14 percent. GAO's survey results and analysis of FCC complaint data also indicate that some wireless phone service consumers have experienced problems with billing, certain contract terms, and customer service. While the percentages of dissatisfied users appear small, given the widespread use of wireless phones, these percentages represent millions of consumers. FCC receives tens of thousands of wireless consumer complaints each year and forwards them to carriers for response, but has conducted little other oversight of services provided by wireless phone service carriers because the agency has focused on promoting competition. However, GAO's survey results suggest that most wireless consumers with problems would not complain to FCC and many do not know where they could complain. FCC also lacks goals and measures that clearly identify the intended outcomes of its complaint processing efforts. Consequently, FCC cannot demonstrate the effectiveness of its efforts to process complaints. Additionally, without knowing to complain to FCC or what outcome to expect if they do, consumers with problems may be confused about where to get help and about what kind of help is available. FCC monitors wireless consumer complaints, but such efforts are limited. Lacking in-depth analysis of its consumer complaints, FCC may not be aware of emerging trends in consumer problems, if specific rules are being violated, or if additional rules are needed to protect consumers. FCC has rules regarding billing, but has conducted no enforcement of these rules as they apply to wireless carriers. This August, FCC sought public comment about ways to better protect and inform wireless consumers. In response to GAO's survey, most state commissions reported receiving and processing wireless phone service consumer complaints; however, fewer than half reported having rules that apply to wireless phone service. Stakeholders said that states' authority to regulate wireless service under federal law is unclear, leading, in some cases, to costly legal proceedings and reluctance in some states to provide oversight. FCC has provided some guidance on this issue but has not fully resolved disagreement over states' authority to regulate billing line items and fees charged for terminating service early. State commissions surveyed indicated that communication with FCC about wireless phone service oversight is infrequent. As such, FCC is missing opportunities to partner with state agencies in providing effective oversight and to share information on wireless phone service consumer concerns.

section_title: Letter
paragraphs: Wireless phone use 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, the total number of wireless phone service subscribers nationwide  has grown from about 3.5 million in 1989 to about 270 million in 2008 (see  fig. 1). As a result of this rapid growth, today the vast majority of  Americans are wireless phone service users. Although the actual number  of wireless users is less than the number of subscribers—since some users  have multiple wireless phones—estimates indicate that about 84 percent  of Americans 18 years of age or older use wireless phones.
Concerns have arisen in recent years about the quality of wireless phone  service, including specific concerns about billing; customer service; and  carriers’ contract terms, such as the fees carriers charge customers for  terminating their service before the end of the contract period (early  termination fees). In June 2009, we reported that such issues continued to  be of concern to some consumers, as demonstrated by the results of our  survey of wireless phone service users. Under federal law, the Federal  Communications Commission (FCC) is responsible for fostering a  competitive wireless marketplace while ensuring that consumers are  protected from harmful practices. FCC’s rules (or regulations) include  procedures for handling consumer complaints. States, which have  traditionally regulated local telephone service through regulatory bodies  known as state utility commissions, also retain some authority under  federal law to regulate wireless phone service and many also process  consumer complaints.
Citing concerns about the quality of wireless phone service, you asked us  to examine consumers’ concerns and government oversight in this area.  This report discusses (1) consumers’ satisfaction with wireless phone  service and problems they have experienced with this service, as well as  the industry’s response to these problems; (2) FCC’s efforts to oversee  services provided by wireless phone service carriers; and (3) state utility  commissions’ efforts to oversee services provided by wireless phone  service carriers.
To determine consumers’ satisfaction with wireless phone service and  problems they have experienced in recent years, we surveyed a nationally  representative, randomly selected sample of adult wireless phone users 18  years of age or older who had cell phone service in 2008. From this  sample, we completed 1,143 interviews. In addition, we interviewed FCC  and stakeholders from organizations representing consumers, state  agencies, and industry and reviewed documents obtained from these  sources. We also analyzed consumer complaints about wireless phone  service that FCC received from 2004 through 2008 and reviewed complaint  data from other sources. To determine the industry’s response to these  problems, we interviewed industry officials from the four largest U.S.  carriers, two smaller carriers, and two national associations. To evaluate  FCC’s efforts to oversee services provided by wireless phone service  carriers—including the agency’s efforts to process complaints, monitor  sources of information to inform policy decisions, and create and enforce  rules—we interviewed FCC officials responsible for such oversight,  including those responsible for consumer issues and enforcement. 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. To describe state utility commissions’  efforts to oversee services provided by wireless phone service carriers, we  surveyed state utility commissions in all 50 states and the District of  Columbia about their wireless regulatory authority and efforts to oversee  wireless phone service and process consumer complaints. All 51  commissions responded to our survey. We also interviewed officials and  examined documents from state utility commissions, consumer advocate  offices, and attorneys general offices in California, Nebraska, and West  Virginia. (See app. I for a more detailed description of our scope and  methodology.) This report does not contain all of the results from the  consumer and state utility commission surveys. The surveys and a more  complete tabulation of the results can be viewed by accessing  GAO-10-35SP.
We conducted this performance audit from September 2008 to November  2009 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 and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The use of wireless phone service has grown rapidly in recent years. By  the end of 2008, about 82 percent of adults lived in households with  wireless phone service, up from 54 percent at the end of 2005.  Furthermore, by the end of 2008, about 35 percent of households used  wireless phones as their primary or only means of telephone service, of  which about 20 percent had only wireless phones and the other 15 percent  had landlines but received all or most calls on wireless phones.  Consumers’ use of wireless phones for other purposes, such as text  messaging, photography, and accessing the Internet, has also increased  dramatically. For example, FCC reports that, while a subscriber’s average  minutes of use per month grew from 584 to 769 from 2004 to 2007, the  number of text messages grew more than tenfold during the same period.
Within the wireless phone industry, four nationwide wireless phone  service carriers—AT&T, Sprint, T-Mobile, and Verizon—operate alongside  regional carriers of various size. The four major carriers serve more than  85 percent of wireless subscribers, but no single competitor has a  dominant share of the market. As recently as 2007, more than 175  companies identified themselves as wireless phone service carriers.
To subscribe to wireless phone service, a customer must select a wireless  phone service carrier and either sign a contract and choose a service plan  or purchase prepaid minutes and buy a phone that works with the prepaid  service. Most customers sign contracts that specify the service plan and  the number of minutes and text messages the customer is buying for a  monthly fee. Also, new customers who sign contracts for wireless phone  service sometimes pay up-front fees for “network activation” of their  phones and usually agree to pay an “early termination fee” if they should  quit the carrier’s network before the end of the contract period. In return  for signing a contract, customers often receive wireless phones at a  discount or no additional cost.
In 1993, the Omnibus Budget Reconciliation Act (1993 Act) was enacted,  creating a regulatory framework to treat wireless phone service carriers  consistently and encourage the growth of a competitive marketplace.  Specifically, the law required FCC to treat wireless carriers as common  carriers but gave FCC authority to exempt wireless service carriers from  specific regulations that apply to common carriers if FCC could  demonstrate that doing so would promote competition, that the  regulations were unnecessary to protect consumers, and that the  exemption was consistent with the public interest. FCC has specific  authority to regulate wireless phone service rates and market entry, while  states are preempted from doing so; however, states may regulate the  other “terms and conditions” of wireless phone service.
The 1993 Act also directed FCC to require wireless carriers, like other  common carriers, to provide service upon reasonable request and terms  without unjust or unreasonable discrimination, as well as to adhere to  procedures for responding to complaints submitted to FCC.  Subsequently, the Telecommunications Act of 1996 authorized FCC to  exempt wireless service carriers from these sections; however, in a 1998  proceeding to consider whether to exempt certain wireless phone service  carriers from these requirements, FCC specifically stated that it would not  do so, noting that these respective sections represented the “bedrock  consumer protection obligations” of common carriers. FCC’s rules  specify that the agency has both informal and formal complaint  processes. FCC’s informal complaint process allows consumers to file  complaints with FCC that the agency reviews and forwards to carriers for  a response. The formal complaint process, which is similar to a court  proceeding, requires a filing fee and is rarely used by consumers.
State agencies also play a role in wireless phone service oversight. State  utility commissions (sometimes called public utility commissions or public  service commissions) regulate utilities, including telecommunications  services such as wireless phone service and landline phone service. State  commissions may also designate wireless phone service carriers as eligible  telecommunications carriers (ETC)—a designation that allows carriers to  receive universal service funds for serving consumers in high-cost areas.  Through this process, state utility commissions may place conditions on  how wireless carriers provide services in those high-cost areas in order for  them to be eligible for such funds. State attorneys general broadly serve as  the chief legal officers of states while also representing the public interest,  and their work has included addressing wireless consumer protection  issues. For example, in 2004, the attorneys general of 32 states entered  into voluntary compliance agreements with Cingular Wireless (now  AT&T), Sprint, and Verizon, under which the carriers agreed to disclose  certain service terms at the point-of-sale and in their marketing and  advertising, provide a service trial period, appropriately disclose certain  taxes and surcharges on customers’ bills, and respond to consumers’  complaints and inquiries.
section_title: Most Consumers Are Satisfied with Their Wireless Phone Service, but Some Have Experienced Problems
paragraphs: According to our consumer survey, overall, wireless phone service  consumers are satisfied with the service they receive. Specifically, we  estimate that 84 percent of adult wireless 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 aspects of wireless  phone service that consumers have reported problems with in recent  years. We identified five key areas of concern on the basis of these  interviews and our review of related documents, and we subsequently  focused our nationwide consumer survey on these areas (see table 1).
Based on our survey results, we estimate that most wireless phone users  are satisfied with these five specific aspects of service (see table 2). For  example, we 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 their wireless phone service coverage. 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.
While we estimate that about three-fourths or more of wireless phone  service users are satisfied with specific aspects of their service, the  percentages of those very or somewhat dissatisfied range from about 9 to  14 percent, depending on the specific aspect of service. For example, we  estimate that 14 percent of wireless phone users are dissatisfied with the  terms of their service contract or agreement. While the percentages of  dissatisfied users appear to be small, they represent millions of people  since, according to available estimates, the number of adult wireless  phone service users is over 189 million.
Other results of our survey suggest that some wireless phone consumers  have experienced problems with billing, certain service contract terms,  and customer service recently—that is, during 2008 and early 2009.  Specifically, our survey results indicate the following:    Billing. 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.
Service contract terms. 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.
Customer service. Among those users who contacted customer service,  we estimate that 21 percent were very or somewhat dissatisfied with how  the carrier handled the problem.
Our analysis of FCC consumer complaint data also indicates that billing,  terms of the service contract, and customer service are areas where  wireless consumers have experienced problems in recent years.  Furthermore, FCC complaint data indicate that call quality is an area of  consumer concern. Specifically, our analysis of FCC data indicates that  the top four categories of complaints from 2004 through 2008 regarding  service provided by wireless carriers were billing and rates, call quality,  early termination of contracts, and customer service, as shown in figure 3  (see app. II for additional discussion of FCC wireless consumer complaint  data).
Our survey of state utility commissions also found that billing, contract  terms, and quality of service were the top categories of consumer  complaints related to wireless phone service that commissions received in  2008. Specifically, among the 21 commissions that track wireless  consumer complaints, 14 noted billing, 10 noted contract terms, and 10  noted quality of service as among the top three types of complaints  commissions received in 2008. Additionally, 3 commissions specifically  cited early termination fees as one of the top three categories of  complaints they received in 2008.
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—AT&T, Sprint, T-Mobile, and  Verizon—reported taking actions such as prorating their early termination  fees over the period of the contract, 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, in 2003, the  industry adopted a voluntary code with requirements for dealing with  customers and, 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. (See app. III for additional information  about industry actions to address consumer concerns.)
Representatives of state agencies and various consumer and industry  associations we interviewed expressed concern to us that many of the  actions the industry has taken to address consumers’ concerns are  voluntary and have not effectively addressed some major consumer  concerns. For example, officials from some state public utility  commissions indicated that there are no data to support the effectiveness  of the wireless industry’s voluntary code and that this code lacks the level  of oversight that state agencies can offer. Moreover, officials from state  utility commissions and consumer associations we spoke with indicated  that the industry’s actions to prorate early termination fees may be  inadequate because the fees are not reduced to $0 over of the course of the  contract period. Furthermore, some representatives of state agencies and  consumer groups suggested that the industry has taken voluntary actions  such as adopting the voluntary code and prorating early termination fees  to avoid further regulation by FCC. Industry representatives, however, told  us that the voluntary approach is more effective than regulation, since it  gives the industry flexibility to address these concerns.
section_title: FCC Processes Wireless Consumer Complaints but Has Conducted Little Other Oversight of Services Provided by Wireless Phone Service Carriers
paragraphs: FCC processes tens of thousands of wireless consumer complaints each  year but has conducted little additional oversight of services provided by  wireless phone service carriers because the agency has focused on  promoting competition. The agency receives informal consumer  complaints and forwards them to carriers for response; however, our  consumer survey results suggest that most wireless consumers with  problems would not complain to FCC and many do not know where they  could complain. FCC has also not articulated goals and measures that  clearly identify the intended outcomes of its complaint-processing effort.  Consequently, if wireless consumers do not know where they can  complain or what outcome to expect if they do, they may be confused  about where to go for help or what assistance they can expect from FCC.  Additionally, FCC cannot demonstrate how well it is achieving the  intended outcomes of its efforts. While FCC monitors wireless consumer  complaints by reviewing the top categories of complaints received, it has  conducted few in-depth analyses to identify trends or emerging issues,  impeding its ability to determine whether its rules have been violated or if  new rules may be needed.
subsections: section_title: FCC Processes Consumers’ Wireless Complaints, but Many Consumers May Not Know They Can Complain to FCC
paragraphs: FCC receives about 20,000 to 35,000 complaints each year related to  services provided by wireless carriers, which the agency forwards to  carriers for response. Given that our survey indicates that an estimated  21 percent of consumers who contact their carrier’s customer service  about a problem are dissatisfied with the result, FCC’s efforts to process  complaints are an important means for consumers to get assistance in  resolving their problems. After reviewing a complaint received, FCC  responds by sending the consumer a letter about the complaint’s status. If  FCC determines that the complaint is valid, 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 it determines the response has addressed the consumer’s  complaint, it marks the complaint as closed. According to FCC officials, if  the response is not sufficient, FCC contacts the carrier again. 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 that FCC sends to a consumer whose complaint  has been closed does not identify mediation as an option. FCC closes most  wireless phone service complaints within 90 days of receiving them.  Specifically, according to FCC’s complaint data, the agency closed 61  percent of complaints received in 2008 within 90 days (see fig. 4).
FCC uses several methods to inform consumers that they may complain to  the agency about their wireless phone service and has taken steps to  improve its outreach. According to FCC officials, the agency provides  information on how to complain to FCC on its Web site and in fact sheets  that are distributed through various methods, including its Web site. Also,  in response to a recommendation from its Consumer Advisory Committee  in 2003 to improve outreach to consumers about the agency’s process for  handling complaints, FCC switched from using one complaint form to  having multiple forms for different types of complaints to make filing  complaints easier for consumers. FCC also made its complaint forms and  fact sheets available in Spanish and has distributed consumer fact sheets  at outreach events and conferences. Furthermore, the agency created an e- mail distribution list for disseminating consumer information materials,  which it used to inform consumers about the revised complaint forms. We  have previously noted that it is important for an agency’s consumer  protection efforts to inform the public effectively and efficiently about its  role and how to seek redress. Additionally, we have reported on various  ways an agency can communicate with the public about its efforts,  including how exploring multiple methods for communicating with the  public may improve public outreach. Such outreach methods can include  making effective use of Web sites, e-mail listserves, or other Web-based  technologies like Web forums, as well as requiring relevant companies to  provide information to their customers. For example, many state utility  commissions require landline carriers to include information on  customers’ bills about how to contact the commission with a complaint.
Despite FCC’s efforts to improve its outreach, these efforts may not be  adequately informing the public about the agency’s role in handling  consumer complaints. Specifically, based on the results of our consumer  survey, we estimate that 13 percent of adult wireless phone users would  complain to FCC if they had a problem that their carrier did not resolve  and that 34 percent do not know where they could complain. Therefore,  many consumers that experience problems with their wireless phone  service may not know to contact FCC for assistance or may not know at  all whom they could contact for help. We reported these survey results in  June 2009. In August 2009, noting our survey results, FCC sought public  comment on whether there are measures the agency could take to ensure  that consumers are aware of FCC’s complaint process, including whether  FCC should require carriers to include information for consumers on their  bills about how to contact FCC with a complaint.
section_title: FCC Lacks Goals and Measures That Articulate the Intended Outcomes of Its Efforts to Process Consumer Complaints
paragraphs: FCC’s goals and measures related to its efforts to process wireless  consumer complaints do not clearly identify the intended outcomes of  these efforts. The Government Performance and Results Act of 1993  (GPRA) requires an agency to establish outcome-related performance  goals for its major functions. 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.
The key goal related to FCC’s consumer complaint efforts is to “work to  inform American consumers about their rights and responsibilities in the  competitive marketplace.” This key goal also has a subgoal 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 related to its efforts to process wireless consumer  complaints under this subgoal is to respond to consumers’ general  complaints within 30 days, which reflects the time it takes FCC to initially  respond to the consumer about the status of a complaint. The measure  does not clearly or fully demonstrate FCC’s achievement of its goal to  facilitate informed consumer choice. Instead, it is a measure of a program  output, or activity, not 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 related 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, which 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 performance  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.
As noted above, consumers may not know to contact FCC if they have a  complaint about their wireless phone service. Additionally, because FCC  has not clearly articulated the intended outcomes of its complaint- processing efforts, consumers may not know the extent to which FCC can  aid them in obtaining a satisfactory resolution to their concerns, and since  FCC’s letters to consumers do not indicate that mediation is available,  consumers may not know that they can request this service from FCC.  Consequently, consumers with wireless service problems may be confused  about where to seek assistance and what kind of assistance to expect if  they do know they can complain to FCC.
section_title: FCC Has Few Rules That Address Services Provided by Wireless Phone Service Carriers
paragraphs: FCC has few rules that specifically address services consumers receive  from wireless phone service carriers, and in general, the agency has  refrained from regulating wireless phone service in order to promote  competition in the market. FCC’s rules include general requirements for  wireless carriers to provide services upon reasonable request and terms  and in a nondiscriminatory manner, and to respond to both informal and  formal complaints submitted to FCC by consumers. FCC also has specific  rules requiring wireless carriers and other common carriers to present  charges on customers’ bills that are clear and nonmisleading, known as  truth-in-billing rules. Additionally, FCC’s rules establish other consumer  protections, such as requiring wireless carriers to provide enhanced 911  and other emergency services and number portability rules that allow  customers to keep their phone numbers when switching between wireless  carriers or between landline and wireless services. While FCC has rules  that cover billing, the agency has not created specific rules governing  other key areas of recent consumer concern that we identified (see   table 3).
According to FCC, the agency does not regulate issues such as carriers’  contract terms or call quality, since the competitive marketplace addresses  these issues, leading carriers to compete on service quality and proactively  respond to any related concerns from consumers. Additionally, having  determined that exempting carriers from certain regulations will promote  competition, FCC has used its authority under the 1993 Act to exempt  wireless carriers from some rules that apply to other communications  common carriers. For example, in 1994, FCC exempted wireless carriers  from rate regulations that apply to other common carriers. FCC has  stated that promoting competition was a principal goal of the 1993 Act  under which Congress established the regulatory framework for wireless  phone service oversight. As required by the 1993 Act, in exempting  wireless phone service carriers from regulations in order to promote  competition, as FCC has done, FCC must determine that such exemption  is in the public interest and that the regulations are not necessary for the  protection of consumers.
FCC officials told us that the agency has taken a “light touch” in regulating  the industry because it is competitive and noted that carriers compete  with one another to provide better service. FCC proposed rules in 2005 for  wireless carriers to address further regulation of billing practices and, in  2008, to address carriers’ reporting of service quality information such as  customer satisfaction and complaint data. FCC has received comments  on both proposals but has taken no further action to date. In August 2009,  as part of its effort to seek comment on a number of telecommunications  consumer issues, FCC sought comment on the effectiveness of its truth-in- billing rules and whether changes in these rules are needed.
section_title: FCC Has Conducted Limited Monitoring of Wireless Consumer Complaints and Has Not Enforced Its Billing Rules for Wireless Carriers
paragraphs: FCC monitors informal complaints submitted by consumers to determine  whether further regulation is needed and if the wireless industry is  complying with the agency’s rules, but such monitoring is limited.  According to FCC officials, trends in consumer complaint data may alert  them to the need for changes in regulation. Furthermore, FCC has  acknowledged that when exempting telecommunications service  providers, such as wireless carriers, from its regulations, the agency has a  duty to ensure that consumer protection needs are still met. FCC’s  Consumer and Governmental Affairs Bureau reviews the top categories of  complaints reported in the agency’s quarterly reports of consumer  complaints and looks for trends. FCC officials said that the agency does  not routinely conduct more in-depth reviews of the nature of wireless  consumer complaints unless they are needed to support an FCC decision- making effort, such as a rulemaking proceeding. FCC does not document  its monitoring of consumer complaints and does not have written policies  and procedures for routinely monitoring complaints.
FCC has taken a number of actions to enforce its rules that apply to  wireless phone service carriers, but the agency has conducted no  enforcement of its truth-in-billing rules as they apply to wireless service.  One of the agency’s performance goals is to enforce FCC’s rules for the  benefit of consumers. According to representatives of FCC’s Enforcement  Bureau, trends in consumer complaints that identify potential violations of  FCC rules may signal the need for FCC to conduct an investigation, which  could lead to an enforcement action. For example, in reviewing complaint  data, the bureau identified five wireless carriers that had not responded to  consumer complaints, which in 2008, led the agency to initiate  enforcement actions against these carriers. However, Enforcement  Bureau officials told us that they have not reviewed complaints to look for  potential wireless truth-in-billing rules violations. Under the method it  currently uses to categorize informal complaints, FCC cannot easily  determine whether complaints may indicate a potential violation of FCC’s  truth-in-billing rules. For example, FCC officials told us that while the  agency uses category codes to identify types of complaints related to  billing, such as codes for rates, line items, and fees, FCC officials would  have to review complaints individually to determine whether they revealed  a potential violation of its truth-in-billing rules—an analysis FCC has not  conducted. Furthermore, according to FCC officials, since the application  of the agency’s truth-in-billing rules to wireless carriers was expanded in  2005, the agency has conducted no formal investigations of wireless  carriers’ compliance with these rules because investigating other issues  has been a priority and FCC has received no formal complaints in this  area. Since our consumer survey indicates that about a third of consumers  responsible for paying their wireless bills have had problems  understanding their bill or received unexpected charges, the enforcement  of truth-in-billing rules is important for the protection of consumers.
Lacking in-depth analysis of its consumer complaints, FCC may not be  aware of trends or emerging issues related to consumer problems, if  specific rules—such as the truth-in-billing rules—are being violated, or if  additional rules are needed to protect consumers. Our standards for  internal control in the federal government state that agencies should have  policies and procedures as an integral part of their efforts to achieve  effective results. Without adequate policies and procedures for  conducting such analyses of its consumer complaints, FCC may not be  able to ensure that its decisions to exempt carriers from regulation  promote competition and protect consumers.
section_title: State Utility Commissions’ Efforts to Oversee Wireless Phone Service Are Varied, Their Regulatory Authority Is Unclear, and Communication with FCC Is Infrequent
paragraphs: Results of our survey of state utility commissions show that while most  commissions process wireless consumer complaints, most do not regulate  wireless phone service. Representatives of state utility commissions and  other stakeholders we interviewed told us that states’ authority under  federal law to regulate wireless phone service is unclear, and this lack of  clarity has, in some cases, led to costly legal proceedings and some states’  reluctance to provide oversight. Additionally, based on the results of our  survey, communication between these commissions and FCC regarding  oversight of wireless phone service is infrequent.
subsections: section_title: Most State Utility Commissions Accept Wireless Consumer Complaints, but States’ Efforts to Address Complaints Vary
paragraphs: In response to our survey of 51 state utility commissions, 33 commissions  reported receiving complaints about wireless phone service, which they  process in different ways. Specifically, 20 of these commissions work with  the consumer and/or wireless carrier to resolve wireless complaints, while  the other 13 commissions that accept complaints forward the complaint or  refer the consumer to the relevant wireless carrier or another government  entity. States that forwarded complaints or referred consumers to other  government entities most frequently did so to FCC or a state attorney  general, with some complaints also going to the Federal Trade  Commission, a state consumer advocate, or another state agency. State  utility commission officials we spoke with in California, Nebraska, and  West Virginia, which all accept complaints and work with carriers and  consumers to resolve them, told us that they have access to higher-ranking  carrier representatives than consumers who call the carriers directly. This  access, they said, helps them resolve wireless consumer complaints in an  effective and timely manner. Twenty-one of the 33 commissions that  accept complaints reported recording and tracking the number and types  of wireless phone service complaints they receive. Based on the responses  of commissions to our survey, they received a total of 8,314 wireless  service complaints in 2008.
section_title: Most State Utility Commissions Do Not Regulate Wireless Phone Service
paragraphs: Most commissions do not regulate wireless phone service. As noted  previously, under federal law, states may regulate “terms and conditions”  of wireless phone service, although they are preempted from regulating  rates and entry. In response to our survey, 19 commissions reported  having rules (or regulations) for wireless phone service, either for  telecommunications services generally, including wireless service, or  wireless services specifically (see fig. 5).
Few commissions have rules within the following five main areas related  to the terms and conditions of wireless service we asked about in our  survey: service quality, billing practices, contract or agreement terms and  conditions, advertising disclosures, and disclosure of service terms and  conditions. Specifically, the number of commissions that have rules in  these areas ranges from 3 that have rules about disclosure of service terms  and conditions to 15 that have rules about service quality (see fig. 6).
While fewer than half of the commissions have wireless rules, most  designate wireless carriers as eligible telecommunication carriers (ETC) to  receive universal service funds for serving high-cost areas. Although ETC  status is not required for a wireless carrier to operate in a high-cost area, it  is required if the carrier wants to receive universal service funding. We  previously reported that wireless carriers often lack the economic  incentive to install wireless towers in rural areas where they are unlikely  to recover the installation and maintenance costs, but high-cost program  support allows them to make these investments. Most commissions place  conditions on receiving these funds related to various aspects of service.  Specifically, 41 commissions in our survey reported having processes to  designate wireless carriers as ETCs, and 31 reported placing such  conditions on carriers to receive these funds. For example, the Nebraska  state commission requires designated wireless ETCs to submit reports  about coverage, service outages, complaints, and their use of universal  service funding. For each of the five main areas related to the terms and  conditions of service we asked about, more commissions reported having  conditions for wireless ETCs than rules for wireless carriers (see fig. 6).  Such conditions would not apply to wireless carriers generally—only to  those carriers designated as ETCs to provide services in high-cost areas.
Few state utility commissions—five—reported taking enforcement action  against wireless phone service carriers since the beginning of 2004.  According to national organizations representing state agencies, states’  concerns about the cost of pursuing these issues in court have created a  reluctance to do so.
State utility commissions generally cannot regulate wireless phone service  unless they are granted authority to do so by state law. According to our  survey of state utility commissions, many state commissions do not have  authority to regulate wireless phone service, and most that do have  authority indicated that it is limited. Specifically, 21 commissions reported  having authority to regulate wireless phone service, with 5 commissions  indicating they have authority to regulate in all areas related to the terms  and conditions of service (excluding those aspects of service preempted  by federal law) and 16 indicating they have authority to regulate in some  areas. Twenty-one commissions reported that they do not have wireless  regulatory authority and another 9 commissions would not assert whether  they did or did not have wireless regulatory authority for various reasons  (see fig. 7). As discussed in the next section, according to some state  officials, the lack of authority or limited authority in many states to  regulate wireless phone service may be due to concerns about the lack of  clarity in federal law regarding states’ authority to regulate wireless phone  service.
section_title: The Extent of States’ Authority to Regulate Wireless Phone Service under Federal Law Is Unclear
paragraphs: State authority under federal law to regulate wireless phone service is not  clear, based on the views of stakeholders we interviewed, court cases,  FCC proceedings, a 2005 FCC task force report, and comments in our  survey of state utility commissions. As discussed earlier, in 1993, Congress  developed a wireless regulatory framework that expressly prohibited  states from regulating the market entry or rates charged by wireless phone  service carriers, while retaining states’ authority to regulate other “terms  and conditions” of wireless service. In an accompanying report, Congress  stated that “terms and conditions” was intended to include billing  practices and disputes, as well as other consumer protection matters. The  report further stated that examples of service it provided that could fall  within a state’s lawful authority under “terms and conditions” were  illustrative and not meant to preclude other matters generally understood  to fall under “terms and conditions.” Despite this guidance, whether  specific aspects of service are considered “rates” or “terms and  conditions” has been the subject of disputes at FCC, in state regulatory  bodies, and in the courts. For example, courts have recently been  grappling with cases about whether billing line items and early termination  fees are defined as “rates,” and are therefore not subject to state  regulation, or as other “terms and conditions,” which may be regulated by  states. Such cases have not resolved the issue, as courts have reached  different conclusions about the meaning of these terms or await action by  FCC. (See app. IV for examples of legal proceedings that address states’  authority to regulate terms and conditions of wireless phone service.)
FCC has provided limited guidance about the meaning of “terms and  conditions.” The agency did offer preliminary observations in response to  petitions states filed with FCC seeking to continue regulating wireless  rates and in a few other proceedings. For example, in 1995, FCC noted  that while states could not set or fix wireless rates in the future, they could  process consumer complaints under state law because “terms and  conditions” was flexible enough to allow states to continue in this role.  FCC has also said that states may designate wireless carriers as ETCs and  that states may impose consumer protection requirements on wireless  carriers as a condition for ETC designation. In 1999, FCC concluded that  billing information, practices, and disputes fall within these other terms  and conditions. Subsequently, in 2005, as part of its truth-in-billing  proceeding, FCC concluded that regulation of line items by states  constituted rate regulation, thereby preempting state authority; however,  this conclusion was rejected by the Eleventh Circuit Court of Appeals. In  this proceeding, FCC also asked commenters to address the proper  boundaries of “other terms and conditions” and to describe what they  believe should be the roles of FCC and the states in defining carriers’  billing practices. However, this proceeding is still open, and FCC has taken  no further action to define the proper role of states in regulating billing  practices.
The lack of clarity regarding states’ authority to regulate wireless service  has led to delays in deciding some legal matters and some states’  reluctance to provide oversight. In some instances, when hearing cases  involving early termination fees, courts have halted proceedings pending  FCC’s resolution of its own proceedings examining whether such fees  should be defined as “rates” or “terms and conditions.” For example, in  2008, rather than issue a ruling, a U.S. District Court in the state of  Washington deferred to FCC a case against a wireless carrier involving  early termination fees, citing FCC’s primary jurisdiction over the issue.  According to FCC officials, when courts defer cases to FCC, the agency  does not automatically address the issue, but requires that a party file a  petition asking FCC to do so. Officials of national organizations  representing state agencies and officials from state agencies we  interviewed told us that some states are reluctant to regulate wireless  phone service until their authority is clarified. This is due, in part, to the  potential legal costs that could be incurred if their authority is challenged  in court by the industry. Such reluctance may lead to less consumer  protection in certain states that otherwise might issue regulations.
As we have previously reported, to develop an efficient and effective  regulatory framework, the appropriate roles of participants, including  states, should be identified. Because of the lack of clarity noted above,  various stakeholders have expressed a desire for clearer roles for FCC and  the states in providing wireless phone service oversight. For example,  officials of national organizations representing state agencies, as well as  officials from state agencies we interviewed, told us that clarity from  Congress or FCC about the scope of state authority in regulating wireless  phone service is needed. Some industry representatives also told us that  there should be better guidance on the respective roles of state and federal  agencies. A report by the FCC Wireless Broadband Access Task Force in  2005 recommended that FCC further clarify states’ authority to regulate  “terms and conditions,” saying ambiguity about this authority has resulted  in several disputes at FCC, in state regulatory bodies, and in the courts,  and has caused significant regulatory uncertainty that will adversely affect  investment in and deployment of wireless networks and other services. In  2005, CTIA–The Wireless Association petitioned FCC to declare that early  termination fees are rates, and FCC sought comment on the petition.  Recently, when CTIA–The Wireless Association withdrew its petition, four  consumer groups opposed its withdrawal, hoping that FCC would offer  some clarity on whether early termination fees are subject to state laws  and regulations in order to help resolve some pending state lawsuits.
State, consumer, and industry stakeholders hold varying views about how  the meaning of “terms and conditions” should be clarified, which would  affect states’ authority to regulate wireless phone service. Industry  representatives argue that “terms and conditions” should be defined  narrowly, which would preempt states’ ability to regulate aspects of  wireless phone service that fall outside the definition. For example,  industry representatives have stated that early termination fees and billing  line items should be considered “rates,” rather than “terms and  conditions,” which would preclude state utility commissions from  regulating these aspects of service. In general, industry representatives  have supported regulation at only the federal level, which they claim  would avoid inconsistent state regulatory requirements they say would  add to their costs. In contrast, state agency representatives and some  consumer organizations have supported clarifying the meaning of “terms  and conditions” to broadly encompass various aspects of wireless phone  service, since they oppose efforts to preempt states’ regulatory authority.  For example, state consumer advocates and consumer organizations have  argued that aspects of service such as early termination fees and billing  line items should fall within the definition of “terms and conditions” of  service that states have authority to regulate. These representatives argue  that states should have authority to create and enforce wireless phone  service regulations, since they claim states are better positioned to  effectively address consumers’ problems.
section_title: FCC’s Communication with State Utility Commissions Regarding Oversight of Wireless Phone Service Is Infrequent
paragraphs: Based on the results of our survey of state utility commissions,  communication between FCC and state commissions about wireless  phone service oversight is infrequent. Eleven state commissions indicated  they had communicated with FCC about wireless phone service oversight  issues during the last 6 months of 2008, and 33 commissions reported they  had no contact with FCC about wireless phone service oversight during  that time. Four of the 11 state commissions reported having  communication with FCC during that 6-month period about wireless  phone service complaints the state commissions had received from  consumers. State utility commission officials we interviewed in California,  Nebraska, and West Virginia said there was a need for better  communication between FCC and the states regarding wireless phone  service oversight, and the National Association of Regulatory Utility  Commissioners has called for more focused and routine dialogue between  FCC and the states, including a formal process to discuss jurisdictional  issues.
While FCC officials told us they routinely coordinate with state utility  commissions about the handling of wireless complaints, they have no  written policies or procedures on how they communicate with the states  about wireless phone service oversight issues. FCC officials do participate  in monthly conference calls with state utility commissions and state  attorneys general during which wireless phone service oversight issues  can be discussed. However, the state utility commission organizer of this  conference call told us that wireless issues are rarely discussed, in part  because few states actively regulate wireless phone service.
Communication between federal and state agencies that share oversight of  a particular industry—such as between FCC and state utility  commissions—can be useful for sharing expertise and information, such  as data on consumer complaints that could be used to identify problems  that may warrant regulatory oversight. As noted earlier, federal law  provides that oversight of wireless phone service is a responsibility shared  by FCC and the states. Also FCC, in issuing its rules for implementing the  wireless regulatory framework created by the 1993 Act, agreed with a  suggestion by the National Association of Regulatory Utility  Commissioners that state and federal regulators should cooperate in  monitoring the provision of wireless services and share monitoring  information. We previously reported that collaboration between agencies  tasked with shared responsibilities produces more public value than  independent actions by such agencies. These practices include  identifying and addressing needs by leveraging resources to support a  common outcome and agreeing on roles and responsibilities in agency  collaboration. Additionally, we have recently developed a framework with  characteristics of an effective system for providing regulatory oversight.  One characteristic of this framework is a systemwide focus—among both  federal and state regulators—with mechanisms for identifying consumer  concerns that may warrant regulatory intervention, while another  characteristic is an efficient and effective system within which the  appropriate role of the states has been considered, as well as how the  federal and state roles can be better harmonized. Without effective  communication between FCC and state regulators, FCC may not be able to  ensure such focus and clear delineation of the federal and state roles.
Without written policies and procedures for how FCC communicates with  states about wireless phone service oversight, FCC may be missing  opportunities to work with its state partners in conducting oversight, such  as sharing complaint data that could be used for monitoring trends. This  lack of communication may also limit FCC’s awareness of issues the states  are encountering in their oversight of wireless carriers. Additionally,  without clear awareness of state-level efforts, FCC may not be aware of  inconsistencies among state oversight efforts that could indicate a need  for changes in its regulations.
section_title: Conclusions
paragraphs: Although the percentages of consumers dissatisfied with various aspects  of their wireless phone service are small, these small percentages  represent millions of people. By emphasizing its responsibility under the  law to foster a competitive marketplace for wireless service, FCC has  contributed to the industry’s growth and to innovative products and  services that have benefited consumers. Nevertheless, FCC’s responsibility  to protect consumers from harm remains critical, particularly given the  growing numbers of wireless service consumers and the limited number of  requirements governing key aspects of service that are currently of  concern to consumers.
FCC’s processing of consumers’ informal complaints may be an important  means for dissatisfied consumers to get help, but as long as FCC lacks  clear outcome-related goals and measures for this process, consumers do  not know what they can expect from it, and FCC cannot demonstrate its  effectiveness in assisting consumers who need help. While most states  accept wireless consumer complaints, many do not work with the carrier  and the consumer to resolve those complaints, making FCC’s efforts an  important resource for consumers in those states that do not accept or  work to resolve complaints. However, if, as our survey of wireless users  suggests, most consumers are not aware they can complain to FCC, those  with problems may not know how to seek a fair resolution. Furthermore,  without policies and procedures to monitor consumers’ concerns and  thereby identify problems that may warrant regulatory or enforcement  action, the FCC cannot ensure that consumers are adequately protected  under the competitive deregulatory framework the agency has fostered.
Finally, without clear guidance for states on the extent of their regulatory  authority under federal law, or policies and procedures for how to  communicate with states about wireless phone service oversight, FCC  could be missing opportunities to partner with state agencies in  developing an effective regulatory system. The lack of clarity about states’  authority may discourage some states from taking action to protect  consumers. While FCC does have efforts to assist consumers, leveraging  state resources by clarifying state authority would better ensure that  identified problems can be addressed effectively at either the state or the  federal level. Additionally, policies and procedures to guide how FCC and  the states communicate would help ensure that FCC and the states are  sharing information to guide their oversight. Improved communication  between FCC and state regulators could help both parties ensure they are  providing effective oversight with a systemwide focus and clearer roles  enabling them to better identify trends in complaints and emerging  consumer concerns that may warrant changes in regulation.
section_title: Recommendations for Executive Action
paragraphs: We are making the following five recommendations to the Chairman of the  Federal Communications Commission:  To improve the effectiveness and accountability of FCC’s efforts to  oversee wireless phone service, direct the commission to  1.  clearly inform consumers that they may complain to FCC about  problems with wireless phone service and what they can expect as  potential outcomes from this process, and expand FCC’s outreach to  consumers about these efforts; 2.  develop goals and related measures for FCC’s informal complaint- handing efforts that clearly articulate intended outcomes and address  important dimensions of performance; and 3.  develop and implement policies and procedures for conducting  documented monitoring and analysis of consumer complaints in order  to help the agency identify trends and emerging issues and determine  whether carriers are complying with existing rules or whether new  rules may be needed to protect consumers.
To better ensure a systemwide focus in providing oversight of wireless  phone service and improve FCC’s partnership with state agencies that also  oversee this service, direct the commission to  4.  develop and issue guidance delineating federal and state authority to  regulate wireless phone service, including pulling together prior  rulings on this issue; addressing the related open proceedings on truth- in-billing and early termination fees; and, if needed, seeking  appropriate statutory authority from Congress; and 5.  develop and implement policies and procedures for communicating  with states about wireless phone service oversight.
section_title: Agency Comments
paragraphs: We provided a draft of this report to FCC for its review and comment. FCC  provided written comments, which appear in appendix V. FCC agreed with  our recommendation on monitoring and had no position on the others, but  noted it has started to take steps to address the issues we raise in our  report. In particular, FCC noted that its August 2009 notice of inquiry  sought comment on a number of issues related to the findings and  recommendations in this report. The agency views this action as the first  step in implementing several of the report’s recommendations.
Regarding clearly informing consumers about its complaint process and  expanding outreach to consumers, FCC noted that its notice of inquiry  sought comment on whether the agency should take measures to ensure  that consumers are aware of its complaint process. Additionally, FCC  noted that it intends to do more to better inform consumers of its services  to assist consumers, including making it clear that consumers can request  that FCC mediate with their carrier on their behalf. Regarding developing  goals and measures that clearly articulate the intended outcomes of its  complaint-handling efforts, FCC noted that it already has some  performance measures for these efforts and, that since the outcome of  each complaint varies depending on its particular circumstances, the  appropriate performance measures for this effort should measure its  procedural aspects rather than its substantive outcomes. We note,  however, that as we indicated in this report, it is not clear to consumers  what they can expect from FCC’s complaint process. Articulating the  intended outcome of this process—whether it be to help consumers  resolve their problems, facilitate communication between carriers and  consumers, or both—would provide consumers with a better  understanding of the purpose of this effort, as well as help the agency  better demonstrate results. Regarding our recommendation to develop and  implement documented monitoring of its consumer complaints, FCC  noted that it has been working to make improvements to its complaint  database, including its analytical tools, which will facilitate such  monitoring.
Regarding the development of guidance delineating federal and state  authority to regulate wireless phone service, FCC noted that, in response  to its August 2009 notice of inquiry, the agency is currently updating the  public record regarding its truth-in-billing rules and carriers’ early  termination fees, and expects to use this as the basis for potential federal  regulatory action, which could include delineating areas within the states’  authority that the record indicates should be addressed. Regarding  policies and procedures for communicating with states about wireless  phone service oversight, FCC noted that it is always looking for new and  better ways to communicate with its state partners and that its recent  notice of inquiry also asks whether FCC can take further action to reach  out to state, as well as federal, local, and tribal government entities.
We also provided FCC a draft of this report’s related e-supplement,  GAO-10-35SP, containing additional results of our surveys of consumers  and state utility commissions. FCC indicated it did not have any comments  in response to the e-supplement.
As we agreed with your offices, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the date of this letter. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Contact information and major contributors to this report  are listed in appendix VI.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) consumers’ satisfaction with wireless phone  service and problems they have experienced with this service, as well as  the industry’s response to these problems; (2) the Federal Communication  Commission’s (FCC) efforts to oversee services provided by wireless  phone service carriers; and (3) state utility commissions’ efforts to oversee  services provided by wireless phone service carriers.
To respond to the overall objectives of this report, we interviewed FCC  officials and reviewed documents obtained from the agency. We also  reviewed relevant laws and FCC regulations. Additionally we interviewed  individuals representing consumer organizations, state agencies, and the  industry to obtain their views on wireless phone service consumer  concerns and oversight efforts. Table 4 lists the organizations with whom  we spoke.
To obtain information about consumers’ satisfaction with wireless phone  service and problems they have experienced with this service, we  conducted 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 billing and call quality; (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 than if we had sampled from only one  frame.
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 of 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 and  Prevention’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.
We conducted an analysis of the final weighted estimates from our survey  designed to identify whether our results contain a significant level of bias  because our results inherently do not reflect the experiences of those who  did not respond to our survey—i.e., a nonresponse bias analysis. We  compared unadjusted weighted estimates and final, nonresponse-adjusted  weighted estimates of the proportion of U.S. adults’ cell phone usage to  similar population estimates from the 2008 National Health Interview  Survey, which also includes questions about household telephones and  whether anyone in the household has a wireless phone. While we  identified evidence of potential bias in the unadjusted weighted estimate,  the final weighting adjustments appear to address this potential bias, and  we did not observe the same level of bias when examining the final  weighted estimates. Based on these findings, we chose to include final  weighted estimates at the national level from our survey in the report. In  addition, we identified all estimates in the report with margins of error  that exceeded plus or minus 5 percentage points and we did not publish  estimates with a margin of error greater than plus or minus 9 percentage  points.
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, which includes a set of  assumptions. Based on these assumptions, the response rate for the  survey was 32 percent; however, the response rate could have been 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. The survey and a  more complete tabulation of the results can be viewed by accessing  GAO-10-35SP.
To identify the type and nature of problems consumers have experienced  in recent years with their wireless phone service, we interviewed officials  from 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 (see table 4). We selected these states based on their varying  geography, populations, region, and approaches to overseeing wireless  phone service, as indicated in part by 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.  We also analyzed FCC’s wireless complaint data on complaints received  from 2004 through 2008. We reviewed FCC’s processes for generating  these data and checked the data for errors and inconsistencies. We  determined that the data were sufficiently reliable for the purposes of this  review. We also obtained the total number of wireless complaints received  in 2008 by the 21 state utility commissions that record and track wireless  phone service consumer complaints. While we did not assess the reliability  of the state complaint data, we are providing the numbers of complaints  states reported receiving for illustrative purposes.
To identify major actions the industry has taken in recent years to address  consumers’ concerns, we interviewed the industry organizations named  above and reviewed related documentation (see table 4). We also  requested service quality information from the four major carriers,  including measures of network performance and the number and types of  customer complaints. Carriers told us that this information is proprietary  and sensitive, and as we did not obtain comparable information from all  four carriers, we were not able to present any aggregate information based  on these data. Additionally, we interviewed consumer, state, and federal  stakeholders about the effectiveness of industry efforts to address  consumers’ concerns (see table 4).
To evaluate how FCC oversees wireless phone service, including the  agency’s efforts to process complaints, monitor sources of information to  inform policy decisions, and create and enforce rules, 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 requirements of the Government Performance and Results Act of  1993 and our prior recommendations on performance goals and measures  and determined whether FCC’s efforts to measure the performance of its  efforts to process consumer complaints are consistent with these  requirements and recommendations. We also interviewed consumer, state,  and industry stakeholders about their views on FCC’s efforts to provide  oversight (see table 4). We focused our review on FCC’s oversight of  wireless phone service issues that have been major areas of concern for  consumers in recent years, specifically targeting consumer protection  efforts and those actions related to how wireless carriers interact with and  serve their customers. We did not assess how FCC oversees a number of  other facets of the wireless industry, including competition, spectrum  allocation, licensing, construction, technical issues such as interference,  public safety, or the agency’s obligations under the Telephone Consumer  Protection Act and the Controlling the Assault of Non-Solicited  Pornography and Marketing Act.
To describe state utility commissions’ efforts to oversee wireless phone  service, we surveyed commissions in all 50 states and the District of  Columbia. We conducted this survey from March 3, 2009, through April 1,  2009. We received responses from all 51 commissions, which we obtained  through a Web-based survey we administered and subsequent follow-up  with some states. The survey and a more complete tabulation of the  results can be viewed by accessing GAO-10-35SP. To obtain illustrative  information about these issues, we interviewed state officials in public  utility commissions, consumer advocate offices, and offices of attorneys  general in three selected states (California, Nebraska, and West Virginia).  Although we met with the offices of the state attorneys general in the three  selected states and a national organization representing state attorneys  general, we did not attempt to assess the full breadth of involvement of  state attorneys general in addressing wireless phone service consumer  concerns.
section_title: Appendix II: Analysis of FCC Wireless Consumer Complaint Data
paragraphs: Overall, the number of informal consumer complaints FCC has received  about the service provided by wireless phone carriers has decreased since  2004 (see table 5). FCC received 20,753 complaints about the service  provided by wireless phone carriers in 2008, the second-lowest total since  2004.
From our analysis of FCC data on complaints about the service provided  by wireless phone carriers from 2004 through 2008, we identified specific  problem areas that complaints cited within the major complaint  categories:    Billing and rates: Within this category, specific issues consumers  complained about included problems obtaining credits, refunds, or  adjustments to their bills; charges for minutes talking on a wireless phone;  recurring charges on their bills; rates; and unauthorized or misleading  charges. Of the nearly 55,000 billing complaints FCC received during this  period, there were 28,000 focused on obtaining credits, refunds, or billing  adjustments. FCC also received almost 9,000 billing complaints about  charges for minutes talking on a wireless phone. Additionally, there were  more than 5,500 complaints about recurring charges on consumers’ bills  and more than 5,500 complaints about the rates they received from their  wireless service providers. Finally, our analysis of FCC’s data identified  more than 2,100 wireless complaints concerning unauthorized, misleading,  or deceptive charges (known as “cramming”).
Call quality: Within this category, the majority of consumers complained  about three issue areas: the quality of wireless phone service in their local  service area, the premature termination of calls (i.e., “dropped calls”), and  the inability to use their wireless phone because of service interruption by  wireless phone service providers. Specifically, of the more than 14,000 call  quality complaints FCC received during this period, more than 7,300 were  about the quality of wireless phone service in the local service area. FCC   also received more than 3,200 complaints about dropped calls and more  than 2,000 complaints about interruption of service by wireless service  providers.
Contract early termination: This category includes termination of  wireless phone service by the consumer or by the carrier. Nearly 12,000, or  just under 90 percent, of all terms-of-service contract complaints FCC  received were about termination by consumers prior to the end of a  specified contract term, which would result in an early termination fee.
Customer service: Customer service complaints were the fourth largest  category of complaints; however, FCC did not report customer service  complaints as a top category of complaints in its quarterly reports from  2004 through 2008. In comparison, FCC identified carrier marketing and  advertising as a top category of complaint in each year from 2004 through  2008, even though there were more customer service complaints in 2005,  2006, and 2007. An FCC official told us they did not include customer  service complaints in the quarterly reports because they fell within the  “other” category, which FCC does not report. FCC also indicated that the  large decrease in the number of customer service complaints from more  than 3,500 in 2007 to fewer than 500 in 2008 was due in part to the agency’s  redesign of its complaint forms, which allows for more accurate coding of  complaints under specific topics rather than placing them in the “service  treatment” category FCC uses to track customer service issues.
section_title: Appendix III: Industry Actions to Address Wireless Consumer Concerns
paragraphs: The wireless phone service industry has taken some actions to address the  types of consumer concerns we identified. Specifically, in 2003, the  industry adopted a voluntary code, and since then, carriers have taken  other measures. Table 6 outlines how elements of the industry code and  examples of subsequent major actions we identified among the four  largest carriers correspond to the key areas of consumer concern we  identified.
section_title: Appendix IV: Examples of Actions Taken by FCC and Courts Regarding States’ Authority to Regulate Wireless Phone Service
paragraphs: Federal law provides that while a state may not regulate a wireless  carrier’s rates or entry, it may regulate the other terms and conditions of  wireless phone service. Section 332(c)(3)(A) of title 47 of the U.S. Code  does not define what constitutes rate and entry regulation or what  comprises other terms and conditions of wireless phone service. This has  left it up to FCC and courts to further define which specific aspects of  service fall within the scope of these respective terms. Recently, two areas  have garnered much attention at FCC and in the courts—the ability of  states to regulate billing line items and the imposition of early termination  fees. However, clarity has not yet been achieved.
subsections: section_title: Billing Line Items
paragraphs: One area of disagreement is whether billing line items, such as surcharges  and taxes that appear on consumers’ wireless bills, should be considered a  rate or a term and condition of service. In 2005, under its truth-in-billing  proceeding, FCC held that state regulations requiring or prohibiting the  use of line items for wireless carriers constituted rate regulation and  therefore were preempted. In the same proceeding, FCC solicited  comments on the proper boundaries of “other terms and conditions”  within the statute and asked commenters to delineate what they believe  should be the relative roles of FCC and the states in defining carriers’  proper billing practices. The National Association of State Utility  Consumer Advocates challenged FCC’s preemption finding in court, and  the United States Court of Appeals for the Eleventh Circuit (Eleventh  Circuit) found that FCC had exceeded its authority. Specifically, the court  found that the presentation of a line item on a bill is not a “charge or  payment” for service, but rather falls within the definition of “other terms  and conditions” that states may regulate.
Subsequent to the Eleventh Circuit’s ruling, the Western District Court of  Washington rejected the Eleventh Circuit’s analysis and concluded that  FCC did not exceed its statutory authority when it preempted line-item  regulation and that line items are charges. However, the United States  Court of Appeals for the Ninth Circuit (Ninth Circuit) reversed the district  court, finding that the Eleventh Circuit decision is binding outside of the  Eleventh Circuit. Furthermore, the Ninth Circuit stated that it agreed with  the Eleventh Circuit’s determination that how line items are displayed or  presented on wireless consumers’ bills does not fall within the definition  of “rates.”
FCC has not responded to these court decisions, nor has FCC concluded  its truth-in-billing proceeding. While FCC has received comments on its  2005 truth-in-billing proposal, it has taken no further action in this  proceeding. Accordingly, the issue of how states may regulate billing line  items remains unclear. In August 2009, as part of its effort to seek  comment on a number of telecommunications consumer issues, FCC  sought comment on the effectiveness of its truth-in-billing rules and  whether changes in these rules are needed.
section_title: Early Termination Fees
paragraphs: Early termination fees are another area where the distinction between  “rates” and “terms and conditions” is not clear. Wireless carriers routinely  offer customers discounts on cell phones in exchange for the customer’s  commitment to a 1- or 2-year contract. If the contract is canceled before  the end of the contract term, the customer is generally charged a fee,  commonly referred to as an early termination fee.
The Western District Court of Washington, in recently considering an early  termination fees case, noted that it is not clear whether a wireless service  carrier’s early termination fees are within the preemptive scope of “rates  charged” under the statute. The court noted that federal courts that have  considered the matter appear to be split on the issue, citing the examples  of a district court that found early termination fees to fall under “terms  and conditions” and another district court that found them to be “rates  charged.” Because of the ongoing FCC efforts in this area, the Western  District Court of Washington halted its proceeding pending a  determination from FCC about this issue.
In 2005, FCC was drawn into this debate at the request of a South Carolina  court. In February 2005, SunCom, a wireless carrier, at the request of the  court, filed a petition with FCC on whether early termination fees are rates  charged. In May 2005, FCC released a public notice seeking comments on  this matter. Subsequently, the parties to the litigation entered into a  settlement agreement and jointly requested that FCC dismiss the matter  without further review. FCC issued an order terminating the proceeding;  however, the agency noted that it had a similar petition under review that  it intended to address “in the near future.” The similar petition was filed  by CTIA–The Wireless Association in March 2005, asking for an  “expedited” ruling on whether early termination fees are rates. FCC  sought comments on the matter from interested parties, who have  submitted over 37,000 filings in this proceeding.
In view of the growing concern over early termination fees and the  number of complaints that FCC receives from consumers on this issue,  FCC held a hearing in June 2008. At this hearing, expert panelists testified  on the use of early termination fees by communications service providers.  A year after the hearing, CTIA–The Wireless Association notified FCC that  it was withdrawing its petition, citing the evolution of the competitive  wireless marketplace as a reason for its withdrawal. However, the  National Association of State Utility Consumer Advocates, the National  Consumer Law Center, U.S. Public Interest Research Group, and  Consumers Union filed a joint response in opposition to the petition’s  withdrawal, arguing that a ruling from FCC would help clarify this issue  and help resolve some pending lawsuits about it. FCC has not responded  to CTIA–The Wireless Association’s notice or the consumer advocates’  joint response. Thus, this is another area that remains unresolved.
section_title: Appendix V: Comments from the Federal Communications Commission
section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Judy Guilliams-Tapia, Assistant  Director; Eli Albagli; James Ashley; Scott Behen; Nancy Boardman; Bess  Eisenstadt; Andrew Huddleston; Eric Hudson; Mitchell Karpman; Josh  Ormond; George Quinn; Ophelia Robinson; Kelly Rubin; Andrew Stavisky;  and Mindi Weisenbloom made key contributions to this report.